PMO and Project Metrics

Guide: PMO Metrics and Project Management Metrics

In business it is vital that we measure any activities that we undertake to gauge how successful they are, and whether we should continue.

Measurement is key to project management projects and PMO’s. Calculating key metrics and sharing them with the team proves the value of the work being undertaken and improves performance by fostering a greater understanding of the work being undertaken.

How are metrics chosen?

There are dozens of different metrics around, so how do we choose those that are most relevant to our project?

Often metrics are influenced by the SMART goals of the organisation, it is therefore important to understand the purpose or goal of the project, and the critical success factors which need to be achieved in order to reach that goal. Once the critical success factors have been identified, appropriate metrics can be chosen.

Critical Success Factors

So, we’ve established that critical success factors influence our choice of metrics, but what are those factors?

There are typically six factors that can be managed to determine the success of a project:

  • Benefits gained from delivering a project.
  • Time taken to deliver the project.
  • Cost to the deliver the project.
  • Scope of work.
  • Quality of deliverables and processes.
  • Risks to project success.

Project Management Metrics

The following metrics are a good starting point to measure the six factors outlined above.

Productivity

Productivity measures the relationship between inputs and outputs and shows how well the business is using its resources. Ideally this metric should show that more is being created for less.

Calculation: Input units/output units

Gross Profit Margin

Arguably, the aim of any business is to make money, and any work completed should contribute to this.

The quickest way of identifying success or failure is by using a metric directly linked to the bottom line, such as the gross profit margin. Subtracting costs from earnings will give the percentage of each pound earned; the higher the margin, the more successful the business is.

Calculation: (Revenue – Cost of Goods)/Revenue X 100

Return on Investment

Another financial calculation, ROI focuses on the amount earned against the amount invested per project rather than the business’s overall profit.

To calculate ROI, a pound amount is assigned to individual units of data which will establish the net benefits. Those units of data may include benefits such as: increased output, profit contributions and cost savings. This is then divided by costs, such as: overheads, labour and training.

Calculation: (Benefits-Costs)/Costs x 100

Earned Value

The value earned from the money spent to date on a project is identified by calculating the earned value. Earned value is commonly used to compare the value of work completed by a specific time-point in a project against the project’s approved budget.

Calculation: Planned Value / % work complete

Customer Satisfaction

Business will prosper when the customer is satisfied. The customer satisfaction metric measures the quality of your product and is generally guided by results from customer surveys.

Measures can vary from business to business, however each will develop a score unique to their business, on a scale of 1 to 100, by weighing variables, such as survey results, repeat business, lost business and complaints, by their importance.

Calculation: (Total survey point score/Total questions) x 100

Employee Satisfaction Score

On the face of it, this metric may not seem vital to measure the success of a project. Employee morale however directly correlates to the success of a project and is measured in a similar way to customer satisfaction, via staff surveys. External surveys allow employees to be more open an honest and are likely to yield more accurate results.

Calculation: (Total survey point score/Total questions) x 100

Actual cost

This metric does exactly what it says on the tin, it shows how much money is spent on a project. It is calculated by combining all project expenses over the time-frame taken to complete.

Calculation: Total costs per time period

Cost Variance

Once the actual cost has been determined it will be possible to calculate the cost variance. This is the difference between the budget estimate and the actual costs. If the cost variance is negative, then the project is over budget. Alternatively, if the cost variance is positive then the project is under budget.

Calculations: Budgeted cost of work – actual cost of work

Schedule Variance

Much like cost variance, schedule variance determines the difference between the estimated time to complete a project and the actual time taken. A negative variance means that the project is behind schedule, whilst a positive variance shows that the project was completed ahead of time.

Calculation: Budgeted cost of work performed – budgeted cost of work scheduled

Cost Performance

Forecasting the cost performance of a project allows for more accurate budget estimations on future projects. The work that has been performed (earned value) is divided by the actual costs that were needed to accomplish that earned value.

A value above 1 is good.

Calculations: Earned value/actual costs


Schedule Performance

Forecasting the schedule performance of a project allows projects to be compared to see how one is performing against schedule compared to others.

A value above 1 is good.

Calculations: Earned value/planned value

Accurate metrics are vital in managing a successful project and PMO office. Knowing whether projects are being completed on or off target, either financially or from a scheduling point of view allows the team to steer the project if it veers off course.

Of course, many other facets of project management rely on metrics, from knowing that your customers are happy to knowing that your staff feel satisfied and valued in their work.

Remember, the purpose of this article is to provide some thoughts on some of the metrics. It is important to think what metrics would be beneficial to measuring progress for your organisation.

Think of these, together with other metrics as building blocks. You can put them together as you require to build the dashboards you need.

PMO KPI Resources

If you would like to compliment with KPI’s to measure progress, please take a look at the article, PMO KPI’s.