5 Critical Metrics for Project Management

Those in project and time management know that measuring is everything! Regardless of what industry or space you’re in, there are certain metrics set in stone. Project managers and executives need KPI’s, or Key Performance Indicators, to gauge several different components. There are many different metrics to keep tabs on, but these 5 are integral to any project:

1. Gross Margin

What it is: Gross Margin is the big daddy of project metrics. There’s no more straightforward measure of how the project is doing, or how much money your business is making.

How you calculate it: Total Revenue – Total Project Costs (Up-To-Date).. That is, you measure how much you’ve taken in (or how much you are expected to take in), and subtract from that how much you’ve spent. You can — and should — be measuring this all the time, ideally by setting up automatic electronic workflows.

Why it’s important: Gross Margin tells you at every point in time what your profit (or expected profit) from a project is; it’s a kind of constant bottom-line. It tells you immediately if your project is meeting its financial expectations, or if you’re spending more than you should be.

2. Cost Variance

What it is: Cost Variance is basically the inverse of Gross Margin. While Gross Margin measures money coming in against money going out, Cost Variance measures budgeted amount against money actually spent.

How you calculate it: Amount Budgeted – Money Spent. The point is to see if you’re staying within budget or not. If the result is positive, then you’re within budget (i.e. “favorable”); if it’s negative, then you’ve spent more than you’ve budgeted, which is called “unfavorable.”

Why it’s important: Like Gross Margin, Cost Variance can tell you immediately if your budget is working. Measuring CV regularly lets you know what percentage of your budget you’ve used; you can use this number to assess your progress overall. (i.e. if you’ve used up 25% of your budget in the first month of a nine-month project, you might be in trouble.)

3. Schedule Variance

What it is: Similar to Cost Variance, but in this case you’re measuring the amount of work done.

How you calculate it: Amount of work expected – amount of work done. Or, if your project is quantifiable, 100% of project – Percent of project completed. In this case, project management means you’re checking in to see if you’re on schedule to complete the project.

Why it’s important: Schedule Variance helps you calibrate the amount of work you or your team need to do to get the project done on time. It tells you at every moment where you’re at relative to your overall project timeline. If you’re ahead of schedule, great! If you’re behind, time to start cranking. (Since you’ve scheduled the project to be done early, and given yourself time to clean up loose ends, right?)

4. Resource Utilization

What it is: Resource Utilization measures how much time individual workers are spending on a project. It’s a measure less of overall progress than of how efficiently your team is working.

How you calculate it: Percent of project done / Number of team hours spent on it. Or, if you’re looking at individual efficiency, Percent of project done / Number of individual hours spent on it. Importantly, to be able to measure utilization, you need to have a time tracker system in place, so that you know how many hours it’s taking people to get different jobs done!

Why it’s important: Resource Utilization is helpful in project management for knowing how much time your team needs to accomplish various tasks. This can help you schedule things in the future (will your team have enough hours available to do those two other projects?), and can isolate inefficiencies in your workflow. If you’d budgeted 300 hours for the first 25% of the project, for example, but it actually took your team 500 hours to complete that portion, you know there’s a problem with either your team’s efficiency or your budgeting procedure!

5. Change of Scope

What it is: Change of Scope keeps track of the size of the project. Every change request clients submit requires you to modify your overall budget (both time and money). Change of Scope helps you stay on top of this, so that you can avoid the dreaded Scope Creep.

How you calculate it: New size of project / Original size of project. The more this ratio increases, the more you’ll need to rebudget. For example, if a change requests increase the size of your project by 20%, you’ll have to set your budgets accordingly.

Why it’s important: Individual change requests can be small, but can add up. Tracking all of them in one metric tells you if the amount you’re getting paid is commensurate with the amount of work you’re expected to do. If 15 different change requests increase the size of the project by 30%, you want to make sure you’re not expected to complete the project in the same amount of time, or at the same price!

Once you’ve got a handle on these five metrics, you can combine them as needed. Maybe 30% of the project is done (Schedule Variance), but you’ve already spend 50% of your budget (Cost Variance). Problem!

Or maybe you’re on track with schedule and budget, but your employees have too much time keeping things on track (Resource Utilization). Problem!

Our advice is to set up a dashboard where you’re constantly tracking all of these things. Doing that gives you instant feedback on the project and ensures that your project will successfully be completed.