The secret behind effective KPIs every project manager should know

The worst fear of every project manager is most definitely that the project may fail. To make matters worse, the fear is not ungrounded. Projects can fail for numerous reasons. A “good old” budget overrun can kill it, as well as scheduling delays, supply chain issues, scope creep, etc.

That is why tracking project health in all key areas is of the utmost importance. Understanding KPIs and their value are vital to project success. However, almost 60% of all project teams (with a project manager in the first line) fail to effectively track key performance indicators (KPIs) in real time.

And what is a KPI anyway?

KPI is a key performance indicator. It is a quantifiable measure of performance over time for a specific objective. Once well set, they can provide targets for teams to meet, milestones to calculate and calibrate progress, and insights that help employees within the company make sound project decisions. As a result, KPIs stimulate every business area – from finance and HR to marketing and sales – to move forward at the strategic level.

How important are KPIs?


Monitoring KPIs in real time ensures that the team supports the organization’s overall goals. Need more reasons? Ok, here they are:

  • KPIs keep a team aligned. All your teams will move in the same direction once you set a reliable measure of the project success or employee performance.
  • KPIs make constructive adjustments. Once you have all successes and failures in front of you, your team can do much more of what’s working and less of what’s not.
  • KPIs provide an adequate health check. Indicators measured and defined by crucial performance analysis offer a realistic look at the health of your organization, from risk factors to financial indicators.
  • KPIs keep your teams accountable. Since the KPIs depend on values provided by each team member, employees can track their progress and, by doing so, help managers move things further.

Let us remember stakeholders.

This group is always tuned, waiting to see whether the results fit their strategic goals. Besides delivering a project on time and within the budget, this is yet another responsibility of a PM. Therefore, KPIs are important in the stakeholder’s issue since they can link the strategic objectives and project goals. This can significantly reduce erosion on all levels – among project managers, employees, shareholders, and customers.

KPIs are an effective control tool!

Once implemented into the workflow, KPIs provide performance evaluation long before the project is completed. PM can measure periodic progress against set targets, determining if the project is headed in the right direction.

Also, KPIs are important for choosing the approach at any given moment. These indicators can be used to adapt and appoint the way of achieving project success at any stage and according to the detailed KPIs. 

How to create KPIs

First, KPIs must be linked to the strategy and the most critical matters. Second, they provide the correct answers to all crucial questions. Third, they must be designed to empower people, providing them with the relevant information to learn from and carefully choose the next step.

What is a good KPI?

A good KPI should be connected tightly with corporate goals. It must be decided by the management and serve as the leading indicator of performance desired by the organization. Of course, they ought to be easy to understand and change only if there is a fundamental shift in business objectives.

For that matter, KPIs change as objectives are met or management shifts the focus.

Important KPIs and when they should be used 

Defining a list of the most important KPIs is the best way to monitor the health of your projects. Here are some to begin with:

  • Budget variance – Essential to measure if a project’s actual budget varies from its projected budget and by how much by determining the distance between baseline expenses or revenue and the expected value.
  • Cost variance – Basically, this is the planned budget vs. the actual budget. This demonstrates if the estimated project cost is above or below the planned baseline. The KPI helps determine when you jump from the previously approved budgets.
  • Cost performance index – This KPI compares budgeted work costs with actual costs, measuring project expense efficiency.
  • Earned value – Determines how much of the planned work is achieved compared to the budgeted work.
  • Planned value – This KPI determines the total cost of the remaining planned project activities based on a specific reporting date.
  • Errors – The number of documented errors is vital to identify when and how frequently tasks require rework because tasks being redone significantly impact project budgets and timelines.
  • Percentage of tasks completed – This one shows how many tasks are completed according to deadlines as a percentage of total project tasks.
  • Resource capacity – Refers to employees engaged with a project, shown in a percentage of their available time. This can help PMs allocate resources and meet a project timeline effectively.
  • Resource utilization – This KPI displays the effectiveness of the project resources used on billable work.
  • Return on investment – This KPI is far and well-known. It is essential because it determines if a project is profitable or not and how much by measuring the money spent compared to its financial benefits.
  • Schedule variance – It identifies if a project is ahead or behind the planned schedule and by how much.

Few steps to a stronger KPI strategy

If you have set your KPIs, and they still need to deliver the desired outcome, you better take one more look at your strategy and adjust it to get the result you wanted in the first place.

First, select the most important KPIs. Of course, it would be best if you were sure to measure what matters the most. Next, ensure you include a balance of leading indicators that predict what might happen based on data and lagging indicators that will help you understand results over a certain period. These two will allow you to make adjustments to improve outcomes.

Next, create a KPI-driven culture within your organization.

If people do not understand KPIs – how and why to use them, your company will hardly benefit from these indicators. But, if you insist on increasing KPIs literacy within your organization, everyone will work toward strategic targets. So, educate employees and assign them relevant KPIs, so you can have everyone making decisions that move your business forward.

Additionally, always review and revise your current KPIs. Do it based on market, customer, and organizational changes. Make any changes public so teams are always up to date.

Teodesk and KPIs

If you need a reliable ally in KPIs determination, Teodesk is the best choice. Its numerous modules can improve and make rather simple your indicator analysis.

Teodesk’s Cost module will be constructive regarding KPIs like Budget and Cost variance, Earned value, Return on investment, and Cost performance index.

With these last two, the Revenue feature will also come in handy to help you clearly distinguish between your costs and your revenues. Also, Teodesk features that include cost and revenue metrics will make KPI Planned value sharp-cut and downright. 

On the other hand, the Project module is perfect for KPIs like the Percentage of tasks completed, Resource utilization, and Schedule variance. Furthermore, within Teodesk, the detailed Employee Module matches KPIs such as Resource capacity and Schedule variance.

On top of all that, by setting milestones on the project within the application enables their automatic connection with the financial realization of the project, which enables complete automation when it comes to monitoring the final realization. If you ask Teodesk’s experienced team, that is the best way to have in order and engaged all the data you have and need.

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