Measuring Project Success Using Business KPIs
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.
- Net Profit
- Net Profit Margin
- Gross Profit Margin
- Operating Profit Margin
- Revenue Growth Rate
- Total Shareholder Return (TSR)
- Economic Value Added (EVA)
- Return on Investment (ROI)
- Return on Capital Employed (ROCE)
- Return on Assets (ROA)
- Return on Equity (ROE)
- Debt-to-Equity (D/E) Ratio
- Cash Conversion Cycle (CCC)
- Working Capital Ratio
- Operating Expense Ratio (OER)
- CAPEX to Sales Ratio
- Price Earnings Ratio (P/E Ratio)
- Net Promoter Score (NPS)
- Customer Retention Rate
- Customer Satisfaction Index
- Customer Profitability Score
- Customer Lifetime Value
- Customer Turnover Rate
- Customer Engagement
- Customer Complaints
Market and marketing efforts:
- Market Growth Rate
- Market Share
- Brand Equity
- Cost per Lead
- Conversion Rate
- Search Engine Rankings (by keyword) and click-through rate
- Page Views and Bounce Rate
- Customer Online Engagement Level
- Online Share of Voice (OSOV)
- Social Networking Footprint
- Klout Score
- Six Sigma Level
- Capacity Utilisation Rate (CUR)
- Process Waste Level
- Order Fulfilment Cycle Time
- Delivery In Full, On Time (DIFOT) Rate
- Inventory Shrinkage Rate (ISR)
- Project Schedule Variance (PSV)
- Project Cost Variance (PCV)
- Earned Value (EV) Metric
- Innovation Pipeline Strength (IPS)
- Return on Innovation Investment (ROI2)
- Time to Market
- First Pass Yield (FPY)
- Rework Level
- Quality Index
- Overall Equipment Effectiveness (OEE)
- Process or Machine Downtime Level
- First Contact Resolution (FCR)
Employees and Their Performance:
- 56. Human Capital Value Added (HCVA)
- 57. Revenue Per Employee
- 58. Employee Satisfaction Index
- 59. Employee Engagement Level
- 60. Staff Advocacy Score
- 61. Employee Churn Rate
- 62. Average Employee Tenure
- 63. Absenteeism Bradford Factor
- 64. 360-Degree Feedback Score
- 65. Salary Competitiveness Ratio (SCR)
- 66. Time to Hire
- 67. Training Return on Investment
Environmental and Social Sustainability Performance:
- 68. Carbon Footprint
- 69. Water Footprint
- 70. Energy Consumption
- 71. Saving Levels Due to Conservation and Improvement Efforts
- 72. Supply Chain Miles
- 73. Waste Reduction Rate
- 74. Waste Recycling Rate
- 75. Product Recycling Rate
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