Metric’ is defined as “Standard of measurement by which efficiency, progress, performance, productivity, quality of a deliverable, process, project or product can be assessed”. Metrics help in building predictability, improving organization’s decision making ability, and lay out what is working and what is not working within the organization and help guide the management focus in the right directions.
Project management metrics enable Project managers to:
- Assess status of ongoing project in terms of schedule, cost and profitability.
- Foresee any potential risks.
- Nail down the problems much before they become severe.
- Keep a check on project profitability.
- Assess productivity of team.
- Assess quality of work products to be delivered.
There can be different project management metrics defined based on complexity and nature of project. However, following five performance metric groups cover all the important aspects of a project to measure during execution:
Metrics #1: Schedule and Effort/Cost Variance
Metrics #2 – Productivity: Resource Utilization
Metrics #3: Change requests to Scope of work
Metrics #4: Quality and Customer Satisfaction
Metrics #5: Gross Margin
Gross Margin is the mother of all metrics and the quickest way to determine if your business in on track or not and acts as an early warning system to put in place margin improvement initiatives. Ultimate goal of project execution is to bring revenue to organization with the approved gross margin. Gross margin (GM) is basically the difference of total revenue and the total cost spent on project i.e. profit.
When a project is started, certain GM levels for the project are approved by project sponsor. This approved GM value is generally based on project scope definition, duration, a forecast of resources: onsite, offshore and organization’s investment analysis. Project PNL (Profit and Loss) statement gives a way to PM for tracking his/her projects GM metric at any point of time. For this, PNL statements and forecasts should be current documents i.e. changes in project parameters need to be reflected quickly in this statement to keep the PM informed about any potential risks to project profitability. All the above four project management performance metrics impact this metric, if not handled in controlled manner. A good organizational level PNL tool rather than manual excel sheets reduces the overhead on PM here.