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Project portfolio managers know all too well how important it is to define key performance indicators at the start of a project. But there’s no need to track every KPI – you only need to track the most meaningful metrics.
Not sure which project portfolio management KPIs you should be tracking?
The best approach is to choose five to 10 that apply to your business, then use the right software to calculate, measure, and track them over time. Below, we explore the 35 most important portfolio management metrics that PPMs can track to make data-driven decisions for future projects.
Financial metrics are among the most important KPIs to track. These eleven KPIs will help you understand your budget, cash flow, profits, and other elements required to manage a successful project portfolio.
The NPV is one of the key KPIs to track. It provides PPMs with essential data about the predicted profitability of a project, which helps with strategic planning and risk management. When considering taking on multiple projects, comparing the NPV of different projects also indicates which are likely to result in a better return.
Budget variance indicates the difference between estimated budgeted costs and actual costs for a project. The higher the variance, the more control you need to take over project costs going forward.
Hitting your project margin is essential, and for many PPMs, it’s this target % that determines if the project can generate the necessary profit and whether or not it belongs in your portfolio.
“Project Margin is not up for debate. If a project is not profitable, it will not be included in the portfolio. I keep an eye on forecast margin versus actual margin to catch scope creep or pricing mistakes early. It's a bottom-line figure that imposes financial discipline.”
— Robert Grunnah | Owner, Austin House Buyer
The earned value KPI considers factors such as schedule, cost, and scope to measure the value of the work performed to date. This metric is a function of the amount of work completed and the amount of work that remains to be done.
The cost performance index indicates whether the project is over or under budget. It shows how profitable a project will be based on the value of the work and the cost of your investment to complete the project.
The cost variance KPI demonstrates the difference between the value of a project and the actual cost of a project. PPMs use this metric to stay on track with project costs.
The resource cost variance metric is like cost variance, but it focuses solely on the cost of resources. PPMs use this metric to determine where to allocate resources and how much of the resource budget is still available for allocation.
With the benefit cost ratio, PPMs can decide if the investment necessary to take on a project is worth the benefits it might gain. The benefits can only be anticipated, but this helps PMOs decide if they should accept or decline a project.
The EMV metric looks at the risk of a project and assigns value to each outcome, should you experience that risk. Because it’s based only on probability, PPMs often use this metric to determine if a project is worth undertaking or not.
The benefits realization rate demonstrates whether you have (or haven’t) delivered the planned benefits of a project. This can help you identify areas you can improve upon to successfully deliver the planned benefits of future projects.
Determine if your resources generated revenue with the resource profitability KPI. This metric indicates whether a particular resource is efficient and effective, and it’s often used to improve resource allocation decisions for future projects.
Business value metrics help inform decision-making both at the start of new projects and throughout a project’s lifecycle. Track these seven KPIs to better assess project performance, improve ROI, increase customer satisfaction, and ensure that projects are aligned with strategic goals.
Return on investment is a key metric that indicates how profitable a project is. PPMs use this metric to assess the financial gain or loss of a project and to compare the value of one project to other projects within the portfolio. ROI helps you determine if a project was worth the effort and the investment you put in.
While ROI measures your financial profitability at the end of a project, ROI velocity measures how quickly you can deliver a project – and how that will affect ROI once the project is complete.
“Return on Investment Velocity tracks the rate at which a project is expected to generate its planned ROI relative to its expenditure over time. If, after three months and 30,000 dollars spent, a project that should have generated 30,000 dollars in nascent ROI only shows 10,000 dollars, its ROI velocity has decelerated significantly. This immediately flags a potential risk, enabling prompt intervention like reallocating resources or adjusting scope to accelerate value realization.”
— Alex Smith | Manager & Co-Owner, Render3DQuick
The realized business value metric demonstrates the measurable outcomes and benefits of projects. PPMs can track this KPI after a project is complete to measure cost savings, profits generated, customer satisfaction, and other factors that can help you make more informed decisions in the future.
The end goal of every project is customer/client satisfaction. The customer satisfaction KPI is based on data collected directly from clients or shared by stakeholders, and it can provide valuable insight into what customers thought of your quality, timeliness, and communication.
The strategic alignment index tells you if an individual project or entire portfolio aligns with your strategic objectives. PPMs use this framework to improve efficiency, improve resource management, and prioritize which projects are more worthy investments than others.
“A primary KPI I track is the Strategic Alignment Index. This metric quantifies how well each project in the portfolio contributes directly to our organization's long-term strategic goals. This KPI helps us avoid resource drain on initiatives that do not move the needle on our core strategic imperatives, challenging the common pitfall of pursuing projects simply because they seem interesting.”
— Benjamin Tom | Editor & Utility Specialist, Electricity Monster
While the strategic alignment index is a model, the strategic alignment score is a specific measure that indicates how well or how poorly each element of a project meets your business’s strategic goals.
“One valuable KPI is the Portfolio Strategic Alignment Score. Each project gets a strategic score based on its link to overarching company objectives. Tracking a low strategic alignment score for a lower-priority project revealed it wouldn’t contribute to new market expansion. Pausing it freed up time and resources for higher-priority initiatives. This KPI ensures investments align with business objectives.”
— Adam Bushell | Director & Electrician, AB Electrical & Communications
Taking a variety of other KPIs into account, the innovation index metric assesses how innovative your workflows are. PPMs use this to determine if they need to improve innovative efforts that will make them more competitive in their industry, improve customer satisfaction, or improve internal processes.
You can gain valuable insight into how you can improve project management processes by tracking execution metrics. Track these seven KPIs to better plan schedules, identify bottlenecks, and increase productivity.
The schedule variance metric shows you if a project is ahead of schedule or behind schedule. It assesses project progress and helps to identify delays that may occur.
The start date variance shows the difference between the planned start date and the actual start date of a project. The fewer projects that start on schedule, the more likely it is that you have bottlenecks in the pipeline from a prior project or that you have scheduling issues that need to be addressed.
The project completion rate calculates the percentage of projects in your portfolio that have been completed. PPMs often use this metric to compare project completion rates from quarter to quarter or year over year.
The project health index is calculated based on a variety of other metrics regarding budget, schedule, scope, and costs. Taking other KPIs like budget variance, earned value, and cost performance index into account, it provides a broad overview of project status and helps identify areas of improvement for future projects.
With data collected from surveys and feedback, stakeholder satisfaction shows if those involved in the project were satisfied with the project progress and whether they believe expectations were met.
The productivity index assesses how productive individuals and teams are. It helps PPMs identify which team members are underperforming or running behind schedule, versus those who consistently complete milestones on time.
The cycle time KPI demonstrates the total time it took to complete the final project, and it’s useful in identifying bottlenecks and shortages in resources. PPMs can use this metric to make their project teams’ processes more efficient going forward.
If team members and processes aren’t efficient, you won’t deliver successful projects. These five KPIs can help you determine if you’re delivering projects on time and on budget, if you’re using and allocating resources in the most efficient manner, and if you’ve stayed within the project scope.
Use the % on-time delivery rate KPI to learn how many completed projects were delivered in a timely manner, versus the total number of projects that took longer than planned.
The resource utilization rate helps identify bottlenecks that can cause project delays and improve resource distribution for future projects. This metric is especially important for PMOs who rely on the same resources for multiple projects at the same time.
“The resource utilization rate informs me whether my staff is over-allocated or if we're wasting capacity. It's not about time tracking; it provides me with an instant measurement of whether we're scaling well or merely busy for the sake of being busy. High utilization with poor project results is a flashing red light.”
— Robert Grunnah | Owner, Austin House Buyer
Reduce bottlenecks and improve the flow of future projects by analyzing the project flow efficiency KPI. This metric distinguishes between the length of time team members worked on a project task and the amount of time they paused their work to wait for other team members to complete necessary preliminary tasks.
The project success rate shows if you’ve completed a successful project or if you’ve come up short. This metric considers factors like whether you delivered the project on time, remained within budget, met expectations, and remained within the scope.
It’s crucial to know how many of your projects were completed and delivered within your allocated budget. Low percentages indicate a need to reduce costs or re-allocate resources in a way that makes the budget more realistic at the onset of a project.
Read Also: Mastering Project Management: Transforming Business Efficiency with a PSA Suite
Project portfolio managers must assess risks throughout the project lifecycle and be prepared to mitigate them at every turn. Track these five KPIs to better understand the risks a project faces and improve reaction time when a potential risk becomes a reality.
The risk severity metric shows you the amount of risk expected based on the size and complexity of the project. This KPI shows you how much money you could lose, how a poor outcome could jeopardize your reputation in the industry, and how it might impact other current projects in your portfolio.
Keep projects on track by analyzing your risk probability. This metric indicates the likelihood of the risk you face based on how far a project has progressed. It goes hand-in-hand with the risk severity KPI because the higher the probability, the higher the risk severity.
Identify and mitigate the potential risks of a single project with the risk exposure metric. This metric makes use of the risk severity and risk probability KPIs to measure the overall potential impact a project may have, should you be faced with the most severe risk.
The portfolio risk exposure score is similar to the risk exposure score, but it looks at the potential risk to the entire portfolio rather than to a singular project.
“A third crucial metric I rely on is the Portfolio Risk Exposure Score. This KPI aggregates the individual risk assessments of all projects within the portfolio into a single, quantifiable measure. If our score jumps by 15% in one quarter, it prompts an immediate portfolio review, allowing us to proactively de-risk the portfolio before bigger issues arise.”
— Benjamin Tom, Editor | Utility Specialist, Electricity Monster
PPMs should always strive to better manage risks in projects, and the risk response time metric can help you do that. This KPI considers factors like the date you identified a project risk and the date you responded to the risk. The longer the risk response time, the more room for improvement in your operations.
Tracking KPIs helps project management teams understand project performance so you can make more informed decisions going forward. PMOs can use the data collected to choose the right projects in the future, identify high-risk projects, optimize resource allocation, improve their return on investment, and more.
Not every PPM tracks every key performance indicator, nor should they. The KPIs that are relevant to almost all PPMs include strategic alignment, project success rate, resource utilization, budget variance, and stakeholder satisfaction.
To identify the right KPIs, consider your specific business goals and identify which KPIs are in alignment with your key business objectives.
Once you’ve identified the KPIs that align with your strategic goals, analyze those portfolio management metrics by using software tools that disseminate the data in a clear-cut manner. Review your performance metrics regularly and take action by putting what you’ve learned to use. This will help you create better project outcomes going forward.
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When it comes to project portfolio management, KPIs offer valuable insights into multiple areas of your business. They provide data on everything from team member efficiency to individual project outcomes to entire portfolio performance, allowing you to make more informed decisions going forward.
KPI insights lead to improved data-driven decisions, which can increase profitability, boost efficiency, mitigate risks, and improve the overall success of a portfolio.
Track the KPIs that matter most to your business with Accelo, the PSA built to deliver successful project outcomes. Book a demo now.
