Definition: What is KPI?
Definition of KPI

What are KPIs

Key Performance indicators exist in multiple processes and as the name suggests are used to indicate the level of performance against a stated goal or objective. Most projects will be established by an organisation or business, which already has existing strategic objectives, and has a commitment to delivering them by a stated date (for example within a fiscal period such as a financial year)

Stakeholders (the Board, shareholders, regulators etc.) will have an interest in whether these objectives are met therefore will ask for visibility of progress on an ongoing basis. Key Performance Indicators are established in order to measure performance, assess whether it is in line with expectation and, if required, adjust course accordingly. Corporate KPIs may include revenue growth, sales, employee experience, customer advocacy and many, many more.

Given Projects should inherit the attributes of the organisation, they will also inherit accountability to deliver against the organisation's KPIs. In certain project delivery frameworks, the Scaled Agile Framework being a popular one, the Strategic themes of the organisation are defined in order to define the Portfolio KPIs. These then support and drive performance accountability at project or value stream level. At all levels the measurement of KPIs must remain objective (ideally automated).

In most traditional projects, the KPIs include indicators for time, scope, cost, quality or benefits and the processes to manage these are defined as part of Project Governance which sets tolerances or ranges the project is expected to remain within to be deemed ‘on track'. A traffic light system (Red, Amber and Green or RAG) of statuses is used in reporting to show where the projects actual performance is against the forecast or expected performance. This reporting drives insights such as a risk that the project may not meet its stated objectives and then allows for intervention if required to adjust where necessary.

In Agile projects the concepts are similar but with Time and Cost being two examples that are fixed for the project duration, the KPIs will look different. Equally with iterative adjustments taking place via sprints or increments, the concept of a traffic light system does not add much value or insight and is likely subjective (bad). KPIs therefore are more likely to be based on team performance (burn-up / burn-down), release health (where a release date is planned ahead of time) or number of bugs in production post-deployment (quality). Some are leading, some are lagging indicators but the intent (stakeholders on a regular basis can derive insights and protect investments / outcomes) remains the same irrespective of methodology.

Defining your KPIs

There are a few high level steps, which might help in defining KPIs:

  1. Understand corporate objectives and goals (where they exist also understand corporate KPIs) and the drivers i.e. are they internal or external, discretionary or mandatory.
  2. As projects are established in the portfolio, ensure each project has a stated goal (or goals) that will have a direct positive influence on the corporate objectives and goals (the business case).
  3. Break the objective down into a set of measurable components (metrics) to which can be incrementally measured. Ideally there should be a set of pre-defined governance metrics (based on existing project governance) or the project can inform what these are.
  4. Agree these with stakeholders and agree what performance looks like (set benchmarks).
  5. Implement monitoring processes to measure and manage these KPIs throughout the project.

The last point is perhaps the most important and if your project data is within a system you should be in a good position to automate these. The more real time data you can provide in dashboard reporting or reports, the happier the stakeholders will be and at the end of the day a happy stakeholder means a happy project manager.