12 indicators to follow in project management

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Shannon M 09 September 2020

Are you a project manager in charge of a team working in project mode? You must surely realise that monitoring the performance, progress, workload and execution of projects in real time is far from simple.

  • What are the most useful indicators in project management?
  • What KPIs should you focus on when you are a project manager?

Here are 12 indicators to monitor in the management of projects and project teams. 

1. Indicators related to project management

The performance of a project, whether it is internal or billed to a client, has a cost to the company. To monitor the performance of a project, there are several metrics that provide visibility on aspects of progress and financial execution

A. Implementation rate
Monitoring the rate of achievement 

Often used in projects sold on a fixed-price basis, it is the ratio between the theoretical valuation of the time to be spent on the entire project, compared to the valuation of the time actually spent on the project. 

  • (Theoretical valuation of time to be spent on a project) / (Theoretical valuation of time actually spent on a project)
  • If a project had a planned 10-day workload at €800 per day of GDT, but in reality the project took 12 days to complete, the completion rate is equal to 8000 / 9600 = 83.3%.

Objective: this indicator allows the actual performance of the project to be assessed in relation to the budget . It is of great interest when the project is sold on a fixed-price basis and the selling price is directly linked to the estimated cost of the project. 

So when the selling price is decided, it is common to do so by calculating the time to be spent on it and multiplying this time by the Average Daily Rate or ADR (if the unit is the day). 

  • Selling price : (Time to spend on a project) * (Average Daily Rate (unit = day))

The project managers' objective: to keep to the number of days planned, or even to improve the organisation in order to carry out the project with the same quality in less time than planned and/or with more profitable employees for the project, i.e. less senior staff than those initially assigned to the project. 

The difficulty is obviously to ensure that customer satisfaction is at least as good as expected.

How can this indicator be monitored? It is interesting to look at the completion rate at the end of the project compared to what was initially planned, but also and especially during the course of the project that it should be monitored, as it is an excellent indicator of the forecast performance of projects .

To be able to monitor the rate of completion of the project, it is necessary to have established the budget, but above all to monitor what remains to be done on the project. This means taking into account the time already spent on the project, as well as the time remaining to complete the work. 

When the resource planning of collaborators is monitored, the data is already present to calculate this completion rate. Ideally, changes to resource planning allow for an immediate reassessment of the completion rate to check the forecast performance of the project and take corrective action before it is too late.

B. Margin on completion

This is the projected project margin at completion. The margin on completion therefore takes into account not only the costs already incurred on the project, whatever their nature (subcontracting, staff, expenses, etc.), but also those to come and deducts them from the total forecast turnover of the project.

  • Past costs + future costs 
  • To be deducted from the total estimated turnover

Objective: Monitoring the terminal margin is important for several reasons.

Firstly, to ensure that the forecast margin for a project is not negative. Beyond the "good management" aspect, which encourages ensuring that projects end with a positive margin, this verification is mandatory for accounting purposes in order to be able to make provisions for losses on completion if necessary. 

Furthermore, monitoring of margins on completion enables better cost management: there are many ways to improve the margin of a project: reorganise the resource planning, reduce the planned travel expenses, go and get an additional order, etc.

How can this indicator be monitored? In order to reliably monitor margins on completion, it is necessary to re-estimate both the forecast turnover and, above all, to be able to forecast future costs. 

  • Re-estimation of forecast turnover
  • Forecasting future costs

It is generally the role of the project manager to calculate the initial budget and then to re-estimate all of these costs for staff, subcontracting, expenses, purchases, etc. during the course of the project. 

It is strongly recommended that regular reviews of all projects are carried out to identify those that deviate from the budgeted margin in order to take corrective action as soon as possible.

C. Unbilled output
Monitoring of unbilled production and percentage of completion (below)

More useful in a project on a time basis, this metric allows you to calculate, as its name suggests, the production achieved (either in value or in time) which has not yet been invoiced to the client

To calculate this unbilled output in value terms, the number of time units already spent on the project is multiplied by the billing rate applicable to that unit, an Average Daily Rate for example, and this value is then compared with the amounts billed to date.

  • (Number of units of time spent on a project) * (Billing rate applicable to this unit)
  • Comparison of the result with the amounts invoiced to date

Purpose: Knowing the value of unbilled production achieved is primarily useful for cash management purposes. Whatever the payment terms, this represents cash that can be recovered in the short term. Of course, it is not always possible to invoice this production immediately according to the deadlines agreed with the customer. However, it is an excellent indicator of future cash flow, especially when viewed on a consolidated basis.

How to monitorthis indicator? It is easier to monitor this indicator when you have an integrated solution that tracks the time spent on a project, the Average Daily Rate (or Average Hourly Rate) allocated to each resource, and which also manages invoicing. Because it is these elements that are compared to each other. A review of the unbilled work done by division or overall enables the analysis of good practice in terms of invoicing.

D. Percentage of completion
Monitoring of unbilled production (below) and percentage of completion

This indicator allows you to check the status of the progress of a project. The progress can be analysed with the time unit or if the project is associated with a turnover with the value unit. 

  • Status of a project
  • Unit of time or unit of value

This percentage of completion can also be analysed in relation to the initial budget or to the last estimate. When your management tool calculates a turnover by progress, it is also possible to know the progress in % of the turnover.

  • (Turnover already recognised) / (Total expected turnover on the project)

Objective: it is important to monitor the percentage of completion to ensure that the objectives are met. Completing deliverables on time is a major objective of project management. 

This target is also often analysed in conjunction with another metric, On-Time-Delivery, which calculates the number of projects completed on time in relation to the total number of projects. The project manager should therefore always keep an eye on this important project management metric.

  • On-Time-Delivery = (Number of projects completed on time) / (Total projects)

How to monitorthis indicator? Thisis where you compare the budget in terms of time and value with the actual, which is based on the activity reports of the employees. If the tool you are using also allows you to re-estimate project costs, progress can be measured against the last forecast and is therefore more accurate.

2.indicators related to team management

Monitoring of utilization rate (TACE) and resource planning
A. utilization rate (or TACE)

utilization rate :

  • (Time spent on billable projects [chargeable]) / (Total time available [excluding holidays])

Objective: To ensure that teams produce work that will deliver profitability at the expected level .

When projects are invoiced to clients, as in service companies, such as consulting firms, ESNs or agencies, the turnover depends directly on the invoicing of the projects.

It is therefore crucial that the company's main resources, i.e. its employees, use their time to work on projects that are billable (chargeable), i.e. revenue generating, rather than on internal projects, even though the latter may have a favourable impact on profitability (deployment of an ERP solution to generate productivity gains, simplification of processes, commercial activity, etc.).

It is not uncommon to set different workload targets for different employee populations. For example, in a consulting company, junior staff are often expected to have a very high utilization rate , often over 80%. In contrast, managers spend more time developing the business and therefore have lower utilization rate targets.

How to monitorthis indicator? Monitoring the activity of employees should make it possible to allocate time not only to chargeable projects, but also to all projects and activities on which the employee spends time: training, internal projects, work on commercial proposals, etc. 

The activity monitoring software (Compte Rendu d'Activité) must allow time to be allocated to all these categories and provide consolidated reporting, to have visibility on past and future utilization rate (the latter depending on resource planning), by employee, team or type of employee population. With this visibility it is much easier to identify issues that are preventing improved profitability.

  • Activity monitoring software: Visibility on past and future utilization rate ), by employee, team or employee population type
B. Rate of resource planning

resource planning (or occupancy rate):

  • (Total time occupied) / (Total time available [excluding holidays])

Objective: unlike utilization rate, the resource planning rate will allow the overall workload of employees to be monitored, whether on projects sold to clients or on any other type of activity. 

Some employees, even if they have lower utilization rate , do not necessarily have a less intense activity: a financial manager, for example, will work more on internal projects than other employees, often with a heavy workload. They will therefore have a high rate of resource planning . 

  • EX: A financial manager will focus more on internal projects and will have a high workload = high rate of resource planning

Depending on the peaks and troughs of activity, having a good visibility on the rate of resource planning of employees allows for a better distribution of the load of the teams.

How to monitorthis indicator? It is particularly interesting to have a forecast view of this metric. Seeing the workload of employees in the coming periods, not only on projects but also possibly on other categories of activity, such as the forecast time to be spent on training or commercial activity, not only allows the team manager to distribute the workload better, but also to identify problems of over- or under-capacity that are materialising in order to react and correct the situation; by hiring, for example, in the case of under-capacity. 

C. Production

Output, when defined in the context of a project, can be tracked in value or in time (usually in days or hours). 

When you look at the output achieved in days, for example, this is the total time spent on a project to date. 

  • Output per day: total time spent on a project to date

When looking at the value of output achieved, this is the total number of days spent on the project multiplied by the value of a day (often called the Average Daily Rate).

  • Output value: (Number of days spent on a project) * (Value of a day)

Objective: it is often interesting to monitor production and production capacity at the level of a team or a company. Depending on the number of employees and their availability, it is possible to read the production capacity in days or in value. A well-organised and optimised company will always try to aligning production capacity with turnover targets and growth. Thus, being able to track this metric ensures that business objectives are aligned with available resources.

  • The JAVA company has 100 developers, whose average working time is €800, and 50 consultants who have an average working time of €750. On average, all employees work 217 days. The total production capacity is therefore :

[100 x 800 + 50 x 750] x 217 = €25,497,500. 

Theoretically, if the teams remain at the same level, a minimum contract value of €25.5m should be sought.

How to monitorthis indicator ? In a business management solution, you often have the possibility of monitoring actual production, but sometimes also forecast production. When forecasts are also available, this makes it possible to know what capacities remain in the next periods, i.e. the commercial effort to be made to cover at least the company's resources.  

3. Indicators related to overall management

If you are in charge of several projects or are a manager, you should also monitor metrics that give you a more holistic view of the business performance. In this case, it is interesting to follow the following metrics:

A. Commercial pipe
Follow-up of the sales pipeline

Sales pipe: the sales pipe corresponds to opportunities that have been identified but not yet won. The monitoring of the sales pipe allows thefuture turnover linked to these opportunities to beanticipated .

  • Opportunities identified and not yet acquired

Objective: monitoring the sales pipeline is crucial in any company, not just those working in project mode and selling services. In addition to anticipating sales performance and being able to forecast future turnover, this monitoring allows you toanticipate resource requirements to respond correctly to future projects. 

It is in this context that it is crucial for team leaders and managers to have good visibility on the maturity of opportunities and the associated resource requirements.

How to monitorthis indicator? It is essential to have a tool to centralise all opportunities, and if possible segment them by maturity or chance of success. 

  • Centralise opportunities
  • Segment them by chance of success and stage of progress

Ideally, it is possible to identify the stage of progress of the opportunity (prospecting, offer sent, negotiation in progress, etc.) and to apply a percentage of chances of success, which makes it possible to weight the associated amount and provide a more realistic vision of future turnover.

When CRM is adapted to resource management, it also allows for the editing of an associated workload plan: what types of roles will work on this project if it is won, for how long, at what Average Daily Rates, and what skills will be needed? 

Depending on the maturity of the offer, it is possible to "push" the needs to the planning managers or team managers so that they can identify the employees who will be able to meet the need, or, on the contrary, to alert them to identify external candidates or subcontractors.

Linking the commercial pipe to the team planning is therefore a best practice to start projects on time and ensure that the right casting is done to meet the project needs.

B. Cost of customer acquisition

This is the total commercial cost of selling projects. This includes the time spent by teams writing proposals, time spent on commercial activity or travelling to meet with prospects. It also includes travel expenses during the pre-sales phase and all other expenses incurred in the context of a call for tenders, for example. 

  • All commercial costs incurred to sell a project
  • Time spent by teams writing proposals, time spent on sales activity, travel costs to prospects before and during the pre-sales phase...

Objective: Monitoring customer acquisition costs is another crucial indicator for ensuring the profitability of the sales activity. It is the investment needed to win projects

It is important to ensure that the value generated by the contracts associated with the business is far greater than this commercial investment. The ratio of 3x value to acquisition cost is often seen as the minimum to maintain good profitability. 

  • The cost of acquisition should be about 3x less than the value subsequently generated by the contracts.

When properly monitored, this indicator also allows the performance of salespeople to be compared with each other. It is an excellent indicator that goes beyond the amount of turnover achieved by the salesperson.

How canthis indicator be monitored? In order to be able to track sales activity and costs, it is necessary to have a solution that allows you to track time spent, costs and expenses and allocate them to each opportunity, or to more general activities, such as email prospecting or trade show participation for example. Having knowledge of the cost of each sales person, it is then possible to calculate the total sales cost spent on each opportunity and on other sales activities, per employee. 

Depending on the solution you use, you will be able to follow reports that give a more precise picture of acquisition costs overall, per team or per salesperson, and the profitability of this cost in relation to the amount of turnover earned.

C. Actual and projected turnover

The calculation of turnover for projects can be quite complex as several methods are used, such as the percentage of completion method or the completion method. 

The percentage of completion method will recognise revenue in the income statement based on the percentage of completion. This percentage of completion is generally calculated as a percentage of the costs allocated to the project in relation to the total costs expected to be incurred on the project. 

  • Percentage of completion = (% of costs charged to the project) / (total planned project costs)

Using the completion method, revenue is only recognised at the end of the project. 

Objective: There is no doubt that tracking project turnover is a key KPI. Whether projects are invoiced internally or to clients, applying a turnover figure gives value to the time spent by resources on the project

Even if you are working on internal projects that are not invoiced, it is worth applying an Average Daily Rate to your resources to identify the revenue equivalent that could have been generated by the resources if the project had been sold.

How to monitorthis indicator? Monitoring turnover canbe quite complicated depending on the size and duration of the projects. The financial teams in charge of this subject often use Excel models, but the use of an ERP solution that allows the calculation to be automated and secured is an advantage, not only because it saves time for the support teams, but also because this metric is so important that it must be able to be monitored in real time by the financial teams, but also by the project managers and other managers

D. Profitability of the activity
Monitoring the profitability of the activity

Monitoring the profitability of an entity that carries out projects implies being able to monitor the profitability of the various projects and being able to analyse the various types of costs: team costs, subcontracting costs, fees and other types of expenses, etc.

Objective: This monitoring ensures that the activity is generating profits at the expected level. Not all project activities are intended to generate profit, but when they do, it is important to have an overall view of the profitability of the activity by monitoring the past and future profitability of projects and comparing it to the budget.

How to monitorthis indicator? Here again, monitoring on an Excel model can be used when there are not many projects, but the use of a dedicated solution offers a large number of advantages, ranging from the automation of monitoring to the security of calculations, not forgetting the monitoring dashboards which make it possible to immediately identify problems of budget overruns and their reasons, and to localise the discrepancies.

E. Billing of projects
Monitoring of project invoicing

This involves monitoring the progress and completeness of invoicing in relation to what was planned. This monitoring must extend to the monitoring of payments in order to have good control of the cash flow.

Objective: the performance of the activity does not stop with the realisation, it is necessary to ensure that the amount sold is collected and if possible as quickly as possible in order to have the healthiest possible cash flow. It is therefore necessary to ensure that :

  1. Invoicing deadlines, i.e. deliverables that will trigger invoicing, are monitored and communication between project managers and the teams in charge of invoicing is excellent to enable invoicing to take place as soon as possible.
  2. All billable items have been invoiced and nothing is forgotten: in a project, not only are the deliverables billable, but it is also common to re-invoice costs, for example. It is important to keep track of these items otherwise the re-invoicing is forgotten and money is left on the table.
  3. Payment terms are respected by customers

How to monitorthis indicator? The indicator can be monitored on a project-by-project basis to see what has been invoiced, what remains to be invoiced, what has been paid and to easily identify invoices that have not been paid when they should have been. 

It is always easier if the billing follow-up is linked to the project follow-up. 

When progress tracking and invoicing elements are linked, for example, it is possible to let the project manager confirm the achievement of a deliverable that triggers an invoice. The teams responsible for invoicing then see this deadline as an invoice to be issued, and can send it to the client as quickly as possible. By speeding up the cash cycle, the entire cash flow of the business improves.

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