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Why You Should Use KPIs

IStock_000006399293XSmall A KPI is a key performance indicator which essentially is a measure of performance that you can use to manage your projects or portfolio of projects.  Why is this important?  Because a KPI provides a quick indicator of what action needs to be taken.  KPIs need to be established based on your strategic objectives and success criteria.  In other words, you need to establish what you need to accomplish, and then create and monitor KPIs to ensure you are doing it.

I read about seven key characteristics of key performance indicators in Skip Reardon's blog post.  Skip was actually referencing David Parmenter's book "Key Performance Indicators: Developing, Implementing, and Using Winning KPIs."  I have not read the book but it sounds promising.

Here are the seven key characteristics:

  • They are nonfinancial measures
  • They are measured frequently
  • They are acted on by the CEO and senior management team
  • They clearly indicate what action is required by staff
  • They are measures that tie responsibility down to a team
  • They have a significant impact
  • They encourage appropriate action

 I would modify this list slightly as follows:

  • They are acted on by the manager.  Your own group could implement KPIs at its own level.  If you wait for the whole organization, who knows when that will happen.
  •  Sometimes financial measures should be included in KPIs.  KPIs such as profit margins or cost indexes may be a central and very important part of a team's success factor.  It makes sense to me not to exclude these.

Since this is a project management software tools blog, let's take this a step further.  Your project management software tool, whatever that may be, should allow you to create and monitor KPIs.  That means that your tool needs to be flexible enough to create your own, unique KPIs that take your project data and spits out a key indicator based on that data.

The most important point is to establish your objectives and success criteria, and then establish some KPIs to monitor your progress and when you are getting off track.





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