KPI AS AN EFFECTIVE TOOL IN PROJECT MANAGEMENT:
CLASSIFICATION OF INDICATORS AND IMPLEMENTATION FACTORS
National Metallurgical Academy of Ukraine (NMetAU)
Modern project management needs new
tools. KPI is an effective tool, which is very popular in international project
management nowadays; it can be successfully applied to different spheres. There
are several types of KPI. Also certain conditions are needed for implementing
In conditions of modern project
management environment one often meets difficulties in determination of project
Any up-to-date project requires new
tools for making right decisions. Tools, which were successfully used before,
are now losing their weight. Constant dynamic growth of economy and changes of
conditions in business environment urges people to look for new ways of getting
and processing of information, organization of work and control of its quality.
Special metrics of project team
effectiveness are used to estimate quality and speed of tasks’ realization.
One of the most popular types of
estimation is Key Performance Indicators (KPI). This evaluation system is
widely used in international projects. The information obtained with the help
of KPI is used as a foundation for making administrative decisions, which are directed
to achievement of project goals.
While detailed financial indicators
not always give complete picture of current project state, estimate of
efficiency allows to decide, whether management is organized in a right way and
whether it helps to implement project team tasks.
Development of performance indicators
provides with basis for taking administrative decisions and reveals problems
with organization of management processes. This includes estimate of quality of
project teamwork and determination of time needed for each separate task realisation.
Key Performance Indicators could be
classified by several principles.
money means: financial indicators (e. g. project team earnings during the
project, inputs in the project) and non-financial indicators (satisfaction of
Process-oriented indicators (process efficiency, productivity,
quality, speed) and result-oriented indicators (money earned, time spent).
Quantitative indicators (money earned, people involved) and
qualitative indicators (satisfaction of interested parties).
Lagging indicators (amount of troubles - delays, mistakes in
processes) and progress indicators (successes).
Monitoring of KPIs are held iteratively –
mostly daily or weekly. Measures that held monthly, quarterly or annually are
not KPIs, as KPI is a momentary technique.
Most popular KPIs are organisational
metrics (such as satisfaction of interested parties), financial metrics (such
as earnings), process metrics (such as productivity, quality, delays).
There is no universal KPI, which can suit any project in a
best way. Only utilisation of several indicators at a time can be efficient for
goals achievement. But in most cases there should be maximum 20 KPIs.
For example, financial indicator is one of the most commonly
used. However, it cannot always show true efficiency of the team. Efficient
team can be influenced by economical unsustainability, situation on the market,
legal obstacles etc.
To implement KPI in project organisational structure, one
should first estimate project environment. Four obvious conditions must
Partnership of project manager with project
team, between project team members, between interested parties, and between
project team and interested parties. Continued successful performance
improvement requires the establishment of an effective partnership between the
management. The implications of this are the following:
by all interested parties that significant organisational and cultural change
requires mutual understanding and acceptance of the need for change and how it
must be implemented;
to the creation and maintenance of advisory effective arrangements with the
development of a strategy for the implementation of key performance indicators.
Transfer of power to the
first line. Successful performance improvement requires the empowerment of
project team members, particularly those in the operational “front line.”
Consequences of the transfer of power to the first line are as follows:
of team members to take immediate action to correct situations that are
negatively affecting KPI, delegate the responsibility for the teams to develop
and to choose their own measures of performance;
of training empowerment, KPI, project essential success factors, process
of measurement, reporting, and improvement of performance. It is essential that
management is developing an integrated framework so that performance is
measured and reported in a manner that results in action. Reporting events should
be on a daily/weekly basis according to their importance, and these reports
should cover the critical success factors. The human resources management has
an important role to ensure that the project team collects the measurement of
performance in a positive way. The implications of measurement, reporting, and
improvement of performance are:
report should link to success factors;
measure should have a reason to exist;
gets reported should get action;
revamp of reporting so that it is more concise, timely, efficient to produce,
and focused on decision making;
performance measures will be modified in response to the performance measures
developed on team level.
of performance measures to strategy. For a performance measure to be a KPI it
has to be linked to one or more of the project critical success factors and strategic
objectives. The project will be more successful if its members have spent time
defining and conveying its vision, mission, and values.
As a conclusion one can say that KPI is an efficient tool in
project management, which still remains underinvestigated and insufficiently
described and characterized. KPI could be successfully used in different
spheres: marketing, manufacturing, IT, supply chain management, government.
This is the incentive to investigate KPI in further works.
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R.S. Balanced Scorecard: Measures That Drive Performance / Robert S. Kaplan,
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