We are living in a service-based environment where everything is essentially a project that needs to be managed. And managing a project isn’t easy. The bigger the project, the more planning, and expertise it requires.
To ease the task for project managers, there are principles like six sigma. If you’re aspiring to work as a project manager, you must learn about the important metrics. Along with that, to be a successful project manager, you should also learn about the six sigma metrics.
Why use project management metrics?
All projects or programs start with a purpose and aim. As the project gets bigger, it gets more and more complicated to manage. And that's when managers turn to metrics.
A metric is a type of measurement that quantifies performance. In real-life projects, the metrics are also known as KPIs or Key Performance Indicators.
By looking at these metrics, the project management and the team determine whether the project is heading in the right direction. They help you allocate and manage resources better.
So you can conclude metrics separate useful information from the noise, which is then used to make informed decisions.
10 Project Management metrics
The world of project management has endless possibilities. There’s no limit as to how many metrics or numbers you can track. But as experienced project managers will tell you, you need to keep things simple.
Before selecting the metrics to track, you need to ensure the following:
A project management process that churns out consistent, reliable data.
Protocols to collect and analyze data.
Internal and industry benchmarks to compare the metrics against
That being said, there are certain metrics that every organization should track. These metrics affect the bottom line and gauge the overall health of the project. Here are the 10 project management metrics you must track:
Top-Level Metrics :
These are the metrics that the top-level management is concerned with. They will have a look at these metrics to determine the project's effectiveness.
1.Project Gross Profit Margin :
Gross Profit Margin is a simple metric. It measures how profitable the project is for the company. The higher the margin, the better the project is for the company. So the management is more likely to make further investments.
It can be calculated as:
Gross Margin = (Revenue - COGS)/Revenue X 100
2.AGI: FTE Ratio:
Although it’s not strictly a metric the ratio is a powerful indicator of the project’s health.
AGI stands for Adjusted Gross Income and is calculated by subtracting the cost of goods from total billings. FTE stands for Full-Time Equivalents and counts how many full-time employees are engaged in a project.
AGI: FTE determines how much money a full-time employee brings in.
3.Return on Investment (ROI) :
A rather common metric that’s tracked across the board, ROI tells how much money a project made as opposed to the investment.
ROI is calculated as (Net Revenue/Costs) X 100.
4.Customer Satisfaction :
The customer is king and the C-suite executives would want to know if the project satisfied the customers. You can either track the Customer Satisfaction Index (CSI) or Net Promoter Score (NPS). The survey is the best way to acquire the data for this metric.
Then calculate (Total Survey Point Score/Total Questions) X 100 for CSI.
For Measuring Project Performance
These are important metrics that tell how well a project is doing, cost-wise.
5.Planned Value (PV) :
Also known as the Budgeted Cost of Work Scheduled (BCSW) metric, it measures the estimated cost of the planned project.
PV is calculated as Planned % Complete X Budget
PV informs about the scheduled value of a project, EV or Earned Value will give you the actual cost. It takes into account the work that’s already done, rather than work that should have been done.
EV is calculated as Actual% Complete X Budget.
7.Actual Cost (AV) :
AV gives the measure of the total cost incurred in completing the tasks to date. To calculate Actual Cost, just add up all the costs you’ve incurred to date on the project.
These metrics determine how well the project is doing budget-wise.
8.Schedule Variance and Cost Variance :
These metrics indicate how far the project has strayed from its initial budget and schedule. They give a quick update on the project’s status.
Scheduled Variance, or SV, is calculated as Earned Value - Planned Value
Cost Variance, or CV, is calculated as Earned Value - Actual Cost
9.Schedule Performance Index and Cost Performance Index :
These metrics are related to SV and CV and measure the same thing. To calculate SPI, you need to divide Earned Value with Planned Value. So SPI = EV/PV.
For the Cost performance Index, divided Earned Value by Actual Cost.
10.Utilization Rate :
For calculating Utilization Rate, divide Hours Worked by Total Available Hours. The metrics tells how well you’re utilizing your resources.
What are the six-sigma metrics?
As already mentioned, you’d also have to track the Six Sigma metrics to succeed in your project. While project management concerns more with getting the project up and running, Six Sigma’s role is to reduce variance and defects within the project.
For managing a project with Six Sigma, you need to have at least one Primary Metric and a Secondary Metric.
Primary Metric :
Primary metrics in Six Sigma acts as a reference point throughout the project life cycle and are an important measure of project success. That’s because primary metrics are tied to the problem, are measurable, and aligned with the business objectives.
Some of the most widely used primary metrics are:
- Customer Satisfaction
- On-time Delivery
- Product Quality
Secondary Metric :
Secondary metrics in Six Sigma are called consequential metrics. These metrics determine whether the project is improving and whether the set goals are being met. The secondary metric is also industry-specific.
Some of the secondary metrics to track are:
- Defects per Unit (DPU)
- Defects per Opportunity (DPO)
- Defects per Million Opportunities (DPMO)
- Parts per Million (PPM)
- Rolled Throughput Yield (RTY)
It's best if you can work with primary and secondary metrics concurrently and as a whole, rather than individually.