In order to understand how quickly and efficiently project work is progressing, it is logical to use special evaluation systems — metrics. The idea of combining objectives with numerical expressions of plans was first expressed in the Balanced Scorecard (BSC) system. It was here that the evaluation of KPIs (Key Performance Indicators) was introduced.
Now that the term KPI is on everyone’s lips, how does it relate to management methodologies, especially agile ones?
Below we will take a closer look at what metrics should be emphasised when planning work within projects and project teams.
When and why to use metrics in your projects
Firstly, the whole project team gets effective assessment tools that show how well and how fast the work is going, what has been achieved and what has not been achieved, etc.
Secondly, if the KPIs are chosen correctly, the project manager can effectively manage the overall progress and adjust the work in individual areas or directions (on individual issues) in time.
Thirdly, clients get full transparency and adequate reporting on the team’s core work.
On the other hand, if KPIs are chosen incorrectly, they may well be detrimental to the project, as work will be focused on those tasks that lead to improved metrics and ultimately affect payment, while all other issues may be ignored.
Furthermore, numerical metrics may not be effective in all teams and approaches. After all, not everything can be measured and counted.
The main conclusion is that metrics, if used in your project, should be aligned with the objectives and effectively complement them by setting the pace and providing the right incentive. If this requirement is not met, metrics will have a negative rather than a positive effect.
The second interesting idea is that since the customer is the one who sets the goals for the project’s existence, the metrics should take into account what is directly related to the customer’s request. Metrics that are internal to the team are also acceptable, but priority should be given to metrics that allow, for example, the investors to assess the correctness of their investment and the customers to understand how quickly they will receive the final product.
Metrics that are common to most projects
The most important KPIs for investors will be those that allow them to evaluate:
- Costs — budget, expenses, losses, payroll, payback, etc.
- Timing — the time taken to deliver the project to minimum, basic or full functionality.
- Reach — the accuracy and quality of hitting the interests of the target audience, in fact, such metrics allow you to assess the quality of the product or project.
Project metrics related to budget estimation
Metrics that help evaluate the cost and quality of budget planning include:
- Hit rate (accuracy) of budget planning — expressed as a plan/act ratio using familiar fractions or percentages. The smaller the variance, the higher the quality of planning. Accordingly, separate bonuses can be calculated for the project manager. The most negative situation will be project overruns (actual costs are higher than planned). If there are budget savings without loss of quality, this can also be rewarded.
- Cost-effectiveness index — the project’s effective cost divided by the actual cost. This is an indicator of the project’s profitability.
- Percentage of business objectives achieved. Again, it is simple — you calculate the share or percentage of tasks/goals that you have achieved from the overall list/pool. The higher the metric, the better.
- Budget savings. Since in some niches it is difficult to calculate a real spending plan, a reserve is put into the budget first. It’s usually between 10% and 30%. Sometimes more. The more you save, the better. The KPI is calculated as a percentage of the volume of real overspend in relation to the volume of the reserve.
- Project payback. The amount of total project costs invested over the life of the project divided by the amount of revenue for a given period (week, month, year, quarter, etc.). This metric shows how long it will take for the project to reach net profit — the break-even point.
- Net Profit. This metric is only relevant for projects that have already paid off all their technical debt to budget. This metric is calculated as the difference between the full amount of revenue and the full amount of project maintenance costs.
- Cost per sale (CPO). A metric that allows you to estimate how much it costs to acquire a customer. It is usually calculated as the amount of advertising spend divided by the number of sales.
- Return on Investment (ROI). Actually, the term is not quite correct, it is more accurate to talk about profitability, which is calculated as the ratio of net profit (minus all expenses) to the total amount of expenses. It can be expressed as a fraction or as a percentage.
- Average revenue per user (ARPU) — the total revenue in a given period divided by the number of sales in the same period.
This can include average cheque, net profit, total revenue, percentage of paying users and other metrics relevant to your business.
Project metrics related to timelines and overall progress
There are not so many indicators, but they are there and should be taken into considered:
- Resource consumption rates (plan/actual).
- Employee workload. Usually counted as the number of hours required to complete active tasks from the pool. However, the team may use a different system, e.g. based on free slots. In this case, the share/percentage of free slots is counted (in total or for each team member).
- Work/load dynamics. Can be estimated based on average statistical data from previous reporting periods. How many tasks have been completed, how many are left. Can be calculated as a ratio — for the whole upcoming period or for a specific time period.
- Overall work progress. This is usually the percentage of tasks completed out of the total project pool.
- Efficiency of planning time. Either as a direct ratio of the actual completion time to the planned time. Or as a ratio of the difference (variance) to the plan.
- Team velocity — the amount of work, tasks completed or time spent per sprint. To understand the efficiency of the current stage/sprint, you can calculate its ratio to the average or to the previous value.
- Technical debt growth. A negative metric that allows you to understand the team’s inability to handle the influx of tasks. It is counted as a direct number of uncompleted tasks or as their share of the total (initial) task pool. If dynamics are important, you can introduce period-specific calculations (e.g. sprints, weeks, months).
Project metrics related to quality and coverage
Many financial metrics that allow you to understand the effectiveness of the project and the final product have been mentioned above. But these are not the only metrics for assessing the quality of work. There are others:
- Customer retention — expressed as the ratio of new user growth over a given period to the total number of customers at the beginning of that period.
- Churn rate — the proportion of users who have left during a given (selected) period.
- Customer satisfaction. This can be a complex assessment based on the results of special surveys, or it can be a system of automatic reviews that many people are accustomed to: rating/evaluation of the application in the market and so on.
- Number of active users or growth in active customer base. These are specific numerical indicators or fractions/percentages in relation to previous periods.
- Project visits. The number of new users as well as repeat visits from existing customers.
- Engagement is the number of specific user responses to the project team’s actions: writing reviews, activity in the application and more.
- Retention is a metric that measures the proportion of users who continue to engage with your product over several consecutive reporting periods. The higher the metric, the better the quality of your product and its appeal to your target audience.
- Feedback metrics. Number of negative and positive, percentage increase or decrease, fluctuations in the average rating, etc., with or without reference to separate periods.
Summary
Metrics are often used in project management. But you need to be aware that not only the team’s salary (motivation), but also the whole vector of project development can depend on the choice of the right KPIs.
To minimise the negative impact, you need to have expertise and properly plan the work, risks, budget, schedule and other parameters of the project. To do this, a project manager should use specialist software — BPM systems, tax managers, planners and so on. Specialised programmes will allow a sober assessment of the overall picture of the project as a whole.
For IT teams, project departments, manufacturing and small/medium/large enterprises, we recommend the Projecto cloud service.
