What is a KPI?
A Key Performance Indicator, or KPI, is an index that monitors the behavior of a process, be it the financial results of a corporation, the suitability of a mechanized production line, or the performances of a project.
Why use PKIs?
A KPI is a kind of medical check-up of a process, and, similar to medical tests, you get the maximum out of it if you perform a regular screening in time. The availability of historical values allows graphic representations, which easily shows past performances, current situations, and trends.
Trends are powerful because they not just give you a clear insight into what has happened in the past, trends also give you clues about what is going to happen shortly.
Exactly as it happens when you have to decide where to invest your savings, you do not want to rely on a single estimation, but you are likely to search for long time series.
In addition, having clear benchmarks and opportunely chosen control limits, helps you in maintaining control over the process at hand.
KPIs and a non-financial approach?
Since you, as a project manager, do not have the restrictions and the formality required in a purely financial and economic environment, do not feel bound to stiff formalisms. Use what you need when you need it. If a KPI can give you the information you need, just use it. In some occasion, it is useful to have some easy tool to get a fast outlook of a project; even just to understand when it is time to require an appropriated financial report to the financial office.
Obviously, when you need an accurate and financially sound report, trust your controllers and accountants.
How many?
Few. This is the short answer.
The long answer is that too much information, if not well managed, could be a detriment to the project.
The more KPIs you got, the more it takes to evaluate them. Moreover, the more variables you try to control, the more it becomes complex to get a meaning out of them.
My advice is to select no more than 10 KPIs and to concentrate them in the most critical area of the project.
If you need a better insight, once again, rely on controllers and accountants.
KPIs evaluation. How many times?
The answer, of course, depends on the time span of the project, and on the number and magnitude of the associated risks. Nonetheless, as a rule of thumb, I will recommend once a month.
How should KPIs be?
Simple
A KPI should give a photography of a process understandable immediately. If you need ten minutes to figure out the meaning of a KPI, every time you look at it, well, you have defeated its purpose.
Keep it simple.
Self-contained
One KPI one information.
If you need to compose two or more KPIs to get the information you need, well, you are not using a KPI anymore.
Timely
You need the information right when you need it.
Otherwise, you are trying to predict tomorrow's weather with last week's forecasts.
Numeric
A number is a KPI. A word is not. Enough can be interpreted in too many ways.
Look for information that can be represented by numbers. Quantitative information is the key.
Specific
One size fits all does not exist.
Be specific when it comes to choosing what you need to monitor.
In a future post, we will focus on a few KPIs that we could use to monitor different aspects of a project’s life cycle.
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