Beki Zajac | PMP, PMI-ACP, PMO-CP

KPIs aren’t just about reporting. They’re about leadership.

When you’re setting up a Project Management Office (PMO) or maturing your project management practice, how do you know whether you’re making progress? You’ve got to have a vision, of course, but then you also need to set tangible goals, objectives, and specific measures that can help you assess your progress along the way.

This is where Key Performance Indicators (or KPIs) come in.

What is a Key Performance Indicator?

A KPI is “a measurement used to define whether an organization, team or employee is meeting a predefined goal” and can be either a leading or lagging indicator.

A leading indicator is something that gives you an early indication of your likelihood to meet a goal. A classic example might be daily sales volume (number or value of transactions each day).

A lagging indicator is something you can assess after the fact to see whether you met your goal. For the sales example, this might be monthly gross profit.

Organizations typically care the most about the lagging indicators. These are the ones that make it into Annual Reports. But by the time you can assess these to identify whether you’re under target, it’s too late to change course. You’ve either hit your goal or missed it.

By tracking a leading indicator linked to your lagging indicator, though, like daily sales volume, you can see troubling trends earlier. This allows you to make adjustments before you see your final results at the end of the month and improve your likelihood of achieving your goal.

You can see how important it is to develop both sets of KPIs for key activities.

Why does this matter for a PMO?

Your project management practice is the same. Lagging indicators may be things like the percentage of projects completed under budget or the percentage of projects completed on schedule. These are both important indicators of project health, and typically the only things your executive team will really care about, but they can only be measured after each project is over. And then, what’s done is done.

To help improve your project delivery practice, you should also be identifying leading indicators that can provide an early warning for potential issues in your important lagging indicators. These will change depending on what’s important to your organization:

• If you’re most concerned with budget overruns, you can look at things like the Cost Variance (CV), Cost Performance Index (CPI), or To-Complete Cost Performance Index (TCPI).
• If you’re most concerned with schedule overruns, you can look at the Schedule Variance (SV), Schedule Performance Index (SPI), or To-Complete Schedule Performance Index (TCSPI).

Monitoring these types of leading indicators over the life of the project allows you to identify issues early and work with project managers to make changes before the project is actually late or over-budget.

If you’re responsible for a PMO or a project delivery team, also consider looking beyond projects to the system that delivers them. For young PMOs, it is helpful to track measures related to skills building, like Number of Training Hours Delivered, or related to process improvement, like Number of Procedures Documented or Number of Processes Mapped. You can also audit key deliverables, such as risk logs or status reports, and create measures for the consistency or quality of these important deliverables.

Whatever you decide to include as a KPI for your projects and teams, ensure that you’re asking yourself whether each metric links to an important success factor. KPIs aren’t just about reporting. They’re about leadership.

Remember: what gets measured gets managed, so ensure you’re measuring the right things to drive the behaviours you want to see in your teams.