Successful project management is all about delivering results for the business. But how can organizations most effectively measure those results? One way is to establish and track project portfolio management key performance indicators (KPIs) to evaluate project management office (PMO) performance.
KPIs for measuring PMO performance fall into two main categories: the internal effectiveness of the PMO and the output of projects. By including all KPIs in an evaluation of PMO performance, organizations can create a comprehensive way to deliver successful projects that generate true business benefits and value.
It's worth noting that this list of KPIs does not apply to all projects, but is a good directional guide for thinking about which ones to use to measure and convey the impacts of projects. For example, a project that is intended to increase revenue will likely not reduce costs at the same time.
Internal Effectiveness of the PMO
The category includes many of the day-to-day assessments of how the PMO is performing. A lot of these performance indicators can be considered table stakes, because they provide a basic list of qualities that all PMOs should be excelling at within companies of all sizes.
Project completion rates
One of the most basic measures of how well a PMO is functioning is the percentage of projects that are completed as a ratio of all the projects in a portfolio. More illustrative is how many of the projects are completed within the timeframes budgeted for the projects.
This can be measured for specific periods of time: for example, the ratio of project completion within a quarter or a year, and how this compares with previous corresponding periods. Another good metric is how much time has elapsed between project conception and project completion, compared with previous years. Of course, this will vary based on the complexity of the projects, but it provides a measuring stick for similar project types.
Project success rates
Naturally, companies want projects not only completed, but completed successfully. That means achieving the main objectives of the project, whether it's the development of a new software application with a given array of features, or the creation of a marketing campaign for a new product for a particular market demographic.
This KPI includes the ratio of successful projects to all the projects in a portfolio, and can be extended to the ratio of successful projects that are strategically important for the company to the total number of strategically important projects in the portfolio. Companies can also measure the ratio of successful, strategically important projects to all the projects in the portfolio.
Overall impact of the PMO
What kind of impact is the PMO having on the organization as a whole? It’s not a trivial question; the answer could determine whether the PMO continues to exist. This breaks down into areas such as how the PMO is making strategic contributions to the enterprise. It might include metrics such as how much the PMO has increased the success rate of strategic projects completed as a percentage of the total number of strategic projects.
Other possible measures can be based on surveys of management and staff within the project management function or in the organization overall. These might include questions such as whether the PMO is making work processes easier, providing time savings in the completion of tasks, communicating the priorities of project portfolios, and promoting communication and collaboration among different project teams.
Improvements in progress
Another consideration is whether the PMO is making improvements in time-to-market for projects such as application development. On average, how much time has elapsed between project conception and the delivery of the final product (or project completion), and how does this compare with previous periods? What improvements have been made in completion times for strategically important projects?
The PMO can increase the speed at which projects are completed and products delivered, which can lead to increased sales, competitive advantage, and higher customer satisfaction rates. If the PMO does a better job of keeping project teams on or ahead of schedule, projects will likely be completed more quickly. This is an especially important set of metrics for the delivery of products that are time-sensitive.
Amount of resources deployed
Projects typically require a lot of resources, and how efficiently the PMO is deploying resources as part of the project portfolio is an important measure of success. In the PMO world, two of the biggest resources to deploy in terms of financial impact are people and money. How many people are deployed across the entire portfolio, how much are the projects costing, and how do these figures compare with previous years?
But when looking at the grand enterprise-wide picture, there are many other resources to consider. These include equipment and other assets; materials; data, applications, and other technology components; intellectual property / ideas; and project locations such as meeting rooms and other facilities. A good indicator of PMO performance is how well all these resources are utilized.
Number of people working on multiple projects
Another good KPI for proper utilization of resources is the number of people working on multiple projects. Given the constraints PMOs often face regarding resources, such as the shortage of particular skills, are people stretched too thin because they must work on multiple projects? Another good question: are they working on the right projects?
Ideally, the capacity of a PMO’s resources should be maximized as much as possible, but not over-utilized. This way a PMO sets realistic expectations and delivers on commitments without burning out the staff.
Management of conflicts and skillsgaps
Given the number of projects underway at a large organization at any given time, and the shortage of certain types of skills such as developers and data analysts, it’s likely that conflicts will arise among projects. A PMO should be evaluated in terms of how it’s handling such conflicts, as well as skills gaps.
One way to do this is to track the number of projects that have existing resource conflicts and compare that with previous years. Another is to measure the time elapsed between the onset of conflicts and the corrective actions taken to address the conflicts. Is the PMO able to divert resources to critical tasks when the need arises? A survey of project managers would indicate whether they feel the PMO is supporting them in resolving resource conflicts.
Management of risks and how risks are trending over time
Every project in a portfolio carries some level of risk, and the PMO must be able to effectively manage and mitigate risk to the extent that it is possible. Some projects have a high level of risk while others are moderate or low in risk. High-risk projects will likely need the most attention and visibility to assure their success.
Examples of risks might include:
- A shortage of specialized resources that are shared among projects
- The skills gap that results from a lack of qualified personnel
- An unexpected decrease in funding
- Cybersecurity threats and vulnerabilities
- Technology-related problems
- Changes in the market for a product or service
- The passage of new legislation that affects the outcome of a project.
Any of these might result in the postponement or delay of projects, so it's important to monitor how the PMO is handling risk. It’s also important to track how various risks are trending over given time periods such as quarters or years.
Types of projects
There is bound to be a variety of projects underway at any given time. This KPI shows whether a PMO is flexible and understands that work can be done in many ways, depending on who is doing the work. By giving the project teams doing the work the autonomy to deliver the work, or by trying to control every detail of the work, a PMO can maximize the potential of work that’s aligned to strategy. It can deliver innovative products and services to market faster.
Also, if a PMO has more input from applications and systems where the work is happening, then it has greater visibility into what’s truly going on across the business, through reports and dashboards.
Output of Projects
This category is more of a reflection of how mature an organization is regarding its PMO function. It includes several indicators of the tangible returns projects are delivering for organizations. It also includes areas such as the management of hurdles, which could also fall into the first category but often have a direct impact on the output of projects.
Management and tracking of budgets
Clearly one of the most important aspects of the PMO function is managing budgets, keeping track of how money is being spent, and whether the expenses are exceeding the original cost plans. A key measure of budget management is whether projects are on track to be completed on time and on budget.
Companies should look at the ratio of estimated project costs to actual costs of projects, as well as the improvement of estimated cost versus actual cost for projects over time. Other areas to look at are the PMO’s integrations into financial systems and time-reporting data from project resources.
Creating a culture of efficiency
For projects to be successful, PMOs need to run efficient operations. That means creating a culture in which employees take care of their responsibilities as part of the progress of projects. For example, are project workers willing to adopt practices that get the information the PMO needs, such as timesheets and reports on their progress?
A high percentage of timesheet completion means that the PMO is getting support from stakeholders – top-down and bottom-up – and that the process is not complicated by rules and policies that make collecting such information difficult.
Contribution to corporate revenue / return on investment
How much revenue is the PMO contributing to the company directly (or indirectly through the results of other parts of the organization), and how has revenue contribution changed over time? That would clearly be a measure of the business value the office is adding. Revenue generation can come from the introduction of new products and services, sales and marketing campaigns, and new partnerships.
Along the same lines, return on investment (ROI) measures how much revenue is being generating compared with how much is being spent on projects. This can be a complex metric because of all the factors that go into project management. As a result, it might make more sense to look at ROI on a per-project basis. But certainly, it’s possible to measure the ROI on the investment managed by a PMO for projects that have a financial return.
How much money the PMO is saving the organization is also a good measure of business value. This includes reducing the costs associated with projects and the management of those projects, which can come from increased efficiencies and better use of resources. Measuring these savings over time is another way to measure effectiveness.
Cost savings can also result from the projects themselves. For example, a project might involve finding a way to revamp a manufacturing process so that fewer materials are needed.
Management of hurdles
The PMO will encounter a host of hurdles, likely daily. How effectively management addresses these challenges and how quickly it resolves them are other good measures of PMO success.
Examples of project hurdles include:
- Ego clashes among project managers, team members, and third parties
- Procrastination and lack of accountability
- Lack of communication among team members and managers
Cycle time / throughput
This metric applies more to Agile development teams from which the PMO is gathering project information. It’s important to improve continuously on the processes of these teams and speed the time of delivery of final products to market. If it’s a repeatable process, can teams become more efficient by identifying the blockers and bottlenecks to avoid?
As mentioned earlier, improving time-to-market for new products and services is an important measure of the function of a PMO. The performance of Agile development teams is key to a more efficient development project process.
Bringing competitive advantage
The PMO can help drive competitive advantage for companies in many ways, including delivering market differentiating products and services quickly. As the Project Management Institute (PMI) states, projects “are often defined as the means by which organizations implement strategy [and] it can easily be understood that the purpose of project management is to improve the organization's competitive position.”
The PMO as an entity is becoming of more interest as the field of project management evolves from techniques that deal with the management of a single project to being one where the entire operation of the organization is considered, the PMI says:
“The amount of guidance provided or the effect the PMO has on directing activities within the organization is driven by and reflects the level of project management maturity.”
And the role of the PMO in providing a tool to better manage, monitor, and manipulate resources gives the PMO the ability to provide a company with a competitive advantage.
Delivering employee satisfaction
The PMO impacts a lot of employees, including those working directly on projects and those affected by the projects in some way. Surveys of project workers can reveal insight such as whether the PMO is:
- Making their jobs easier
- Helping them to save time
- Responding quickly to their concerns
- Communicating the project portfolio’s priorities
- Promoting cross-project communication and the sharing of information
- Providing the necessary training
Employee satisfaction levels can be compared over periods of time to see if the PMO is improving its ability to meet the expectations of stakeholders.
Delivering customer satisfaction
Finally, how well is the PMO delivering customer satisfaction? Projects might be aimed at specific customers or an entire group. Either way, feedback from these sources is an important measure of how well the PMO is delivering value.
Companies can survey customers during and after the completion of projects to determine the level of satisfaction, with assessments in areas such as:
- Timeliness of deliverables
- Communication on progress
- Quality of services
- Whether the results met business expectations
Conclusion: KPIs are Vital – Don't Neglect Them
Organizations that measure how well their PMO is functioning are more likely to see improved project performance by gaining insight into how the PMO is performing compared to past performance.
Using the right mix of KPIs, companies can make evaluations that lead to:
- Fewer project failures
- Increased business value from projects
- Higher productivity
- Lower costs
- Happier employees
- More satisfied customers
KPIs can help PMOs enhance their value to the organization by finding ways to improve processes in numerous areas. The metrics a company will need to measure PMO performance will vary depending on the situation and what its goals. Some might grow in importance over time, while others diminish. But the important thing to remember is that KPIs matter to a lot of project stakeholders, and they should be a key part of the process of running a successful PMO.