Part 1: KPIs for executive oversight

What should an executive monitor?

Executive oversight of projects can be challenging, especially for executives with little experience with projects. Many executives rise through the ranks of the operations side of the business, using Key Performance Indicators (KPIs) monitoring the expenses, rework rates, marketing costs, and revenues. Projects are an unusual investment on which the company embarks. There is no revenue to monitor, and marketing does not result directly in sales. So, what is an executive to monitor.

Anyone who has studied project management knows what is known as the iron triangle. It indicates that we monitor cost, schedule, and scope (or quality) in projects. In recent years, scope has started to be replaced by numerous factors to fit the many types of projects. They can include safety for construction work, and customer satisfaction for software development. The truth is every industry addresses different factors for their specific types of projects. Each factor leads to different KPIs.

It is important to identify the KPIs for executives based on their role in projects. Their role is not to execute the project, but to ensure it is being executed effectively. They are interested in making sure the company’s resources are used efficiently, and that the project begins to produce revenue on time. Knowledge of their role in projects helps them focus in on KPIs for executive oversight.

We can begin identifying KPIs by reviewing the iron triangle factors; cost, schedule, scope (quality, safety, risk, etc.). There are many measurements that have been created for each factor. Select the KPIs that have meaning to your company, industry, and project types. For example, there are many indicators for cost and schedule available from earned value management or other management techniques. Review the meaning of each indicator to select the ones that already fit within the company’s vernacular. Companies (and industries) have their own vocabulary for business, and keeping consistent with that business language will help to ensure understanding of the KPIs.

Another method of identifying appropriate KPIs is to review the company’s financial statements and operational KPIs. It is important to identify the efficient usage of company resources as identified in the expenses side of the balance sheet. Similarly, identifying the financial instruments used for supporting projects can provide insights into the appropriate KPIs for reporting projects to executives. It is also important to identify the expected revenues through economic measures. With this component, executives can ensure the expected value is being provided by the investment.

A third method to assist in identifying appropriate KPIs for executive oversight of projects is to review the operational KPIs. These may indicate specific indicators as they relate to efficiency and effectiveness of resource usage. Operational KPIs such as downtime or rework can help to identify quality measure that should be provided by projects. Industry KPIs for safety will work on projects as well as operational work.

Executives are looking for meaningful KPIs, and prefer a single set of indicators. The idea of a set for operations and a set for projects becomes confusing and unwieldy. Therefore, a review of all KPIs should include a check for consistency. Where there may be a few KPIs that are specific to projects or operations, it is important that there be consistency in the definitions of the KPIs selected for the company. Consistency will allow the KPIs to become a single set for executive oversight.

It is critical to understand a few things when selecting KPIs for executive oversight. First, every company will have a different set of KPIs that mean something to them, and not all factors were discussed here. Second, executives should be seeing KPIs that are similar (where possible) with the KPIs reported on the operational side of the business. There is not always a comparable measure with both operations and projects. Third, executives need to know what the KPIs they are receiving are supposed to be telling them, and how to use that information. This third point is critical and required training the executives. There are differences between projects and operational work. Therefore, executives need to know the differences. They need to know how the KPIs represent similarities to operational measures. Proper KPIs and education will prepare executives for project oversight.

 

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Dr. Glen JonesPh.D., PMP, is the president of GMJ Leadership. He is an accomplished leader with over 26 years of experience in the development and management of large, complex international projects within the energy industry. Glen is currently a leadership coach and project management consultant performing project management audits, project audits, and 360 personnel assessments. His education culminated with his Ph.D. in project management from Northcentral University. Glen writes about strategy and governance.

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