I noticed something the other night while rewatching 22 Jump Street with my girlfriend. (Since the movie has been out since 2014, I feel absolutely no shame in writing mild plot spoilers into this piece.)
There’s a point in the movie where the two main character undercover cops are taken to their new headquarters where their old captain has decked the whole place out with expensive decorations, amenities, and even interns. He brags about their huge budget for solving their new case since their last successful bust.
However, only a few days later, all of their money dries up when our dynamic duo spends tons of money on expensive detective gear, and all I could think was How did nobody see that coming?
Of course, it’s just a comedy movie and this plot point is used more for comedic effect later on, but in the real world, this kind of mismanagement seems awfully grotesque. It seems as though no one was setting limits for purchases or evaluating the hard benefits and returns they would produce.
The truth is, whether you’re running a police department or working in construction project management, you need to establish some foundational metrics for your budgets, efforts, and time spent on an initiative.
Overview: What are project management metrics?
Project management metrics, performance measures, and KPIs (key performance indicators) are the different types of quantifiable data used to measure the success of your project and your team.
These metrics are meant to prove the value of your projects as well as provide insights into whether those projects are on track for completion or if they’re falling behind.
Why should you track project metrics?
When you’re spending countless hours and thousands of dollars on a project, it’s important to understand the impact of those efforts. Project metrics provide the transparency needed to justify all of those resources.
In order to better clarify that need, I’ve identified the three most important reasons for tracking project metrics.
Creating and tracking KPIs gives you the reference points you need in order to find the areas of your project that are succeeding and struggling.
Using this information, you can identify patterns that lead to a loss in productivity and alter them so you can improve the efficiency of your work. Improvements in productivity can also come from the encouragement that positive metrics can give to your high performers.
If your team feels like they’re on the right track, they’ll be more inclined to sustain that performance and continue to improve.
Keep records for future projects
Project management is a learning process of trial and error. Tracking the metrics for your projects gives you the ability to record the ups and downs of every project and learn from them with subsequent initiatives.
If you’re executing the same type of project multiple times per year, referencing past metrics will help you create a more accurate project scope in the future based on the issues you ran into, how you solved them, and other ways you can improve team performance. In fact, all of this information is crucial for developing future project risk management plans.
It’s difficult to guesstimate how your project is coming along in terms of task completion times, money spent on projects, or the quality of the deliverables your team is putting together. Project performance metrics provide the ability to hold you and your team to a quantifiable standard.
Best project management metrics to track
The metrics you track for your project will vary based on the tasks and needs of your team, but there are specific KPIs that nearly every project manager will use. I’ve listed six core metrics in project management that you need to understand and use to succeed.
1. Gross profit margin
When it comes to initiating any project, at the end of the day the almighty dollar still makes the world go round.
Gross profit margin is one of the most important metrics you’ll need to track while executing any project because it is typically the ultimate indicator of success. The better your gross profit margin, the better your project is performing.
The formula for calculating your gross profit margin is:
Gross profit margin = (Total project profit – Total project costs) / 100
This formula will calculate an earned percentage per dollar once you’ve accounted for the project costs.
Pro tip: Your target gross profit margin should be established during the planning stage of the project management process so that you’ll have a concrete standard to hold yourself to.
2. Return on investment (ROI)
While the gross profit margin measures the earned percentage per dollar, your return on investment looks at the benefit of every dollar spent on a project.
It’s a ratio of either the profit or loss when it comes to investing in a project, which is extremely helpful when determining the financial viability of similar projects in the future.
Calculating ROI is as simple as:
ROI = (Net benefits / Costs) x 100
Pro tip: When measuring your return on investment, be sure not to include any vanity metrics. Vanity metrics include any data that can’t specifically correlate to project or company growth. This is especially true when it comes to social media marketing and using metrics such as Twitter followers and Facebook likes that don’t directly correlate to real growth or conversions.
3. Earned value
Earned value is a sobering metric that shows exactly where your project stands in terms of work completed and value created at that point. This is typically expressed in terms of the budget spent up until that point versus the value that has been created as juxtaposed to the money allotted for this project.
The formula for calculating the earned value of your project is:
Earned value = % of completed work / Budget at completion
Pro tip: For additional context on where your project stands, try using burndown charts for comparing the current stage of your project versus the planned schedule.
4. Actual cost
This is one of the easiest-to-determine project management KPIs on this list. The actual cost is the measurement of actual expenses made up to that point. These expenses include everything from direct costs that were planned, regular costs (monthly fees), and any other monetary expense made so far.
Once you’ve accounted for all of these costs, you simply add them up to determine the actual cost.
Pro tip: While this is an extremely simple metric, actual cost plays an important role in determining the cost variance of your project, which just happens to be the next metric on this list.
5. Cost variance
The cost variance measures whether or not your project is currently under, at, or over the planned project budget. It doesn’t get any simpler than that.
The formula for cost variance makes use of the previously mentioned actual cost metric:
Cost variance = Budgeted cost of the project – Actual cost of the project
If your cost variance exceeds your budget, that means you have a negative cost variance and a serious money problem on your hands. If it is under your budget, then that means you have a positive cost variance and, hopefully, you have enough left in your budget to complete the rest of your project.
Pro tip: Like most project success metrics, these cost variances can be calculated for individual tasks as well as for your entire project. Luckily, if you’re looking at positive variances in some areas and negative in others, this means you’ll have the know-how to shift these assets if need be.
6. Cost performance
Yet another project performance metric that relies on others in this list in order to be determined. Cost performance measures the financial efficiency of your project by determining the amount of work you’ve completed for every unit of cost spent.
Calculating the cost performance of your project requires your results of the actual cost and earned value metrics:
Cost performance = Earned value / Actual cost
Pro tip: This calculation will provide you with a ratio that shows whether or not your project is performing well when considering your planned budget:
- Ratio value above "1": Project is performing better than expected and is under budget
- Ratio value at "1": Project is performing exactly as expected and at budget
- Ratio value below "1": Project is performing worse than expected and is over budget
The best project management software for measuring metrics and KPIs
These are the best project management software options for measuring project KPIs.
When I reviewed Scoro, I remarked on the vast metric reporting capabilities of this tool. It all starts with the project metrics dashboard, which covers nearly anything you’d need to know about the assignment at hand.
On top of that, Scoro’s project reports are nearly second to none. The long list of report types includes financial margin reports, budgets, productivity reports, sales reports, and most any report you can think of relating to your project.
All you have to do is select the report you need and Scoro will render an easily digestible readout and visual aid for whatever metric(s) you’ve selected. If you’re looking for a hefty enterprise-level project management software with plenty of metrics reporting, Scoro might be the platform for you.
Mavenlink is a serious competitor for Scoro. They both appeal to the corporate world with their extensive metric-driven approach to project management, and both offer a similar pricing structure.
That being said, Mavenlink offers slightly less in the reporting department, but makes up for it in visual aesthetics and ease of use.
Mavenlink offers a more seamless user experience as a project tracker than Scoro, thanks to the fluid navigation throughout the software.
This includes the window-in-window display of task information, the more appealing interface, and the inclusion of Gantt charts as a task management feature (unlike Scoro).
Venturing outside of the enterprise world of software, Wrike is also a fantastic tool for measuring project management performance metrics. Wrike’s report builder will help you measure and track premade metrics as well as custom variables that you determine beforehand.
These report types include time tracking, budgeting, cost per hour, and other team performance metrics. All you have to do is select the report type, the project you’re working on, the report modifiers (assignees, task types, dates, etc.), and the report layout.
Data, methodology, and software is the perfect combination for project success
You’re going to need more than metrics to make it anywhere in project management. That’s why we cover all of the bases here at The Blueprint by offering lots of beginner’s pieces, how-to guides, software comparisons, and reviews.
Combining all of this information will give you the framework you need to build the perfect project team, plan, and execution strategy. We cover everything from lean project management to Agile, so be sure to check out everything we have to offer!