24. June 2021 By Sandra Weis
Success in projects with key performance indicators
Long gone are the days when the project manager could tell the steering committee and the stakeholders that everything was fine and they’d happily accept that statement as fact. Stakeholders want to see more and, above all, verified information and data. That’s why key performance indicators (KPIs) are being increasingly used as a control and steering instrument in companies and in projects. Managers also require them to be met. The term originates from business management and refers to metrics that are used to measure the success of a strategy or project, for instance.
Nowadays, it’s the norm to present the progress of a project using KPIs and to use them as a control instrument. The KPIs are regularly reviewed and analysed, strengths and weaknesses are identified (in relation to risk management, too) and measures are derived and implemented.
Advantages created by KPIs
A company or project uses KPIs, for example
- to evaluate the success of a project.
- to review the project to see if the actual KPIs match the planned KPIs.
- to analyse why the actual KPIs differ from the planned ones.
- to derive and implement measures if the actual and planned KPIs differ.
- to evaluate the effectiveness and success of the derived and implemented measures.
- to prioritise issues, activities and/or work packages.
- to prepare forecasts.
- to quickly and transparently inform stakeholders of the status of the project and present a forecast.
KPIs in projects
There are number of KPIs that are used in projects to measure the success of those projects. Here are just some of the possible KPIs that could be used in a project:
- Project budget
- Project duration
- Project budget that has been used
- Cost difference
- Expected residual costs
- Cost development index
- Planned total workload
- Total workload to date
- Expected total workload
- Completion status
- Planned residual workload
Challenges in defining and calculating KPIs
Realistic and meaningful KPIs are crucial for evaluating the success of a project and preparing forecasts. Various systems and tools are used in projects that can evaluate most of the required key figures automatically. This includes, for example, the planned and used project budget and the planned workload and workload to date. In practice, it’s unclear to managers a lot of the time as to which key figures the stakeholders need and how these should be calculated – especially in terms of what technical options are available to them so they can evaluate the KPIs directly from the relevant systems. It’s often the case that managers aren’t the ones calculating the key figures, but rather one or more employees. If an employee or even several employees fail to provide the information or data required, then it won’t be available when it’s needed and/or is incorrect.
In addition, some key figures required estimates, such as the expected total workload. Misjudging these, either consciously or accidentally, will distort the results. This may be because the employee responsible for providing the estimate lacks the knowledge or experience in how to calculate them. The corporate culture and general conditions at the company also have an influence that should not be underestimated. If stakeholders expect too much from the project and the delivery of the KPIs, it can have a counterproductive effect on the quality of the key figures, especially if the project manager and their project staff face sanctions for not achieving the targets, for instance. There is a risk that the KPIs will be presented with something of a gloss on them, thereby distorting the results and preventing important measures from being derived and implemented. This leads to the project objectives not being achieved.
Defining and calculating KPIs
The project manager and the stakeholders should jointly determine which KPIs are necessary and useful, as well as who should deliver them, how they should deliver them and by when, before the project even starts. Here are a few of the questions we recommend that the project manager and stakeholders ask themselves when determining the KPIs:
- Determining KPIs
- Which key figures are necessary and useful?
- Who needs which KPIs?
- By which date or at what intervals are these required?
- How will the KPIs be determined (mechanically or manually)?
- Who will determine the KPIs?
- Presenting KPIs
- How will the KPIs be presented and by whom (for example, by the project manager using dashboards)?
- Who informs whom about the KPIs?
Success factors for defining and calculating KPIs
Taking a structured approach is not the only factor for success when determining and calculating KPIs – it’s vital to make full use of the technical options available to you, too. The employees responsible for the KPIs need the appropriate systems and tools as well as the necessary access authorisations. It’s also important to know about the evaluation options available in the systems and tools, how to prepare the information and data to determine the KPIs (on a technical level) and how to present the KPIs.
Estimates for KPIs should be performed by experienced employees who possess the technical and operational expertise. Where appropriate, the stakeholders should be provided with the necessary theoretical knowledge and practical experience on KPIs.
The corporate culture and the frameworks must be designed in a way that prioritises honesty, especially in the project. Trust plays a fundamental role here. Open-minded stakeholders with realistic expectations of those involved in the project and motivating communication promote openness and loyalty among the project participants in particular – especially in difficult times.
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