I’m sure you’d agree that measuring project management metrics is the only way to really improve your agency’s output.
Sure, you might be able to identify inefficiencies and make small tweaks here and there.
But big changes only come from taking accurate measurements of project progress against some important, well-defined key performance indicators (KPIs).
Of course, figuring out which metrics to measure isn’t always easy.
So that’s why I’ve put together this post:
To show you 5 project management metrics that measure your efficiency and effectiveness.
You’ll see exactly how you you can monitor and measure your team’s progress so that you can make adjustments and maximize your agency’s profitability.
Sound interesting? Then let’s get started.
Wait, Isn’t Project Completion the Only Metric that Matters?
Look, of course it’s important to track and measure how frequently you’re hitting deadlines.
But you know there’s a lot more that goes into deeming a project “successful” than just delivering on time.
And that’s why you need to set SMART goals for each stage of the project.
SMART goals uncover inefficiencies and optimize your project flow for fast, efficient delivery of your agency’s best work.
But what does it actually mean for a goal to be “SMART” in project management?
Let’s say you wanted to reduce scope creep like I discussed in a recent post.
Here’s what that would look like in a SMART goal format:
- Specific: Reduce the impact of scope creep requests by 25 percent on upcoming project
- Measurable: Scope creep currently costs our agency an estimated $2,000 per month.
- Attainable: Yes. After reading the recent post on Zapty, I have some ideas on how to reduce scope creep.
- Relevant: Reducing scope creep will improve project profitability.
- Time-Based: Upcoming project will take 2 months.
That gives us a formal KPI to measure success against (as opposed to the generic “reduce scope creep” goal).
Makes sense, right?
But, I’m sure you’re wondering:
So What Project Management Metrics Do I Need to Be Measuring?
A quick Google search for “project management metrics” will bring up thousands of results with any number of different KPIs to focus on.
The problem is, those sites list sometimes 10 or 20 different metrics to look at.
And if you’re just getting started with measuring project management metrics, that can be a bit overwhelming.
That’s why I put together this short list of the five essential project KPIs you need to establish in your agency now.
Each of these metrics will help you easily spot inefficiencies in your project management process so you can quickly get started on putting a fix in place.
So, let’s start with a key metric for ensuring you stay on budget:
#1 & #2. Earned Value and Cost Variance
These two go hand-in-hand.
I’m sure you’re familiar with the concept of the “Iron Triangle” and how the quality of your work depends on a balance of resources, scope, and schedule.
But you may not know that one of the key metrics you can uncover by using the “Iron Triangle” is something called “earned value.”
Earned value is the measure of how much you have earned from the budget spent to date.
It’s an important metric for project managers because it let’s you know whether the budget you’ve spent is proportionate to the amount of work you’ve completed.
Michael S. Wilson explains it further over on the 4castplus blog:
“When asked about where their project stands against initial budget and schedule, most project managers will have a pretty good idea. They’d be able to tell you something like, “We’re running quite close to budget”, or “We’re almost half done”. However, without the tools and tracking to provide sufficient substance to those statements, gut-feel assertions like that are often dangerous guesses that can lead to cost overruns and delays.”
Here’s the formula used to measure it:
Earned Value = % of completed work X BAC (Budget at Completion).
So, let’s say you’re three-quarters of the way through a project budget of $100,000 but only 50 percent of the work is complete.
That would mean your earned value is $50,000.
And here’s where cost variance comes into play.
Cost variance tells you your completed work cost compared to the actual cost.
So in this example you would take my completed work cost (earned value) and subtract the actual amount of budget spent.
$50,000 – $75,000 = -$25,000
So in this situation, I am currently $25,000 over budget on this project (yikes!).
I’m sure you can see how this metric is valuable in keeping the team on-budget and ensuring you don’t find yourself with negative profit margins on a project.
But you can forecast your profit margin in several different ways.
Here’s another one:
#3. Resource Utilization
At the start of a project, I’m sure you make a rough estimate of the number of hours it’ll take for each piece to get complete.
Development needs 100 hours, design another 150, engineering needs 400…and so on.
But how often do you actually check that you’re on pace with those estimates once the project is up and running?
I’d bet it’s not all that often.
Measuring resource utilization shows how effectively you’re utilizing team members.
By comparing the estimated work hours determined at the start of a project to the actual time spent on the project, you get a good idea of any potential threats to going over budget.
If your design team is already approaching 150 hours and only 30 percent of the way through the work, then it’s a good indication you may need to make some adjustments to accommodate more time.
(NOTE: This is also where good project management software can really help you. A tool like Zapty gives you a high-level view of project completion so you can measure and forecast potential resource utilization issues long before they cause major disruptions.)
#4. Measurement of Scope Creep
I mentioned this briefly in my example earlier as well as in this previous post, but it’s worth bringing up again for one important reason:
Scope creep can be one of the biggest differentiators between whether a project is profitable or not.
Remember: “scope” is one of the three points of the “Iron Triangle,” so if it goes out-of-whack, the quality of your project inevitably suffers.
“[A]dding scope increases the amount of work to be done which increases cost or forces other scope to be deprioritized. This, in turn, extends project timelines, requires additional staff, or decreases the quality of the finished product.”
That’s why you need to measure two key aspects:
- How often are new requests for changes to the scope of a project coming in?
Take a look at how frequently you receive scope creep requests and the stages in your projects where they’re most likely to occur.
- And what’s the dollar amount correlated to those changes?
This is the more important part. One large scope creep request can be far more damaging than several small ones. Track the dollar amount of any scope creep – whether you bill the client for it or not.
#5. Customer Satisfaction
Of course, not all metrics need to be internal project measures.
It’s important to regularly check in with your clients to measure their level of satisfaction in two key areas:
Are you effectively communicating with the client about important benchmarks and deadlines?
Does the client feel they know who to contact and how?
Is the client satisfied with the frequency of your check-ins and updates?
All important questions to ask that gauge customer satisfaction.
This one is a bit more simple and you can boil it down to one question:
Is the client happy with their return on investment so far?
Of course, your reputation – including future work with the client and potential referrals – hinges on their answer to this particular question.
So if you get a “no,” do what you can to turn that into a “yes.”
And One Bonus Metric…
Of course, this is the most important metric of all.
Did the overall revenue of the project exceed the cost to generate profit for your agency?
And is that profit within the range of your gross margin?
When projects consistently fall outside your gross margins set at the start of a project, you know there’s opportunity to tighten up your project management flow.
And now that you have these key project management metrics, you’ll be able to figure out exactly where inefficiencies come from and make immediate improvements.