Five Project Management Performance Metrics key to Successful Project Execution Operational

Excellence

If you dont measure something, you cant change it. The process of leadership is one of painting a vision, then
saying how youre going to get there, and then measuring whether youre actually getting there. Otherwise, you
risk only talking about great things but not accomplishing them. Mitt Romney
Continual improvement is a prerequisite for any organizations success. A continual improvement process,
also often called a continuous improvement process (abbreviated as CIP or CI), is an ongoing effort to
improve products, services, or processes. These efforts can seek incremental improvement over time or
breakthrough improvement all at once. Delivery (customer valued) processes are constantly evaluated and
improved in the light of their efficiency, effectiveness and flexibility (Wiki).

Gauging whether there is incremental improvement and setting up mechanisms to track and measure these
improvements is the difficult part and this is where Metrics come in. I am passionate about metrics and have
written about my favourite performance management metrics in business,sales and human resourcesearlier. In this
guest post, Kavita Verma draws upon her PMO experiences to list the most effective metrics that can be used by
project managers to determine the success of their projects.
Metric is defined as Standard of measurement by which efficiency, progress, performance, productivity, quality of
a deliverable, process, project or product can be assessed. Metrics help in building predictability, improving
organizations decision making ability, and lay out what is working and what is not working within the organization
and help guide the management focus in the right directions.
Project management performance metrics enable Project managers to:
Assess status of ongoing project in terms of schedule, cost and profitability.
Foresee any potential risks.
Nail down the problems much before they become severe.
Keep a check on project profitability.
Assess productivity of team.
Assess quality of work products to be delivered.
There can be different project management metrics defined based on complexity and nature of project. However,
following five performance metric groups cover all the important aspects of a project to measure during
execution:
Performance Metric #1: Schedule and Effort/Cost Variance
The goal of this metric is to measure the performance as well as progress of the project against signed
baselines. This metric is very important and is the base for profitability of project. The EVM (Earned Value
Management) concept, as defined by PMI standard PMBOK, is the commonly used method to track this metric. It
integrates project scope, cost and schedule measures to help the PM to assess and measure project
performance and progress. The principles of EVM can be applied to all projects, in any industry. Under this
method, at any given point in time, project performance to date is used to extrapolate the expected costs and
duration at project completion. This technique uses past performance (i.e. actuals) to more accurately forecast
future performance. EVM develops and monitors three key dimensions of each work package:
Planned Value (PV): How much you planned to spend for the work you planned to do i.e. it is the authorized
budget assigned to the work to be accomplished for an activity or work breakdown structure component. Total PV
is also known as Budget at Completion (BAC). PV at any stage = (Planned % Complete) X (BAC)
Earned Value (EV): Earned value is the value of work performed expressed in terms of the approved budget
assigned to that work for an activity or work breakdown structure component. It is the authorized work that has
been completed, against the authorized budget for such completed work i.e. EV is how much you planned to
spend for the work you actually did. Earned Value is also known as the Budgeted Cost of Work Performed
(BCWP).
Actual cost (AC): Actual cost is the total cost actually incurred and recorded in accomplishing work performed
for an activity or work breakdown structure component. It is the total cost incurred in accomplishing the work that
the EV measured. I.e. how much you spent for the work you actually did. Actual Cost is also known as the Actual
Cost of Work Performed (ACWP).
Using these three variables project Schedule variance and Cost variance metrics can be derived which shows if
the project is running over or under budget; project is running behind or ahead of schedule, as follows:
Schedule Variance (SV) is the measure of schedule performance of the project. It is the difference of Earned
value and the planned value i.e. SV = EV PV
Positive result means that you are ahead of schedule.
Negative result means that you are behind schedule.
Cost Variance (CV) is the measure of cost performance on the project. It is equal to earned value (EV) minus
actual costs (AC). Any negative CV is often non-recoverable to the project.
CV = EV AC
Positive result means that you are under budget.
Negative result means that you are over budget.

Since EVM method allows PM to extrapolate the expected costs and duration at project completion based on
project performance to date, PM can develop a forecast for the estimate at completion (EAC) which may differ
from the budget at completion (BAC) based on project performance. Forecasting of EAC involves making
estimates or prediction of conditions and events in the projects future based on information and knowledge
available at the time of forecasting. EAC is typically based on actual cost (AC) incurred for work completed, plus
an estimate to complete (ETC) the remaining work. I.e. EAC = AC + ETC.
Based on this PM can also derive another metric, Variance at completion (VAC) = BAC EAC

Performance Metric #2 Productivity: Resource Utilization
The objective of this metric is to measure productivity of resources involved in project and let PM assess over or
under-utilization cases.
Utilization% = Total Effort spent by resource/Total Budgeted Effort for the resource
Budgeted effort is the planned billable work of resource. Any over-utilization and under-utilization indicated by this
metric has an impact on the projects profitability. It is important for the PM to track this metric very closely and
find out the reason for deviations and the action items to bring back resource utilization to optimal level. Delayed
projects, increased ramp up activities, less work provided by customer, unplanned vacations, less competent
resources can impact this metric. To get better control over this metric, robust time reporting systems should be
available in the organization. Using this, PM can analyze effort distribution across different project
phases/activities. For e.g. Effort distribution can tell PM that how much effort is being spent on defect resolution,
customer support or design activities. PM can take corrective actions based on this, if required. For instance, if
the resource is complaining that customer support is taking considerable time but the effort distribution shows it
otherwise, PM can see where the corrections are needed on what resource is doing. Effort distribution from time
reporting systems can also tell the areas of improvement for better estimations/planning for the next project.

Performance Metric #3: Change requests to Scope of work
Signed Scope baseline with customer forms the baseline for the entire project planning and development. Any
change to signed scope should happen in controlled manner. So here comes another important metric for PM to
track i.e. the number of change requests coming from customer for the already signed scope of work. Each and
every change request, once approved by internal change control board (CCB), requires update to Scope baseline
which in turn has a cascade impact on cost baselines and schedule baselines and resource plans. Uncontrolled
change requests often result in project scope creep and further impact negatively on the project cost/schedule,
which is the worst thing to happen for any project. PM should never allow such scope creep. Based on the
magnitude of the variance from original scope baseline, CCB should decide whether to accept or reject the
change request and this decision should be communicated back to customer. In case of acceptance of change
request, the impact on project cost and schedule should be clearly communicated in written form to customer and
a written agreement from customer secured on those from customer before proceeding.

Performance Metric #4: Quality and Customer Satisfaction
Throughout the execution of project, Quality Assurance should always be on the radar of project manager.
Quality here is defined as the number of severe, medium or low defects delivered through the lifetime of the
project. It indicates the health of the deliverable to the end user and drives the Customer Satisfaction. PM needs
to define, based on project type, what severe, low and medium means. Quality should be reported throughout the
life of the project; the later defects are caught, the more impact they will have on the project. Under quality
metrics, following are the key ones to track:
Defect density = Total number of defects found/ Measure of size.
For e.g. in case of software projects this can be: how many defects are found in 1KLOC (Kilo line of code). In
general, size measure can be considered as planned effort like person day total planned effort.
Defect age
Number of days since the defect is open and not fixed. It can also be inferred as the time customer has been
waiting for their issues to get resolved,
Defect resolution rate = Total number of defects resolved/ Total effort spent
Rate of closing the open defects over a period of time. If the rate of resolution is not in line with the defects being
opened over a particular time, this indicates to the PM a situation of concern.

Number of defects reported by customer
PM should keep this as a separate metric to differentiate from the defects reported out of internal testing and the
defects reported by end user i.e. Customer. Customer satisfaction depends a lot on the quality of deliverable
provided and on how fast defects raised by customer are resolved.
As said above, the later defects are caught, the more impact they will have on the project, it is worth to mention
here about Paretos principle i.e. 80/20 principle, which PM can use to categorize causes of defects and late time
entry relationship. As per this law 80% of the problems are due to 20% of the causes. PM can concentrate on
these 20% causes impacting the project most.

Performance Metric #5: Gross Margin
Gross Margin (as I wrote in my earlier post on key performance metrics) is the mother of all metrics and the
quickest way to determine if your business in on track or not and acts as an early warning system to put in place
margin improvement initiatives. Ultimate goal of project execution is to bring revenue to organization with the
approved gross margin. Gross margin (GM) is basically the difference of total revenue and the total cost spent on
project i.e. profit.
When a project is started, certain GM levels for the project are approved by project sponsor. This approved GM
value is generally based on project scope definition, duration, a forecast of resources: onsite, offshore and
organizations investment analysis. Project PNL (Profit and Loss) statement gives a way to PM for tracking
his/her projects GM metric at any point of time. For this, PNL statements and forecasts should be current
documents i.e. changes in project parameters need to be reflected quickly in this statement to keep the PM
informed about any potential risks to project profitability. All the above four project management performance
metrics impact this metric, if not handled in controlled manner. A good organizational level PNL tool rather than
manual excel sheets reduces the overhead on PM here.
While working with all of these metrics, following points should be very clear in the project managers mind:
What to measure
How to measure
How to gather data to measure and represent
How to analyze gathered data and what actions to be defined based on that
How to show improved effectiveness of metrics by using improved numbers before and after
In my view these five project management performance metrics are critical metrics to be tracked while taking
charge and during execution of a project. The continued analysis of these metrics provides additional insights into
what is working and what is not, allowing the PM to make appropriate improvements. These metrics also help in
building up historical data for similar kind of projects so that in future, better project planning can be done.
Success story of project can be then built up based on the effectiveness of defined metrics by showing the
improved numbers before and after. This ensures that the effort spent by team in collection and measurement
of data for these metrics is leading to continuous improvements and not just an overhead activity.
In summary, metrics improve decision making ability by providing the foundation and rationale for the decision by
making explicit what is usually implicit in the decision-making process.
So what are your experiences when it comes to project management performance metrics and tracking? What
are some of the other project management metrics you have been tracking? We would love to hear and learn
from you.
References: www.PMI .org : PMBOK