Which of the following would be the most useful metric for management to consider when reviewing a project portfolio?

December 18, 2021 by Admin

• Total cost of each project
• Expected return divided by total project cost
• Net present value (NPV) of the portfolio
• Cost of projects divided by total IT cost

Quick Take:

• The adage that what gets measured, gets managed is only partly true
• Determining what to measure is the first step, and tying these measures to outcomes is key
• Evaluate your KPIs on a regular schedule to ensure the Project Portfolio is on course
• Ask yourself (and your team) the question “what does success look like?”
• Only measure things that are directly linked to outcomes
• Evaluate the impact and likelihood of each measure to affect the project or the project portfolio positively or negatively
• Key Performance Indicators can:
  • Provide objective evidence of progress towards achieving a desired result
  • Measure what is intended to be measured to help inform better decision making
  • Offer a comparison that gauges the degree of performance change over time
  • Track performance measures

The famous management expert Peter Drucker has been quoted as saying, “What gets measured, gets managed.” You’ve probably heard this quote before, perhaps many times.

Drucker never said it, but it somehow still rings true. Despite this advice, the important thing to realize is that just because you’re measuring it doesn’t automatically mean you’re managing it, and vice versa. It certainly doesn’t mean you’re measuring the right thing.

Measuring something that doesn’t matter wastes everyone’s time and might end up making the project fail. Not measuring the right things will definitely put your project portfolio at risk.

So how do you determine what should be measured? And how can you strike the right balance between under- and over-measuring?

The best solution to these questions is to only measure things that are directly linked to outcomes. Ask yourself (and your team) the question “what does success look like?”  You might think this is a no, duh question, but you may be surprised how many differing answers there can be.

Of course, success usually means the project delivered on its charter. It can be on-time, on-budget, and on-scope and still have been a terrible project to be part of. If your team is on salary, there’s higher likelihood that it was a tough slog to get that final outcome. Should you measure team satisfaction? If it is tied to productiveness, yes, you should.

The first step in determining your metrics for success is to find out what to measure. Find the project activities or assets that most affect project outcomes. If they can be measured, they should be.

The second step is to evaluate the impact and likelihood of each measure to affect the project or the project portfolio positively or negatively. Sometimes project managers have blinders on when it comes to how their project affects other projects in the portfolio. Every project is #1 for the PM. It’s difficult to do project prioritization if all the PM is looking at is his or her projects. You need some way to score and select the most impactful projects in a portfolio.

This is where Project Portfolio Management (PPM) comes in.

Key Performance Indicators

The emperors of the Chinese Wei Dynasty (221-265 AD) may have been the first to use Key Performance Indicators (KPIs) when they rated the performance of members of their family. But the KPI really took off in the 1990s when the first Balanced Scorecard was used.

Simply put, KPIs are a set of quantifiable measurements used to gauge performance or progress of a business or program or project. KPIs must be specific and must clearly define or contribute to the goal of an effort. They also must be relevant, quantifiable, and outcome based. Good Project Portfolios evaluate KPIs often, perhaps quarterly, monthly, or even week by week. Such measurement can affect future project success by delivering a clearer understanding of past performance.

KPI.org says organizations using Key Performance Indicators can:

• Provide objective evidence of progress towards achieving a desired result
• Measure what is intended to be measured to help inform better decision making
• Offer a comparison that gauges the degree of performance change over time
• Track performance measures such as:
  • Efficiency
  • Effectiveness
  • Quality
  • Timeliness
  • Governance
  • Compliance
  • Behaviors
  • Economics
  • Project performance
  • Personnel performance or resource utilization
• Work most effectively when balanced between leading and lagging indicators

KPIs and other metrics such as Objectives and Key Results (OKRs) are important tools that can provide project and portfolio managers with an immediate understanding of how an organization’s project portfolio is performing.

It’s up to management to decide which potential measures are KPIs. Depending on the organization, the KPIs for your project portfolio could be based on typical project concerns, such as:

• Timeliness
• Quality
• Effectiveness

Or they could be financially oriented, like:

• Budget Variance
• Planned Value
• Cost Performance Index

KPIs can also be built on customer measures like:

• Customer Satisfaction
• Customer Loyalty
• Net Promoter Score

There are myriad other important measures you can use to evaluate your portfolio. These measures should also be embedded in your project reports and dashboards that include project metrics or PPM metrics (for the whole project portfolio).

The following KPIs and metrics should be part of your comprehensive project reporting.

Operational Efficiency KPIs

These metrics and KPIs measure resource utilization and team performance. Typically, this information is presented in a Gantt Chart or Reporting Dashboard.

• Resource Allocation: Measures percentage of time spent by a single resource (or group of resources) over the project duration. Shows tasks completed by resource in certain time span. Resource productivity is measured and should be evaluated by the manager in charge of a project.
• Project Effort: Measures time devoted to working on a project.
• Project Churn: Measures projects that are on stand-by or have been forfeited over a period of time. Conveys changes in a project and how it will adjust and keep up with these changes. Eliminates excessive projects that might otherwise disrupt the balance of the project portfolio causing project churn.

Execution KPIs

These metrics illuminate project implementation and impact once projects are deployed for assessment. They reveal whether projects are successful and show costs accumulated during the project operation. These KPIs are usually presented via dashboard or report.

• Project Success Rate: Measures rate of success or failure for a portfolio of projects based on time, budget, and fulfillment of requirements through delivery of expected results. This metric takes into consideration stakeholder satisfaction.
• Budget Variance: Estimates costs included in the planning stage of the project. Computes or estimates via budgeted task cost, actual task cost and earned value.

Business Value Delivered KPIs

Business value metrics are used for measuring the expected value of projects. Projects rely on return value to determine if they are successful or not.

• Customer Satisfaction: Measures customer satisfaction through both client and stakeholder feedback after the project is delivered.
• Business Value Realized: Measures whether projects are properly selected and implemented at the proper time interval. Estimated benefits can be computed from the date of the project’s delivery. Measured benefits include revenue added, cost savings and customer satisfaction.

Strategic Alignment KPIs

Alignment KPIs measure whether projects are congruent with an organization’s objectives, target, and unit investments.

• Percentage of Projects Aligned with Objectives: Measures the percentage of existing projects that are aligned with the business objective of a company.
• Investment Class Targets: Estimates the investment made in a project through the following components: run, grow, and transform.
• Business Unit Investment Targets:  Measure existing business units by setting targets for effort and cost. Once these investments are spent, it will be assessed against the two factors.

What metrics are you using?  Any from these lists? Any to add?  Let us know!

Project portfolio management helps organizations to work on the right projects at the right time, improve decision-making, and deliver better business value.

Free video demo:  Portfolio Reporting with BrightWork for SharePoint On-Premises 

A successful project portfolio is measurable, supported by clear alignment with strategic goals and regular reporting.

It’s also important to periodically review the overall status of the portfolio against agreed objectives and external business factors to identify any changes.

Let’s take a look at each of these components, starting with strategy.

Project Portfolio Management and Business Strategy

As defined by Porter:

Strategy should reflect the organization’s purpose, informing company structure and ways of working.  Porter identified three types of strategy – cost leadership, differentiation, or focus – and recommended organizations pursue one strategy type to achieve optimal results.

Realizing a strategy depends on comprehensive implementation plans, which reflect internal capabilities and resources, and external opportunities and threats.

Projects are core to the delivery of the agreed strategy. However, projects can only yield the desired results when the strategy is defined and aligned with project portfolios.

Ideally, organizations should define their strategy before creating a project portfolio to reach these goals.

There is a circular link between strategy and project portfolios. Strategy informs the portfolio, which impacts on approved projects. In turn, these projects deliver the desired solutions and innovations.

Without the ‘big’ picture, it’s too easy to waste time and resources on the wrong projects or to assume all projects are equal and deserve the same support.

Linking strategy and portfolios helps senior management make informed decisions, end underperforming projects, and improve business performance.

Additionally, teams who are familiar with the strategy and the business value of a project are more likely to deliver the desired result.

Finally, aligning strategy and project portfolios creates the optimal culture for success.

Senior management should encourage everyone to focus on key strategic objectives. This will help portfolio managers to determine what projects to execute and when, and where to deploy the right resources.

Once your strategy and project portfolio are aligned, the next step is to measure the effectiveness of this relationship with metrics.

Project Portfolio Management Metrics

A metric refers to a measurement of something. In a project management context, this includes estimated project costs, risks, and project duration.

Project performance is tracked overtime against the agreed metric, helping teams to make decisions and manage risks as work progresses.

PPM metrics should be visible, measurable, understood by management, and reveal the value delivered by the overall portfolio.

Metrics are also a common language for project teams and stakeholders throughout the organization, improving collaboration and communication.

When selecting metrics, use the SMART framework to successfully match measurements with your goals:

• Specific
• Measurable
• Attainable
• Relevant
• Timely.

Here are some six commonly used metrics to consider using.

1. Strategic Alignment

Areas to examine include the number of ongoing projects aligned to one strategic objective, time to market for a new solution, and the number of completed projects within the portfolio.

2. Timeliness

Use this metric to identify how many projects were completed on time, and how many adjustments were made to schedules by project teams.

Understanding these trends is especially important if your business strategy is based on quick product releases or a ‘first-mover’ advantage.

3. Budget

A popular financial metric is budget variance, the difference between proposed and actual costs.

You should also review how much time was needed to develop the budget and how frequently the budget was revised during project execution.

4. Quality

To help determine business value, gather customer satisfaction rates using surveys.

Once the solution is launched, track customer complaints and feedback to gauge if the project delivered as expected.

5. Effectiveness

Collate both the number of recorded errors and rework on various projects as these affect the schedule, budget, and overall business value.

6. Business Value

Typically, this is measured as Return on Investment (ROI). It is also useful to compare the final cost of completing the project against the cost of not completing the project. Other measurements also include customer satisfaction surveys and the volume of customer complaints following a new product launch.

Metrics, data sources, and reporting tools will vary between organizations. Depending on your current requirements, and portfolio processes, it may be best to start with just a few metrics to track and understand the health of your portfolio before introducing more metrics over time. If you are unsure where to start, check with your project management office or consult with senior management.

Tracking Portfolio Metrics with SharePoint

Deciding which metrics to track presents certain challenges; selecting how to track metrics is another!

Using a collaborative tool such as BrightWork, which offers configurable metric tiles, scorecards, and dashboards, create a single source of project truth.

Real-time dashboards provide visibility and insight for senior management, informing key business decisions such as resource allocation.

From time to time,  review the health of your portfolio to check if any projects need to be stopped or re-prioritized. Businesses must adapt to customer demands and new opportunities so it is essential to take a flexible approach to your portfolio.

The frequency and duration of the review will depend on local needs. A review can take place when a major project ends, when reallocating resources to new projects, or as part of annual business planning.

You can examine the entire portfolio or pick a few projects to rank against part of your business strategy, for example, focusing on high-value or high-risk projects only.

Using agreed goals and metrics, the review may also be divided into strategic (overall portfolio results) and tactical (health and performance of individual projects) considerations.

Here are some questions to help you get started.

If you’d like to see how BrightWork delivers cross-project reporting for SharePoint On-Premises (server editions of SharePoint 2019, 2016, 2013), take a look at our free video demo.

In just 20 minutes, you’ll see how BrightWork will help you to:

Editor’s Note: This post was originally published in September 2017 and has been updated for freshness, accuracy, and comprehensiveness