Projects fail for many reasons — budget overruns, scheduling delays, supply chain issues, and scope creep, among other things. If you’re not tracking project health in all key areas, your projects are prone to fall prey to these types of issues and fail. Approximately 54% of all organizations working on projects fail to effectively track their key performance indicators (KPIs) in real-time. Understanding KPIs and their value is vital to project success.

When used correctly, KPIs provide valuable insight into how projects are progressing compared to their intended goals. But not every metric is relevant to every project. The trick is to know which of the numerous KPIs matter most to your particular project — from those used to measure progress over time, to those that keep tabs on budget, performance, the quality of deliverables, and so forth. While KPIs come to bear used once your project is under way, establishing which KPIs are best for your project should be undertaken in the planning stage before work actually starts.

Here are some important KPIs and when they should be used to monitor the health of your projects:

• Budget variance: This KPI measures whether a project’s actual budget varies from its projected budget, and by how much by determining the distance between baseline expenses or revenue and the expected value.
• Cost variance (CV) (planned budget vs. actual budget): CV determines whether the estimated project cost is above or below the planned baseline, enabling you to see when you are outside approved budgets.
• Cost performance index (CPI): This compares completed budgeted work costs with actual costs spent to measure project expense efficiency.
• Earned value (EV): EV captures the project budget approved for all performed activities completed by a particular date to determine how much of the planned work has been achieved compared to the budgeted work.
• Number of errors: This KPI identifies when and how frequently tasks require rework or the number of times a task needs to be redone within a project, which can have a significant impact on project budgets and timelines.
• Percentage of tasks completed: This measures project performance regarding how many tasks are completed according to deadlines as a percentage of total project tasks.
• Planned value (PV): PV estimates the total cost of the remaining planned project activities based on a specific reporting date.
• Planned vs. actual hours: This KPI refers to the amount of time a project was estimated to take versus the actual hours it took to complete. This provides clues into whether you underestimated the allocation of resources.
• Resource capacity: This refers to the number of people working on a project as a percentage of their available time. Resource capacity helps project managers effectively allocate resources to meet a project timeline.
• Resource utilization: Resource utilization shows how effectively your project resources are being used on billable work, where they are spending time, and how frequently.
• Return on investment (ROI): ROI is a well-recognized KPI in project management. It shows whether a project is profitable or not and by how much. It measures the money spent on a project compared to its financial benefits.
• Schedule variance (SV): This KPI identifies whether a project is ahead or behind the planned schedule and by how much.

Before setting KPIs for your project, it’s important to remember that they need to be realistic, timely, specific to the project and its goals, and agreed on by all parties before the project begins.