Choosing not to track project management metrics is a bit like trying to guess what’s going to happen with the weather without looking at the forecast. You might be able to tell it’s getting colder, but not by how much. Perhaps you have a hunch that it’s going to rain, but you don’t know when. So, you’re either stuck lumbering your umbrella with you everywhere just in case you need it, or you leave it at home and risk getting soaked. By ignoring the forecast, you’ve hampered your ability to act strategically.
Project management metrics can be thought of in the same way. If you’re not tracking project KPIs, you might still find you get a hunch when things are going wrong (perhaps your cranky, over-utilized project team is staring daggers at you in the daily stand-up meeting). But by the time it gets to that point, it’s often too late to pivot and resolve the problem.
Metrics help you assess the direction your project is heading in before you get stuck going down a negative path. They give you the best chance at rescuing a project before it goes awry.
But project performance metrics aren’t just useful to see where things are going wrong. In fact, if you put the best, most successful projects under a microscope, you’ll have a better chance of replicating that success in the future.
Let’s dive right in and consider how you can measure key metrics in project management effectively.
What are Project Management Metrics?
Project management metrics are data points that you can track and interpret to get an understanding of your project’s status. These metrics are also called project performance metrics, as they are often used to track key elements of project performance, such as whether the project is likely to stay with the agreed budget or timeline.
When leveraged well, project management metrics provide an unambiguous picture of project health, helping Project Managers identify risks before they materialize. In this way, performance metrics are used to inform crucial decisions that keep projects on track. Project Managers can also use metrics to help get approval for additional time, budget, or resources if needed. Solid, unambiguous numbers help build a strong case and make it much more likely that your request for changes will be accepted.
How to use Metrics to Improve Project Management
Metrics are there to make the picture clearer. So if your metrics are just muddying the waters, they aren’t doing their job. In order for the metrics to be worth looking at, Project Managers need to follow good practices around collecting and interpreting data. “For a metric to be effective,” John Webster writes for PM Network, “Data must be well defined, accurate and relevant. In a nutshell, a metric is only as reliable as the data that's fed into it.”
Your methods for collecting and interpreting data will naturally affect how useful the data is. The less manual work and number-crunching required, the less likely it is that human error will creep in and cause problems. Intelligent project management platforms can do a lot of this work in the background, producing real-time visualizations from simple inputs.
A Resource Utilization Report in Forecast, which generates automatically from timesheet entries.
However, it is also worth noting that metrics should not be treated as an end in themselves. If you find yourself and your team focusing on just hitting the right numbers and stats without thinking about the bigger picture, this can result in a harmful deviation from the strategic goals of the business. Metrics should always be in service of you and the business; not the other way around. They can tell a story, but they shouldn’t become the story.
Key Metrics to Measure Project Success
Choosing the right metrics to measure is vital, but these decisions are very context-dependent. What makes sense for one business to measure might not make sense for another. However, some project management KPIs are inevitably relevant in almost every context. You can’t run a business off the back of consistently loss-making projects, so profitability metrics are crucial for everyone. But there may be specific metrics relevant to your sector or context. Construction projects, for instance, pose different occupational health hazards to IT projects. A Project Manager running a construction project might have certain additional health and safety KPIs that factor into their project performance metrics.
Part-way through a project, it may also come to light that you would benefit from measuring something that had not previously appeared important. For example, if you’re starting to notice a worrying trend towards scope creep in the projects that your teams are working on, you might start tracking the number of change requests to identify if something needs to be addressed with your process of client management.
With some project metrics, you may wish to monitor them continuously, to get a picture of the health of your projects. But some metrics might be more useful in a retrospective context, reviewing the overall performance of the project so you can learn for the future.
These are some examples of project management metrics that are useful to track:
- Planned Value (or “Budgeted Cost of Work Scheduled”)
Very simply, this figure is the budget agreed for the work required to complete the project. This metric gets worked out right at the beginning of the project, and generally it won’t change (unless changes to the budget are agreed). The Planned Value is also an essential part of your Baseline - a vital benchmark that helps you measure project progress and, crucially, check that you’re on track.
- Earned Value (or “Budgeted Cost of Work Performed”)
The Earned Value is another one of those metrics that you can use as a benchmark to check whether your project is ahead, on track, or behind. On its own, this metric isn’t that useful as it only tells you what the value of the work should be. Where it becomes very useful is when you start comparing it to Actuals and seeing if you have a variance.
You can work out the Earned Value figure by multiplying the overall Planned Value for the project by the percentage of work completed. For example, if your project had a Planned Value of $100,000, and the work is 30% completed, the Earned Value would be $30,000. You can also work out the Earned Value of a specific phase or task within the project, as well, using the same calculation.
What is key for this metric is to have a clear overview of all the work that comprises your project, so that you can accurately understand what percentage of the work has been completed. Creating a solid Work Breakdown Structure is the best way to get this overview.
- Actual Cost (or “Actual Cost of Work Performed”)
The Actual Cost is the real-world cost actually incurred by work undertaken, rather than just the estimate.
- Budget Variance
When you’re assessing project performance, this metric is crucial. The Budget Variance is the difference between the Planned Value and the Actual Cost. A positive variance (where the Actual Cost is less than the Planned Value) shows that the project is under budget. A negative variance indicates that the project is over budget, because the Actual Cost is more than the Planned Value.
- Utilization Rate
This is a key metric to watch for professional services organizations. The Utilization rate is the amount of time that employees spend working on client-facing tasks vs. the total amount of time that they are available to work.
- Planned Hours vs Actual Time Spent
Not one to miss, this metric can warn you if a project is veering into overrun territory. It measures the variance between the scheduled time estimated to complete the project, vs. the time that has actually been spent on the project. The ideal scenario is that this number is as close to zero as possible. A negative value should ring alarm bells: it means that you’re falling behind. But a positive value, while less panic-inducing, should still prompt your curiosity. It’s very possible in this instance that tasks are being over-estimated.
- Client Satisfaction
Compared to some of the other metrics on our list, this may sound harder to quantify. But even though it is more challenging to measure than straightforward numerical estimates of hours and cost, for instance, it’s absolutely worth looking at ways you can metric client satisfaction.
Repeat clients and retainers are a more stable and predictable source of revenue for professional services organizations, but it can be challenging to get clients to stick. Measuring their level of satisfaction with your service is a great place to start troubleshooting the issues that might be making retention difficult.
But how can you measure Client Satisfaction in a quantifiable way? The Net Promoter Score, developed by Bain & Company, is a popular alternative to the traditional ‘CSAT’ survey, as it identifies how likely a client is to recommend your services to someone else. Measuring client churn can also give you some insight into client satisfaction.
Telling a Story with Metrics
When you are the person closest to a project, all of its idiosyncrasies seem obvious to you. That includes any metrics being measured or any regular reporting that is undertaken. But what is immediately obvious to you might not be clear to someone who spends less time working on that particular project. That’s why it’s so important to choose the right metrics to measure. When you’re presenting them to an external stakeholder, you want to be able to build a data-driven story that gets to the heart of the project in a way that is clear and meaningful.
But building this compelling data story doesn’t have to be onerous. When you use an intelligent project management tool like Forecast, tracking and interpreting project metrics becomes a seamless part of your process, rather than a hefty and time-consuming job. By intelligently connecting budget data, scheduling, and time estimates and entries, Forecast puts the data to work. Whether you are comparing your Actual Cost to your Baseline, tracking Billable Utilization to a target, or looking for tasks that pose an overrun risk, Forecast makes it simple, visual, and dynamic, updating in real-time. As your projects progress and evolve, you can make decisions with confidence knowing that your data is always sound and up-to-date.
Telling strong, clear narratives about your project health really can be simple. To learn how this could look for your business, sign up below for a free, 14-day trial of Forecast, or book a bespoke consultation with our expert team.
And if you're in the mood for more informative content that gets to the heart of metrics and analytics, you won't want to miss our free webinar, From flagging to flying: How to boost your business with advanced analytics.
