How to Measure PMO Metrics & KPIs

We live in a data abundant world and collecting and reporting on project-related metrics is an integral part of the role of a Project Management Office (PMO). After all, as Peter Drucker said, “If you can’t measure it, you can’t manage it.” But with so much data available, the PMO has to collect and synthesize the right information to demonstrate outcomes and show the impact that it is having on the business.

It’s worth investing time in looking at PMO metrics as there is a strong case for tangible returns. In organizations that measured the business value of their activities, 31 percent saw a decline in failed projects, 21 percent report improved productivity, and 17 percent reported cost savings averaging $567,000 per project.

PMOs continue to face mounting pressure to align with the strategic priorities of the business. With this pressure comes the added responsibility for any PMO to show not only how it is adding value but also to prove its worth as a strategic partner.

To do that, your PMO should focus on four key areas:

1. Strategic alignment: Demonstrate that business efforts are prioritized and aligned with organizational strategy. Show the value that the PMO brings to the organization to run, grow, and ultimately transform the business.
2. Return on investment: Track whether strategic projects are delivering the expected ROI. Review and share how the PMO is supporting achieving financial results by making success transparent.
3. Operational efficiency: Monitor whether projects are completed on time, meeting milestones and budget requirements. Provide assurance that risks are being mitigated. Communicate quality information to the business to raise confidence that projects are being carried out on time and on budget.
4. Resource optimization: Ensure team members are correctly assigned to projects according to their skills and workload. This goes a long way to ensuring job satisfaction and employee retention, which in turn reduces overall resource costs in the long term.

That might sound like a lot to ask, and fortunately there are tried-and-tested PMO success metrics to help you focus on exactly those things.

The process of working on projects generates a lot of data, and rather than trying to capture everything, pick the data points that will have the biggest impact on your strategic plans and quantify the value of the PMO to the business.

Let’s take a closer look at some common PMO performance metrics with a focus on the types of reports that will shine a light on the details.

Strategic alignment

The PMO plays an important role in evaluating projects in the context of how they align with the company’s overall objectives and target investment. You need to demonstrate that the right projects are being prioritized and meet defined criteria in order to progress.

The reports to help you do that include:

1. Demand funnel: The number of Ideas at each phase of the funnel, which shows the health of innovation within the organization.
2. Average time to market from ideation to delivery: The time from idea generation to project initiation. Add on the phase cycle times to give you the full timeframe to take a bright idea to a saleable product.
3. Accepted projects: Projects that have been accepted into the active portfolio for execution. Once ‘accepted’, a proposed project would transition from its proposed state to an ’in execution’ state where it would be assigned a project manager.
4. Gate approvals: The number of gates that have been met in the execution of a project, which provides a measure of project progress Each gate can have documents, tasks, milestones, and deliverables that must be completed before that Gate can be marked as complete, serving as an audit trail for approvals.

Return on Investment (ROI)

ROI could easily be the most critical metric for securing the longevity of your PMO because it allows you to track and report on expected business value, demonstrating the impact that projects have on financial reports.

Look at ROI holistically, including project and resource costs but also the IT, cloud and telecom costs associated with the project.

The power in ROI is not simply being able to measure it, but being able to centralize that information and make it visible, holding the business accountable for what is being delivered.

The reports to achieve this include:

1. Forecast vs. actuals: How much the actual budget varies from the projected budget. To track this KPI, measure how close the baseline amount of expenses or revenue is to the expected value.
2. Line items in budget: Line items helps owners and managers keep track of individual expenditures and provide a more detailed way to see how the budget was spent.
3. Planned value: The value of what’s left to complete in a project in other words, the planned cost of what still needs to be done. For example, if you have a $20K budget and 30 percent of the project remaining, the planned value of the remaining work is $6K. Use this project KPI to compare against the actual cost and adjust the budget if needed.
4. Cost performance index:  The budgeted cost of the work you’ve accomplished so far compared to the actual amount spent. This is a ratio to measure the expense efficiency of a project—earned value divided by actual costs.

Operational efficiency

Executives can make better decisions about prioritization, capital expenditure and resource allocation if they know how the organization is performing—it can literally pay in some situations to have a grasp of how efficiently projects are being delivered.

The metrics to help you present this information to decision-makers include:

1. Cycle time: The time needed to complete a certain task or activity. This is helpful for repeated tasks in a project as it improves estimates.
2. On-time completion percentage: Whether or not an assignment or task is completed by a given deadline.
3. Time spent: The amount of time that is spent on the project by all team members—or, if you like, by each team member individually.
4. Number of adjustments to the schedule: How many times a project team has made adjustments to the completion date of the project as a whole.
5. The number and percentage of strategic projects delivered: The number of strategic projects delivered compared to the total number of strategic projects. This measure can be worked out on a month-to-date and year-to-date basis and tells you how much progress is being made towards turning your strategic plans into reality. Use a similar metric to track the number of projects in the portfolio delivered over a certain time period compared to the total number of projects in the portfolio.

Resource optimization

Tracking utilization provides visibility into team capacity and overall productivity. It also spotlights employee wellbeing as you can easily see the bandwidth for each team member, understand if they are over or under-utilized according to their abilities and availability, and adjust accordingly.

These six reports will help with monitoring resource optimization:

1. Utilization: The percentage of project hours compared with the total number of working hours. Utilization typically looks at project-related tasks, instead of more administrative hours.
2. Training/research needed for project: Measured in hours, number of courses taken, or something similar. If you need to do a lot of this, your project might get started later than you hoped. Another way of looking at this is asking, “What percent of resources did you have at the beginning of the project that were qualified to immediately begin working on the project?”
3. Planned hours vs. time spent: How much time you estimated a project would take versus actual hours. If the time spent differs from the amount of time anticipated, it’s a flag that the team underestimated the resource allocation or budget, and the timeline may be affected.
4. Resource capacity: The number of individuals working on a project multiplied by the percentage of time they have available to work on it. This project KPI helps to properly allocate resources, determine any hiring needs, and set an accurate project completion timeline.
5. Resource conflict YOY: The number of projects with resource conflicts year over year (YOY). Not having the resources to complete projects or having employees assigned to several projects at a time can decrease how much the teams can do. KPIs that highlight these conflicts will show whether the situation is a persistent problem or one-off situation that needs to be addressed.
6. Time spent plus adjustments made to project schedule. How much time has been invested by team members in a particular project (together or individually). It also looks at the number of adjustments made by the team to the existing schedule that affect the project completion date.

Future-proof your PMO

Project portfolio management provides a single source of the truth to look at all the KPIs for project performance. Once this information is analyzed, you’ll know exactly what’s happening with strategic projects, and where the PMO can add the most value through targeted intervention. When you capture the right data, you can provide transparent, reliable information to decision-makers.

The exact PMO performance metrics you choose to track your PMO’s effectiveness might be different from what we’ve outlined in this article, based on what is important to your business. Whatever makes your list, the important thing is that you have a set of meaningful PMO metrics you can track over time.

A PMO can’t afford to miss out on an opportunity to shine. When sponsors and executive management don’t believe the PMO provides sufficient value, the team is disbanded and the PMO has ‘failed’.

Those PMOs that measure a defined set of metrics stand out from the crowd and earn the respect of their colleagues for being able to provide accurate and transparent insights into how the company is performing.

Ready to chat with an expert? Contact us  to request a demo and learn how PPM-native analytics will give you insights into PMO performance, and help you demonstrate alignment and productivity.