10 Key performance indicators (KPIs) every project manager should know
Last updated on: February 22, 2023
Leading projects without periodically collecting performance data is the project management equivalent of walking on a tightrope blindfolded — while your experience and intuition might help you make a few steps forward, they won’t be enough to successfully carry you to the end of the project.
The most important parts of this performance data are called key performance indicators — or KPIs for short.
They allow project managers to measure and understand the performance of their teams — and use that information to control that performance to an extent.
This text will dive into the topic of key performance indicators to give you examples of the most important KPIs in project management and explain:
- What KPIs are,
- Why they are important, and
- How to formulate KPIs for your specific project.
So, let’s dive in.
What are key performance indicators in project management?
According to the definition, key performance indicators (KPIs) are quantifiable measures of progress toward an intended goal.
KPIs can be used to measure the progress of your:
- Program, or
💡 Plaky Pro Tip
Follow the link below to learn the difference between a project and a program, as well as the difference between project and program management:
Measuring the right KPIs allows project managers to see:
- What is going well,
- What’s going badly, and
- What will go badly if things continue in the same direction.
This information enables project managers to make informed decisions and change strategies according to the results.
Types of project management KPIs
KPIs can be sorted into several different categories according to:
- The level of information they provide,
- The direction of information, and
- The area of the project they focus on.
These are not formal categories, but we divided them this way for the sake of better organization.
So, let’s go over each of these categories.
Types of KPIs according to the level of information
Depending on the level of information they provide, there are 3 categories of KPIs in project management:
- Strategic KPIs or outcome KPIs are focused on measuring the progress toward an organization’s strategic goals. They normally offer very high-level information. In other words, they give an overview of how the project is doing, without going into the nitty-gritty. Strategic KPIs are most often used in reports to executives who just want to know how the project is doing overall.
- Operational KPIs show information about the project’s day-to-day, week-to-week, or month-to-month progress. They offer more detailed (lower-level) information on different areas of the project and inform better decision-making based on previous experience.
- Functional KPIs offer detailed (low-level) information about different departments or teams working on a project. Normally, each team will have their own unique KPIs.
Types of KPIs according to the direction of information
Depending on the nature of the information they provide, there are 2 types of KPIs in project management:
- Leading KPIs offer information about the progress toward a certain goal. They help us predict issues or successes that might happen as a result of our actions. Leading indicators are not always accurate — but they help project managers make informed decisions.
- Lagging KPIs show information about things that have already happened. In other words, they help project managers understand how successful they were in their endeavors and why. This way, similar successes can be recreated and similar mistakes avoided in the future.
Types of KPIs according to the area of the project
Depending on the area of the project they focus on, there are 4 main types of KPIs in project management:
- Budget KPIs help determine how the actual expenditure compares to the cost baseline. Is everything going well, or is the project exceeding its allotted budget?
- Quality KPIs measure the perception of the quality of work being performed. Since quality is not always an objective indicator, these KPIs are sometimes measured through surveys, in which case they fall under qualitative KPIs (more about them further in the text).
- Effectiveness KPIs, also known as process KPIs, help you determine how productive you are and how effectively you’re spending your resources.
- Time KPIs measure all relevant information regarding the project schedule — what activities are ahead, behind, or on schedule. They allow project managers to take preventative measures against the project going off track and make more accurate estimates about the project’s completion time.
💡 Plaky Pro Tip
Unexpected issues crop up all the time in project management, and as a result, deadlines often get missed. But there are ways to remedy this. Take a look at how you can get your project back on track if you get behind schedule:
Types of KPIs according to the data source and type
Project Management Institute (PMI) makes another distinction between KPIs depending on where the data is coming from.
According to them, KPIs are divided into 4 additional categories:
- Input KPIs measure all types of resources invested in the project.
- Output KPIs measure the results that the project has yielded.
- Qualitative KPIs measure opinions and perceptions, usually by means of surveys.
- Quantitative KPIs measure data in raw numbers and percentages. Thanks to the clear and objective information they provide, quantitative KPIs are the most common and valuable type of performance indicators.
Why are KPIs important in project management?
Say, your goal is to travel from Florida to New York, but you end up in Texas.
Arriving in Texas isn’t an indicator that you’ve gone off track — it’s the result. Your indicators were all the signposts you encountered on the road over hundreds of miles, but failed to notice.
In project management, key performance indicators fulfill the role of these signposts. All you need to know is where to look for them.
Good and well-spaced KPIs will tell you:
- How your performance has changed over time and in which direction,
- How close/far you are from reaching your goals,
- How efficiently you’re utilizing your budget,
- How well your existing strategy is working, and
- Which areas of the project require your attention.
When the results from measuring KPIs are not favorable, they serve as clues for project managers to figure out what went wrong and how to fix it.
KPIs can also show early signs of an impending disaster and help in preventing it.
But, when the results are good, they prove that everyone’s effort was worth it and therefore act as powerful motivators and morale boosters for project managers and their teams.
How to track KPIs in project management
So, we’ve talked about all the different types of KPIs and why it’s important to track them. But, there’s one more question left to answer — how exactly do you track your key performance indicators in project management?
As it so happens, there are 5 steps that will help you track your KPIs:
- Decide on the KPIs you wish to track,
- Define your KPI targets and frequency,
- Start tracking,
- Share results with your team, and
- Continue tracking your KPIs regularly.
Step #1: Decide on the KPIs you wish to track
This tip might sound silly — of course, you can’t track something if you first haven’t decided what it is you want to track. However, the purpose of this step is to make you think about what KPIs really are — they are key performance indicators, with “key” being the key word.
There are countless performance metrics you might be tempted to track throughout your project — but only a handful are essential to your project’s success.
So, to avoid getting overwhelmed by unnecessary information and wasting time collecting unnecessary data every time a report is due, try to limit your KPIs only to those that really matter.
Step #2: Define your KPI targets and frequency
This one is pretty straightforward, but some project managers still struggle with clearly defining their key performance indicators and their targets.
The catch is to make your KPIs as specific as possible — and, to do that, you should always make them S.M.A.R.T.
The S.M.A.R.T. acronym stands for:
- Specific — KPIs should be defined as clearly as possible to avoid any confusion when collecting and reviewing the results.
- Measurable — KPIs should be quantifiable. A KPI that can’t be objectively measured in cold hard data is unusable.
- Attainable — KPIs should be realistic. Unattainable KPIs will reflect poorly on your team’s morale and negatively affect their performance.
- Relevant — KPIs should be relevant to your project. There are many KPIs a project manager could measure, but only a few (approximately 6–12) will be relevant to your unique situation.
- Time-based — KPIs should be measured within a specific time frame. Usually, this is daily, weekly, or monthly, depending on the type of your project. This timeframe should always be the same so that project managers can accurately track performance over time.
Keep in mind that you might not always be able to set the optimal goals at the very beginning. In those cases, don’t stress about it — use an estimate.
Once you get better acquainted with your project and gain more information, you’ll have a better idea of what’s realistic and what isn’t.
💡 Plaky Pro Tip
For a detailed explanation of why S.M.A.R.T. goals are important and how to implement them in your project, check out our guide below:
Step #3: Start tracking
Now that you know what you’re tracking and what targets you want to hit, you can start tracking.
Make sure your entire team is well-informed about which KPIs you’re focusing on and why — so that everyone is on the same page.
To make the tracking process easier, your best option is to use a project management tool to keep all your information in one place. This way, when the time comes to collect that information, everything is gathered from the same source.
Step #4: Share results with your team
Next, it would be optimal to create a KPI dashboard where your information can be presented in the form of graphs and charts.
Depending on your style of reporting, this can be done via software or on paper and then shared with the rest of your team or your executives as part of your project status report.
Step #5: Continue tracking your KPIs regularly
Keep in mind that your data might not be stellar at first. Like with any statistical report, the more information you collect, the more accurate your results will be — so give it some time.
Furthermore, a single KPI report won’t give you much information. The best KPI report is one that tells a story and answers questions such as:
- How have things changed compared to last time (or over time)?
- What have we done differently since the previous report, and what is the result?
- What should we continue to do in the future, and what practices should be updated?
This information allows you to take a step back and look at your project objectively.
10 Examples of KPIs in project management
Now that you’re aware of the types and importance of key performance indicators for successful project completion, here are 10 examples of KPIs in project management.
Depending on the type of project you’re working on, you can choose an appropriate number of KPIs to track from the list below — or you can create your own unique KPIs to fit your specific project needs.
KPI #1: Net income
This KPI measures a project’s overall profitability. It’s calculated by deducting the cost of all resources used from the project’s total revenue.
You may track this KPI at the end of the project or compare your earnings over time by tracking it during the project.
KPI #2: Return on investment (ROI)
This KPI is another important measure of profitability in project management. It’s measured by using the formula:
ROI (%) = Net income / investment x 100
ROI can be used to calculate how much a project investment is worth — but also to compare the value of several different projects to determine which one the organization should take up.
KPI #3: Budget variance
This KPI shows the efficiency of budget management by measuring the actual funds spent compared to the estimated expenditure.
Signs of misalignment of these two measures allow project managers to make early changes to the plan before the entire project goes off the rails.
💡 Plaky Pro Tip
Budget management can be tricky. To prevent large discrepancies between your planned and actual spending, try a few of the top budgeting methods out there:
KPI #4: Project cycle time
This KPI shows how long it takes to complete a task from its inception.
Calculating average cycle times can help project managers estimate the project timeline and create schedules more accurately.
KPI #5: Project lead time
This KPI shows how long it takes a task to get completed from the moment it’s created (not from the moment you start working on it).
Lead time shows your team’s efficiency — the lower the lead time, the more efficient the team.
KPI #6: Schedule variance
This KPI benchmarks current progress against the schedule baseline to determine whether the project is ahead or behind schedule.
So, schedule variance measures how far the project has progressed compared to estimated progress.
KPI #7: Planned hours vs time spent
This KPI measures the time spent to reach the desired level of progress compared to the time the project manager estimated it would take.
Many project managers can fall into the planning fallacy trap. According to this fallacy, people tend to underestimate the time needed to complete a task, even if the estimate contradicts their previous experience.
By keeping track of the planned vs actual time spent on each task, project managers can recognize early signs of having fallen for the planning fallacy trap and adjust their schedules accordingly.
KPI #8: Customer satisfaction
This KPI falls in the category of qualitative KPIs as it is usually determined with the help of surveys.
It shows how happy the customers are with the development of the project so far, or how likely they are to stay loyal to the organization performing the project.
KPI #9: Number of change requests
This KPI measures how many times the client has requested that changes be made to the already agreed upon scope of work.
The more changes are made, the greater the chance of project failure or low project quality.
KPI #10: Number of returns
If your project includes the creation and selling of a physical product, the number of returned items is a good indicator of product quality and customer satisfaction.
It’s similar if you’re working with a third-party contractor. The number of returns may indicate your ability to properly plan the project and choose a good contractor by measuring the times you return the delivered product due to low quality.
Conclusion: Tracking KPIs is crucial for project success
Key performance indicators are the most important measures of project performance. While there are many performance indicators a project manager could track, only KPIs are vital to project success.
By carefully choosing the KPIs you wish to track, you arm yourself with the information that will help you:
- Have a constant bird’s eye view of the project’s performance,
- Understand the variables that boost or impede your performance, and
- Notice early signs of problematic issues and react to them in time.
✉️ Do you track KPIs? Do you find them helpful? What are the KPIs you tend to track most often? If you have an interesting story, or a suggestion you’d like to share with us, email us at email@example.com, and we might include some of them in one of the future updates. And, if you liked this post and found it useful, share it with someone you think would benefit from it.