Sunday, 04 May 2014 08:20

Measuring Project Success Using Business KPIs

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Delivering a project “on-time and on-budget” is no longer an adequate measure of project success. In today’s environment, the key question should be: “Did the project deliver value to the business?” For example, a project could be delivered on time and on budget, but does not guarantee:

  • Benefits outlined in business case were achieved
  • User adoption
  • Expected ROI was achieved
  • A satisfied customer
  • The solution addresses the customer need
  • Sales were in line with forecasts
  • There will be market demand for the product

As a project manager, you may think that delivering business results isn't your concern and that it is the customer's problem to solve. However in today’s environment, project managers are expected to partner with the customer, understand the business drivers, and ensure that the project delivers the business results that were specified in the business case. That is how many organizations are beginning to view project success.
Delivering business value can be a tall order. Delivering business value requires gaining an understanding of the business drivers: the problem or opportunity that precipitated the project and defining a clear set of business objectives to address the problem. Measuring business value is best done through defining Key Performance Indicators (KPIs) and measuring actual performance using the KPIs. Key Performance Indicators are quantifiable measurements that are agreed to by stakeholders to reflect the critical success factors of an organization. KPIs are:

  • Established by the customer at the beginning of the project and listed in order of priority.
  • Directly related to and supported by business goals and objectives.
  • The basis for critical decision-making throughout the project.
  • The basis for acceptance of the solution by the customer at the end of the project.

Defining KPIs can be challenging. Good KPIs must have a target value and a way to be accurately measured and reported on. Ideally, it would be best if the project sponsor simply handed you a list of project objectives, success criteria, and KPIs when you were brought on board as the project manager. However this rarely happens; you will usually need to work with the customer or project sponsor to define them. Many sponsors are not trained on how to define good KPIs. This is a skill that you will want to have and to provide as a project manager. Good KPIs are:

  • Aligned—Agree with the specific organization’s vision, strategy, and objectives.
  • Optimized—The KPIs should be focused on providing organization-wide strategic value rather than on non-critical local business outcomes. Selection of the wrong KPI can result in counterproductive behavior and sub-optimized results.
  • Measurable—Can be quantified/measured.
  • Realistic—Must be cost effective and fit into the organization’s culture and constraints and achievable within the given timeframe.
  • Attainable—Requires targets to be set that are observable, achievable, reasonable, and credible under expected conditions as well as independently validated.
  • Clear—Clear and focused to avoid misinterpretation or ambiguity.
  • Understood—Individuals and groups know how their behaviors and activities contribute to achieving the KPI.
  • Predictive—The KPI may be compared to historical data over a reasonably long time so that trends can be identified.
  • Agreed—All stakeholders should agree and share responsibility for achieving the KPI target.
  • Reported—Regular reports are made available to all stakeholders and contributors so they know the current status and take corrective action if needed.

Bernard Marr, a well-known performance management expert, has developed a list of 75 KPIs that every manager needs to know. Every business and every project will have different KPIs to measure performance, but Bernard’s list gives you a good starting point for conducting discussion with the business. The set of 75 KPIs that Bernard Marr developed is listed below for your convenience.
Financial Performance:

  1. Net Profit
  2. Net Profit Margin
  3. Gross Profit Margin
  4. Operating Profit Margin
  5. EBITDA
  6. Revenue Growth Rate
  7. Total Shareholder Return (TSR)
  8. Economic Value Added (EVA)
  9. Return on Investment (ROI)
  10. Return on Capital Employed (ROCE)
  11. Return on Assets (ROA)
  12. Return on Equity (ROE)
  13. Debt-to-Equity (D/E) Ratio
  14. Cash Conversion Cycle (CCC)
  15. Working Capital Ratio
  16. Operating Expense Ratio (OER)
  17. CAPEX to Sales Ratio
  18. Price Earnings Ratio (P/E Ratio)

    Customers:

  19. Net Promoter Score (NPS)
  20. Customer Retention Rate
  21. Customer Satisfaction Index
  22. Customer Profitability Score
  23. Customer Lifetime Value
  24. Customer Turnover Rate
  25. Customer Engagement
  26. Customer Complaints

    Market and marketing efforts:

  27. Market Growth Rate
  28. Market Share
  29. Brand Equity
  30. Cost per Lead
  31. Conversion Rate
  32. Search Engine Rankings (by keyword) and click-through rate
  33. Page Views and Bounce Rate
  34. Customer Online Engagement Level
  35. Online Share of Voice (OSOV)
  36. Social Networking Footprint
  37. Klout Score

    Operational Performance:

  38. Six Sigma Level
  39. Capacity Utilisation Rate (CUR)
  40. Process Waste Level
  41. Order Fulfilment Cycle Time
  42. Delivery In Full, On Time (DIFOT) Rate
  43. Inventory Shrinkage Rate (ISR)
  44. Project Schedule Variance (PSV)
  45. Project Cost Variance (PCV)
  46. Earned Value (EV) Metric
  47. Innovation Pipeline Strength (IPS)
  48. Return on Innovation Investment (ROI2)
  49. Time to Market
  50. First Pass Yield (FPY)
  51. Rework Level
  52. Quality Index
  53. Overall Equipment Effectiveness (OEE)
  54. Process or Machine Downtime Level
  55. First Contact Resolution (FCR)

    Employees and Their Performance:

  56. 56. Human Capital Value Added (HCVA)
  57. 57. Revenue Per Employee
  58. 58. Employee Satisfaction Index
  59. 59. Employee Engagement Level
  60. 60. Staff Advocacy Score
  61. 61. Employee Churn Rate
  62. 62. Average Employee Tenure
  63. 63. Absenteeism Bradford Factor
  64. 64. 360-Degree Feedback Score
  65. 65. Salary Competitiveness Ratio (SCR)
  66. 66. Time to Hire
  67. 67. Training Return on Investment

    Environmental and Social Sustainability Performance:

  68. 68. Carbon Footprint
  69. 69. Water Footprint
  70. 70. Energy Consumption
  71. 71. Saving Levels Due to Conservation and Improvement Efforts
  72. 72. Supply Chain Miles
  73. 73. Waste Reduction Rate
  74. 74. Waste Recycling Rate
  75. 75. Product Recycling Rate

Don't forget to leave your comments below.

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John Parker

John Parker is a seasoned expert in IT strategy, requirements management, business analysis, project management, IT strategic planning, and IT value management. His experience and knowledge span decades, stemming from leadership roles as CIO and strategy consultant for Hospital Sisters Health System; executive vice president and chief technology officer for the national consulting firm MAXIMUS; founder, partner, and executive vice president of Spectrum Consulting Group; and partner at KPMG.

Drawing from his vast knowledge of business analyses and project management, John leads the design and development of Enfocus Requirements Suite’s valuable mind maps, templates, examples, and tools. John also regularly shares his expertise and insights at http://blog.enfocussolutions.com.

John graduated cum laude from Baylor University. He is a Certified Public Accountant and a Certified Systems Professional. He also holds a Certificate of Mastery in Process Reengineering.

Comments  

+2 # Abhay 2014-05-07 14:59
Excellent focus and supporting points.
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0 # Harry Hall 2014-06-02 10:58
Great article. I recommend companies designate early in the project who will measure the actual results at designated time frames (e.g., six months after project completion and again twelve months after project completion).
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0 # Wojciech 2015-01-26 14:44
Good article - thank you - one comment regarding KPI 38. > should not be "Sigma level" instead of "Six Sigma level" ?
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0 # Muzzafar 2015-04-07 05:25
Excellent article. It explained all the key aspects of KPIs and some great examples.
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0 # Rajivsing Jeetoo 2015-10-29 04:07
Excellent piece of precise work.
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0 # Pankaj 2015-11-20 05:02
Good concise and clear article with valuable key points to take away. Thanks for the same.
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0 # Elif 2016-05-06 08:33
Thank you Mr. Parker. All KPI metrics are so useful.
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+1 # Myron 2016-10-04 09:36
Thank you for list of KPIs, they really got me thinking.
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