4 Project Management KPIs Important For Performance Management

Project management software has made it easy to track project and portfolio performance. Nearly every tool comes with pre-built and customizable dashboards and reports, putting a wealth of information into the hands of business leaders.

Unfortunately, the ease with which you can aggregate data often results in small businesses tracking more than is essential, leaving these same leaders unable to identify meaningful trends and make actionable decisions.

If you’re tracking everything, you’re not paying attention to anything.

Project management KPIs should be tied to strategic goals. As such, you should really be tracking only three to five metrics at any given time.

In this guide, we highlight four project management KPIs that SMBs can use to evaluate and improve performance. We also run through the best ways leaders can use these KPIs to measure portfolio performance.

4 Project Management KPIs That Can Benefit Small Businesses

While the exact project management KPIs you track will be specific to your organizational goals, there are a few standard metrics that have proven value across industries, e.g., IT, software development, marketing and advertising.

These project management KPIs include:

1. Return on Investment (ROI)

ROI helps you quantify project value and gauge an investment’s profitability.

Small businesses use this project management KPI to compare the “return” expected from different types of projects. This information helps them decide which projects within their portfolio to prioritize in the short term as well as which types of initiatives to fund in the future.

PM Solutions places ROI first on its list of universally beneficial KPIs that can help organizations evaluate project management performance and improve the “health” of their portfolio—i.e., establish the right balance of high-risk, high-return and low-risk, low-return projects.

 ROI  = (Gain From Investment – Cost of Investment) / (Cost of Investment)

Or, if you’re familiar with iSixSigma, you may have seen the formula written as:

 ROI  = [(Financial Value – Project Cost) / Project Cost] x 100

To calculate ROI (using either calculation), divide the expected return (i.e., the net gains/benefits/value) by costs.

In the latter calculation, multiplying the result by 100 gives you the percentage return for each dollar you’ve invested—which is simply an additional step to make decimals into whole numbers (e.g., 0.03 would become three percent).

To quantify “net gains/benefits/value,” you must assign a dollar value to each benefit you are measuring. Benefits can include cost savings, increasing profits and increasing output.

Costs are a little more obvious: they can include travel expenses, various department budgets and employee salaries.

Here are some common benefits and costs associated with investing in a new project management software:

costs and benefits of project management software

2. Cost Performance Index (CPI)

CPI shows you how efficiently you’re using project funds.

Small businesses can use this project management KPI to better understand the actual costs associated with a project. This enables them to forecast future performance and better allocate funds to projects.

 CPI  = Earned Value / Actual Costs

To calculate CPI, divide earned value (EV) by actual costs (AC).

earned value vs. actual cost

If your result is a number greater than one, your project is on track to finish under projected costs. However, if your result is less than one, you’re headed for a project overrun.

3. Schedule Performance Index (SPI)

SPI can tell you how well you’re executing on a project schedule.

Small businesses can use this project management KPI to understand their pace of work, which allows them to schedule projects more accurately in the future.

This is especially helpful for organizations which are bidding on a project as they can say with confidence, “my team works at this pace, and we can complete this amount of work in that time.”

 SPI  = Earned Value / Planned Value

To calculate SPI, divide earned value by planned value.

earned value vs. planned value

If your result is a number greater than one, your project is on course to finish ahead of schedule. However, if your result is less than one, this indicates that you’re behind schedule.

4. Resource Capacity

Resource capacity can help you understand the limits of your project teams.

It’s common to overestimate employee availability. But doing so can have disastrous effects on the success of the individual project as well as the portfolio as a whole.

As each project in your portfolio pulls from the same resource pool, learning how to forecast resource-needs for upcoming initiatives is an important part of performance management.

Small businesses use this project management KPI to see how many full-time equivalents they have available to work on projects. Then, they can allocate resources to projects based on project priority.

For example, both project A and project B require two FTEs, but project A is expected to deliver a greater financial value. So project A would be prioritized and receive appropriate resources.

 Resource Capacity  = (Number of People) (Availability)

To calculate resource capacity, multiply the number of people you have by the amount of time they have available to work on projects. Bear in mind that employees can realistically dedicate less than 50 percent of their work day to projects.


How To Use Project Management KPIs to Measure Portfolio Performance

Start with a “S.M.A.R.T.” performance management strategy, i.e., one that is specific, measurable, agreed upon, realistic and time-based.

This involves completing the following steps:

smart performance management strategy steps

Next, be consistent. KPIs show trends over time, so it’s important to use a consistent set of metrics to measure performance across several similar projects.

This will give you the best insight into what you should replicate on future initiatives, as well as areas you can improve upon moving forward.

Also, remember that in addition to being “measurable,” KPIs need to be “manageable.” As such, you should realistically be tracking only three to five KPIs at any given time.

Any more than this and you’ll be ineffective at driving organizational change and project improvement simply because there are too many factors and a lack of cohesive analysis.

Finally, look for the following capabilities as you evaluate tools to help you measure project management KPIs and monitor the health of your portfolio:

Project planning Map out a project’s critical path (often with Gantt charts) , identify important milestones, pinpoint dependencies and constraints and assign tasks to users. Set baselines for scope, budget and timeline.
Project tracking Compare actuals to estimates (e.g., actual expenses vs. planned budget and actual schedule vs. planned timeline) and report status to stakeholders. Aggregate data, create dashboards and run reports.
Risk management Manage both positive and negative occurrences that result from a project. Identify risks, assess their impact (perform both qualitative andquantiative analysis), respond, monitor and control the impact.
Budgeting Manage project expenses, compare costs to budgets and track financial performance. Proves early detection and warning of potential overruns. Helps management forecast revenue and profitability.
Resource management Identify employee skill sets, track each employee’s workload and availability and allocate them to projects accordingly. Forecast staffing needs and make proactive hiring/training decisions.
Portfolio management Coordinate project management efforts across a portfolio of work. Tie project efforts to strategic goals. Use project evaluation criteria to evaluate which projects take priority and receive funds and staffing.


Note: The project management KPIs you use to measure portfolio performance against strategic goals are not the same as the project-specific KPIs your managers track for individual initiatives, such as:

  • Percent complete
  • Overdue tasks
  • Identified issues/risks
  • Estimated vs. actuals (for cost and schedule)

These project-specific KPIs won’t offer much insight into the “health” of your overall portfolio, rather they help keep projects on track and offer early warning signs if a venture is in danger of cost or schedule overruns.

If you’d like to learn more about the performance management solutions available to help small businesses, visit our portfolio management buyer’s guide for more information.

If you have questions about the project management KPIs discussed here, email me at eileen@softwareadvice.com.

You may also like

5 Steps to Fully Upgrade Strategic Planning at Your Small Business

3 Tips for Reducing Project Management Costs

Project Management Challenges: Will Replacing Your PM System Help?

Get a FREE Custom Quote for 5 Leading Project Performance Management Systems