Projects as a means to achieve strategic objectives should be seen as the strategy guard and implementer. That is why measuring project progress should be interpreted in a way that can be linked directly and easily to the strategy objectives. This paper describes the key performance indicators (KPIs) and discusses the need for project KPIs during project selection and execution.
The Easy Answer
If you ask a project manger how you measure project success, he or she will answer against the planned schedule, determined budget, scope boundaries, and approved quality level. This answer is correct if we are talking about one project in an isolated island.
What if performing this project, which was done in the right time and within the budget, was a main reason of another strategic project failure? What if this project started to help an organization meet one of its strategic objectives, but after a while it is not because of objective changes?
The Right Answer
Strategic objectives must be one of the main stakeholders, where management should keep watching how each project is feeding results into the overall strategy progress. The organization should emphasize the project’s strategic benefit in order to help project manager find the right answer.
One of the most important items in the project charter is explaining the link between this project and one or more of the targeted strategic objectives. Then what? After kicking of the project, the link is missed, and the organization cannot see through the statistics window or the portfolio view of how this project is affecting the general strategic progress.
Many organizations try to grab the financial or scheduling information to show how this project is working. What prevents keeping the linkage/answering is the two different languages each management level is using.
Key Performance Indicators
Key performance indicators (KPIs) represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of the organization. Since it is a measurement tool, there should be such progress being measured and a target level being headed. In other words, the KPIs should tell you where you are in reference to where you should be.
KPIs may have a target and allowable margins for forming a range of required performance. For example, average time for response to a customer inquiry is less than two days; it means that the KPIs allow response from less than one day but no more than two days.
Although KPIs are a general trend to drive behaviors within the organization, it is best to be shown as one of the strategic planning outputs in order to link performance on the lower levels to the total performance on the organizational level. KPIs help build the value of/for a organization.
According to the balanced scorecards approach, there should be KPIs on financial, customer, process, and learning and growth perspectives. Each KPI can be cascaded into the different organizational levels, such as corporate, departments, sections, and employee. This way of decomposing KPIs all over the company will help in integrating people, processes, and technology during the planning period where targets are developed, and during the execution where KPIs are being watched.
Mentioning KPIs for projects could be seen in two ways. The first one is that this project will help the organization to achieve a specific general strategic KPI. The other way of seeing project KPIs is using a KPI as project progress measuring tool. This paper examines the second approach.
Instead of measuring project schedule performance, strategy sees it as an input for actual time spent to planned time ratio where the targeted KPI is to keep it within +/- 10%. This ratio for all projects represents two-tenths of the process perspective. Another example of measuring project cost status by cost performance indicator (CPI) isolated for the remaining projects is having a general KPI for the whole organization. This will help management determine how this project is helping to achieve its financial perspective objectives.
Building a project KPIs library should be a joint effort between the strategic management board and the project management office (or those who act in those roles). This will help in drawing the right map (planned projects) and making the compass (measuring KPI) available for project managers and teams.
Two Ways for One Result
If the projects are the strategy guard and implementer, then the KPIs are the messengers of the organization’s strategic objectives. They should meet and walk together in two ways (Exhibit 1).
The first direction is top-down. Here management should think of projects as KPI enablers, which is why the targeted KPI must be present in choosing projects. The organization should know how this project would help the organization achieve its KPIs.
When a project goes on and has some performance information, the project manager and team members measure it according to pre-defined KPIs and then send it bottom-up (the second way) to feed the general KPIs.
Implementing the Concept
Change the Culture
It is always a cultural change that an organization should make. The organization needs to change their perspectives toward the project to see the big and small building blocks for their strategic walls. Meanwhile the project manager must see their management level and execution effort as a part of the strategic progress.
After awareness, the tools come. It is important to have a library of project KPIs, which is extracted from the main organization’s KPIs. This will help the project manager map his or her work to the whole organization’s performance.
Update the Project Charter
The project charter is a document issued by the project initiator or sponsor that formally authorizes the existence of a project. It provides the project manager with the authority to apply organizational resources to project activities (Project Management Institute [PMI], 2008). The organization should have in each project charter a table showing the strategic KPIs that will be served by this project. These KPIs will represent the top management.
There are three related software programs that may be used for project reporting: strategic management software, project management software, and enterprise management software. The latter supports both strategic and project planning and controlling. In all cases, there should be a shared way of thinking of a project during the planning phase and during the execution and reporting.