Key Performance Indicators (KPIs)

Introduction

• Definition: Most important quantifiable measures of progress towards intended outcomes.
• Purpose: Link KPIs to achieve business, portfolio, program, or project objectives.
• Focus: Help focus work on delivering operational or strategic requirements.
• Quote: "What gets measured gets managed" – Peter Drucker
  • If measured, it’s likely to be managed, increasing chances of desired results.

Functions of KPIs

• Targets: Provide targets to work towards.
• Engagement: Help engage and energize project teams.
• Types: (2)
  • Ultimate statements: What we ultimately want.
  • Proxy indicators: Measure things closely related to the actual desired outcomes but harder to measure directly.

Types of Indicators

• Leading Indicators: Measure progress towards goals.
• Lagging Indicators: Measure success after work completion.

Characteristics of Good KPIs

1. Objective Evidence:
   • Provide reliable, non-subjective evidence of progress.
   • Free from opinion, preference, or prejudice.
2. Inform Decision Making: Measure the right things to inform better decision-making.
3. Strategic Alignment: Link directly to the organization’s strategic imperatives.
4. Track Performance Over Time: Allow understanding of performance trends.
   • Improve, decrease, or stay level.
5. Measure Important Aspects: (Examples):
   • Timeliness, efficiency, effectiveness, quality, governance, compliance, team behaviors, resource utilization, economics, financial performance, project performance.
6. SMARTest Criteria: (Significance)
   • S: Significant (measurable implies specific).
   • M: Measurable.
   • A: Achievable.
   • R: Relevant.
   • T: Trackable.
   • E: Ethical.
   • S: Supported.
   • T: Time-bound.

Creating Good KPIs

• Questions to Ask: (8)
  1. Desired outcomes: What are they?
  2. Reasons: Why do you want each outcome?
  3. Influence: How can you influence each outcome?
  4. Responsibility: Who will be responsible for each outcome?
  5. Measurement: How can you measure progress against each outcome?
  6. Review: When will you review progress?
  7. Achievement: How will you know when the outcome is achieved?
  8. Communication: Who needs to know and understand the KPIs?
  9. Review Process: What is the cycle for reviewing KPIs?

Examples

• Tesla: Prioritizes the one metric that matters most.
• Large Organizations: Use KPIs to measure progress, track progress, and highlight issues.

KPI Process in Project Management

• Adoption: Use KPI process to drive projects.
• Mechanism: Utilize KPIs to drive and improve project performance.

Conclusion

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