Executive oversight requires a set of KPIs that will provide executives with information to make decisions at the corporate level, and ensure projects are being performed in a consistent manner with the proposals they have approved. To identify KPIs, we will keep the iron triangle in mind, and review the role of the executive on projects. They are interested in making sure the company’s resources are used efficiently. Therefore, we need to focus on the company’s resources; people, equipment, reputation, and money.
The first resource, people can be identified as a KPI with full-time equivalents (FTE). Each project is planned to utilize a specific number of people during any period, and a total over the course of the entire project. The planned FTE usage can be compared with the actual usage to identify a level of productivity for executive oversight (See part 1). This KPI provides the executive with the opportunity to evaluate which projects should be receiving resources, and help them prioritize projects. This also closely resembles the staffing measurements reported in the normal operations.
Equipment is the second factor that executives should have an interest in monitoring. This resource could be machines in the shop, computer time, or construction equipment. There are many ways to measure this usage, machine hours, a percentage of available capacity, or idle time. The key is to identify the indicator that closely matches the KPI used for the operational side of the business.
Reputation is not something everyone will think of as a factor to measure for projects, but it can be critical for the company as a whole. Therefore, it is important for the executive to be kept aware of the status of the reputation. This is where we can talk about risks, although they may manifest in other areas of the KPIs as well, such as cost or schedule. Each project should be evaluated to identify any benefits to the reputation the project is bringing and what risks to the company’s reputation the project brings. This will be a more subjective evaluation, with reporting on a Likert scale (i.e., 1 to 5, 1 being a high risk to the reputation, 3 being neutral, and 5 being a large benefit to the reputation).
Money is the most important KPI to report, as everything boils down to the all mighty dollar. For this resource, we can use the earned value indicators, budget and actual comparisons with which we are all familiar. Keep in mind that these factors only address the expense side of the balance sheet that executives are used to seeing. Therefore, we must add a KPI that addresses the revenue side. I recommend using the economic indicator used when originally evaluating the project, return on investment (ROI), return on equity (ROE), payback period, etc. It is important that the projects update and report on this KPI to ensure the project will still provide the value expected.
Dr. Glen Jones, Ph.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.