A key performance indicator or KPI is a measured value indicating how effective an organization is in achieving its key business goals. In the context of project management, it demonstrates how successful the project was in benefiting all the people involved: stakeholders, customers, employees, and the community as well. Without KPIs, it would not be possible to assess the progress of the projects towards fulfilling the goals set.
Here are six such key performance indicators that will ensure success in managing your project portfolio.
1. Customer satisfaction
Our service at the end of the day is to serve our customers and clients. So, the ultimate measure of success in a project is customer satisfaction. Surveys are carried out to get their feedback. After that is calculated as (total points from the survey) * 100 /(number of questions).
2. Productivity
Productivity measures the output of a resource as compared to its input. For every unit of input, what is the output? One way to measure this would be revenue per employee; the ratio of revenue per employee to the average salary per employee gives a productivity ratio for the organization. We could measure the number of projects done per employee or the number of lines of code per employee as well.
3. Cost efficiency
Cost Performance Index is the ratio of the value earned and the cost incurred to obtain that value. This helps organizations reduce financial risk by keeping the capital cost in check and allocating the capital wisely.
4. Time
The time taken from the beginning to the end of a project is referred to as the cycle time. Similar schemes can have a standard benchmark of cycle time to measure against. A shorter cycle time means a faster return on investment to the organization. Also, giving time for more projects to be taken up.
5. Return on investment (ROI)
ROI can be calculated as the total benefit divided by the total cost, expressed as a percentage (multiply by 100). It measures the returns for every dollar invested. Benefits can include the profits, cost savings, increased outputs expressed as a dollar amount while costs can consist of the cost of resources, travel expenses, cost of design and maintenance of a project, etc.
6. Alignment with goals of the organization
You also need to measure if the projects you are doing are right for you keeping in mind the purposes of the organization as a whole. Surveys can be conducted along with alignment ratings where the business managers, leaders and project managers are the participants.
With these KPIs in mind, you are on your way to effectively manage any project that serves the goals of your organization.
With expertise in project management and a keen focus on performance metrics, I can guide you through the intricacies of key performance indicators (KPIs) and their application in managing project portfolios. Let's delve into the concepts within the article you provided:
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Customer Satisfaction: This KPI measures the success of a project in meeting customer expectations. Surveys gather feedback to calculate a satisfaction score, often computed as a percentage using a formula based on the total points from the survey divided by the number of questions.
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Productivity: Productivity evaluates output against input. Metrics such as revenue per employee, projects completed per employee, or lines of code per employee assess the organization's efficiency and resource utilization.
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Cost Efficiency: The Cost Performance Index assesses the value earned versus the cost incurred, aiding in managing financial risk and resource allocation effectively.
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Time: Time-based KPIs, like cycle time, gauge the duration from project initiation to completion. Shorter cycle times imply quicker returns on investment, allowing for more projects to be undertaken within a given timeframe.
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Return on Investment (ROI): ROI measures the benefits obtained relative to the total cost invested, often expressed as a percentage. It encompasses factors like profits, cost savings, and increased outputs against expenses like resources, travel, design, and maintenance costs.
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Alignment with Organizational Goals: Evaluating if projects align with the overarching goals of the organization involves conducting surveys and alignment ratings involving business managers, leaders, and project managers. This ensures that projects support the organization's broader objectives.
Effectively utilizing these KPIs empowers project managers to monitor, evaluate, and steer projects toward meeting organizational goals. They serve as crucial metrics, offering insights into project performance and aiding in informed decision-making for enhanced project management and success.
