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Oracle® Fusion Applications Project Management Implementation Guide
11g Release 1 (11.1.2)
Part Number E20384-02
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50 Project Performance Reporting Configuration: Define Key Performance Indicators

This chapter contains the following:

Manage Key Performance Indicators

Manage Trend Indicators

Manage Key Performance Indicators

KPI Components: How They Work Together

A key performance indicator (KPI) enables you to define thresholds of possible values for a performance measure for any project in a project unit. During KPI definition, you associate a performance status indicator with each threshold level. When you generate KPI values, the application compares the value against the thresholds defined for the KPI. If the value falls within any of the defined threshold levels, then the application associates the status indicator of that threshold with the performance measure. The following are the KPI components we will discuss:

Performance Measure

Oracle Fusion Project Performance Reporting provides both fundamental and derived measures that present an objective insight into the performance of the project. In addition, you can create custom measures to meet the unique needs of your organization. Use any delivered or custom performance measure to create a KPI.

Performance measures are available in the areas of budgets and forecasts, billing and revenue, costs, effort, margin, capitalization, and more. Following are examples of predefined performance measures:

A performance measure is associated with a time dimension. The following time dimensions are available:

A particular performance measure set, such as Budget Cost, can have as many as six performance measures: one for each time dimension.

A performance measure can be expressed as a currency amount, as a percentage, or in time units such as hours when effort is measured. If the KPI is used on projects that use different currencies, you can enter different thresholds levels for each currency you need.

Performance Status Indicator

Performance status indicators give an immediate picture of the status of a project, such as critical, at risk, and on track. Icons with unique colors and shapes indicate the status and severity of performance. During KPI definition, you first associate status indicators with performance statuses:

You then associate these statuses with threshold levels. When KPI values are generated for a project, each value is compared to the defined thresholds and the corresponding status indicator for the KPI appears on project performance reports.

A status can identify negative performance so that you can take the appropriate actions to prevent or quickly resolve problems. Conversely, a status can identify positive performance to help you track expected or excellent performance.

Threshold Level

During KPI definition, you define threshold levels to cover all possible values for a KPI. If a KPI value exceeds the range of values defined for the KPI threshold levels, the closest threshold is used to determine the KPI status. For example, if a KPI value falls below the lowest threshold level, the application assigns the status of the lowest threshold level to the KPI.

A status indicator can be associated with more than one threshold level. For example, both underutilization and overutilization of resources can indicate a critical performance status.

Trend Indicator

Performance trend indicators give an immediate picture of improving or worsening KPI value trends on the project. Icons with unique colors and shapes indicate whether an increasing performance trend has a positive or negative impact. For example, an increase in nonbillable costs is considered unfavorable to organizations that are able to bill costs to their clients. In this example, the performance trend indicator will show a negative impact.

Tolerance Percentage

A tolerance percentage is used to compare the previous KPI value to the current value to show if the performance trend is increasing, decreasing, or staying the same. For example, if the tolerance percentage is 10 percent for a KPI, and the difference between the previous KPI value and current value is greater than 10 percent, then the trend is increasing. If the difference is greater than -10 percent, then the trend is decreasing. If the difference is between -10 percent and 10 percent, then the trend shows no change. A single tolerance percentage value, such as 10 percent in this example, represents both negative and positive tolerances.

Project Performance Data

The application provides programs that extract and update transaction data and maintain project performance data. The process of generating KPI values uses this project performance data. Before you generate new KPI values, check the date that the project performance data was last generated to make sure that the data includes all transactions that may impact project performance results. Then decide if you must update project performance data before you generate KPI values. After you run these programs you will have a true picture of project performance.

When you generate KPI values, the period for which KPI values are being generated is determined by the KPI Period Determination Date. The data during that period is used to generate project performance data that will be populated on the project performance dashboard.

Note

KPIs that are enabled for use in the KPI definition are included when KPI values are generated.

Project Unit

KPIs are created for specific project units. During project unit implementation you specify whether KPIs are tracked for the project unit.

KPI Values: How They Are Generated

Key performance indicator (KPI) values are calculated when you generate KPI values. KPI values must be generated after project data is updated.

Settings That Affect KPI Values

You must specify the following parameters:


Settings

Description

KPI Period Determination Date

Set the date used to derive the project calendar and accounting calendar periods for performance measure calculations when KPI values are generated.

Replace Current KPI Values

Replace the current KPI values with the values that are generated now.

Delete Previous KPI Values

Delete the KPI values that were generated the previous time the generate KPI values process was run.

Number of Days to Retain KPI Values

Retain KPI values for the specified number of days starting from the current date before deleting previous KPI values.

For example, assume KPI values were generated on the following dates:


KPI Period Determination Date

Generation Date

October 29, 2010

November 12, 2010

September 30, 2010

October 15, 2010

If you generate KPI values on November 18, 2010 and select to replace the current KPI values, the KPI values generated on November 12, 2010 are deleted and replaced with KPI values generated on November 18, 2010. You must select to replace the current KPI values for a given period if you want to retain one set of KPI values and review KPI values during the period.

You can also delete KPI values that are not required for reporting. The options, Delete Previous KPI Values and Number of Days to Retain KPI Values, enable you to delete KPI values that were generated prior to a specific number of days. For example, if today is November 18, and you want to remove all KPI values generated in the previous year, you must select to delete previous KPI values, and set Number of Days to Retain KPI Values to 322. All KPI values created since January 1, 2010 are retained and KPI values generated before that period are deleted.

Important

Do not delete previous KPI values in the following cases:

When you generate KPI values, you can select to receive a notification by e-mail by enabling workflow notifications, once KPI values are generated.

How KPI Values Are Generated

KPI values are calculated based on the value of the performance measure associated with the project. When you generate KPI values, the KPI period determination date is compared to the current date to determine the period. KPI values are generated for the period based on the options in the key performance indicator definition. Only one set of key performance indicators is kept for a single KPI period determination date.

For example, KPI values are generated for a KPI period determination date of August 24 at 8:15 a.m. for Projects A and B. Then KPI values are generated for a KPI period determination date of August 24 at 10:45 a.m. just for Project B. The KPI values for Project B generated at 8:15 a.m. are deleted, but KPIs belonging to Project A are retained.

Note

To keep historical information, use a unique KPI period determination date.

Performance Status for Tasks and Resources: How It Is Calculated

The application calculates performance status for individual tasks and resources for percentage-based key performance indicator (KPI) values.

Settings That Affect Performance Status for Tasks and Resources

When you enable the Track by Task and Track by Resource options on the project definition, a status indicator appears for the task and resource on project performance reports when the individual KPI value is not on track. Enabling this option helps you easily identify the troubled tasks and resources in a hierarchical task and resource structure in a project.

Note

You can track performance by task and resource only for KPI values that are expressed as a percentage.

How Performance Status for Tasks and Resources Are Calculated

Performance status is individually calculated for all levels of the task and resource hierarchy based on the KPI threshold definition. KPI threshold values are defined when KPIs are created. Based on the threshold values defined, the status for tasks and resources are calculated for the KPI values that are based on a percentage. This example shows how the status of tasks and resources are calculated. For example, assume that the KPI named ITD Nonbillable Cost as a Percentage of Total Cost has the following threshold definition.


Threshold Level

Threshold Range From

Threshold Range To

Status Indicator

1

-99.00%

-12.00%

Critical

2

-11.99%

-5.00%

At Risk

3

-4.99%

4.99%

On Track

4

5.00%

11.9%

At Risk

5

12.00%

99%

Critical

Example of System Implementation Task

In the example, we have a System Implementation task containing six subtasks.


Task

Task

ITD Nonbillable Cost

ITD Billable Cost

ITD Total Cost

ITD Nonbillable Cost as a Percentage of Total Cost

System Implementation

 

20,000

105,000

125,000

16.00%

 

Planning

0

21,000

21,000

0%

 

Definition

6,000

51,000

57,000

10.53%

 

Build

15,000

33,000

48,000

31.25%

 

Test

0

0

0

0%

 

Release

0

0

0

0%

 

Support

0

0

0

0%

The ITD Nonbillable Cost as a Percentage of Total Cost KPI value for the Definition task is 10.53% (6,000/57,000). Based on the threshold levels defined for this KPI, the Definition task shows the At Risk status indicator.

Example of a Consulting Resource Breakdown Structure

In another example, the Consulting resource breakdown structure contains a Labor resource. Labor is a parent to the Project Manager resource, which is a parent to resources Max Martin, Robert Altima, and Fred Jones. The ITD Nonbillable Cost as a Percentage of Total Cost KPI value for Labor is 12.97% (15,700.00/121,015.00). The ITD Nonbillable Cost as a Percentage of Total Cost KPI value for Fred Jones is 0%. Because the KPI value for each row in the hierarchical structure is calculated separately, Labor has a status indicator of Critical and Fred Jones does not have a status indicator.


Resource

Resource

Resource

Resource

ITD Nonbillable Cost

ITD Billable Cost

ITD Total Cost

ITD Nonbillable Cost as a Percentage of Total Cost

Consulting

 

 

 

19,776

105,315

125,091

15.81%

 

Labor

 

 

15,700

105,315

121,015

12.97%

 

 

Project Manager

 

15,700

50,000

65,700

23.90%

 

 

 

Max Martin

2,800

14,000

16,800

16.67%

 

 

 

Robert Altima

8,400

0

8,400

100.00%

 

 

 

Fred Jones

0

36,000

36,000

0%

If you track tasks and resources for a project, each task and resource with a KPI value that is not on track is designated as an exception. The KPI value for the project does not impact the exception designation for individual tasks and resources. For example, if a task has a Critical status indicator based on the KPI value and threshold definition, it is designated as an exception even if the project has an On Track status indicator.

Important

Task and resource performance status is based on the latest summarized data, which may not be the same as the summarized data used to generate the latest KPI values.

Tolerance Percentage: Explained

Tolerance percentages are used to compare the previous key performance indicator (KPI) value to the current value to arrive at the performance trend.

Trend indicators are calculated based on the percentage increase or decrease in a KPI value and the tolerance percentage on the KPI definition.

Example of Tolerance Percentage

When you create a KPI, you must enter a tolerance percentage that is used in determining the trend indicator to display for a KPI. The percentage change in KPI value is calculated using the following formula:

Percentage Change in KPI Value = absolute value of (Current Value - Previous Value*100 / Previous Value)

 

The following example illustrates how tolerance percentage is used to calculate the trend indicator to display.


KPI

Tolerance Percentage and Trend Indicator Setting

Current Period KPI Value and Status Indicator

Previous Period KPI Value and Status Indicator

Percentage Change

Trend Indicator Based on Previous Period

PTD Actual Invoice Amount

5 percent

Up is Favorable

$3500

Critical

$4800

Warning

27 percent

Down, Unfavorable

PTD Actual Spent Labor Effort Percentage

5

Up is Favorable

75

On Track

71

On Track

5.6 percent

Up, Favorable

PTD Actual Margin Percentage

2 percent

Up is Favorable

28.5 percent

Warning

30.2 percent

On Track

5.6 percent

Down, Unfavorable

Creating Different Threshold Levels for Each Currency: Examples

You must define threshold levels for each currency for currency-based KPIs.

Scenario

A company is in the business of selling and installing human resource software. One of the standard KPIs used for the installation projects is Period-to-Date (PTD) Invoice Amount. Installation projects are performed in different countries having different project and ledger currencies, such as, United States dollars, Japanese yen, Mexican pesos, and Indian rupees. Projects performed using currency in United States dollars have a higher threshold for criticality with respect to PTD invoice amounts. This is reflected with unique currency threshold definitions.

Ledger Currency Definitions

For projects with a ledger currency in United States dollars, the PTD invoice amount is considered critical if the value is between 0 and 3,000 USD. For projects with a ledger currency in Indian rupees, a critical PTD invoice amount would be between 0 and 50,000 INR. The different currency thresholds do not have to necessarily correlate to exact currency conversion.

FAQs for Manage Key Performance Indicators

What's the difference between key performance indicator and performance measure?

Key performance indicators (KPIs) measure how well an organization or individual performs an operational, tactical, or strategic activity that is critical for the current and future success of the organization. Examples are: Period-to-Date (PTD) Actual Spent Labor Effort Percentage, PTD Actual Spent Equipment Effort Percentage, and PTD Actual Margin Percentage.

Performance measures are singular data elements defined by a specific account, scenario, and time dimension combination. For example, the performance measure, Quarter-to-Date (QTD) Forecast Labor Effort, references the account of labor hours, in the scenario of primary forecast, and the quarter-to-date time dimension.

A KPI is created based on a performance measure, and specifies how a performance measure value is interpreted using threshold levels. For example, the KPI PTD Actual Spent Equipment Effort is based on the measure actual spent equipment effort.

What's the difference between key performance indicator and KPI category?

Key performance indicators (KPIs) measure how well an organization or individual performs an operational, tactical, or strategic activity that is critical for the current and future success of the organization. Examples are: Period-to-Date (PTD) Actual Spent Labor Effort Percentage, PTD Actual Spent Equipment Effort Percentage, and PTD Actual Margin Percentage.

A KPI category is a group of KPIs that belong to a specific performance area. Examples are: cost, profitability, financial, and schedule.

From the examples above, PTD Actual Margin Percentage must be in the KPI category of profitability.

What's a KPI period determination date?

Date used to determine the accounting calendar and project accounting calendar periods for performance measure calculations during key performance indicator (KPI) value generation.

For example, assume that your project uses a monthly accounting calendar and a weekly project accounting calendar. You generate KPI values on December 8, 2010 with a KPI period determination date of November 30, 2010. The current period for KPI generation is determined based on the type of calendar used. In the accounting calendar, the date November 30, 2010 falls into the November 2010 period. In the project accounting calendar, November 30, 2010 falls in the first week of December 2010.

Note

The KPI period determination date must be a date in the past.

Why can't I create or edit a key performance indicator for a project unit?

Since the project unit is not enabled to track key performance indicators.

What happens if I attach different KPIs to a project for the same measure?

Overall project health is based on the most severe KPI status even if you have more than one KPI that uses the same performance measure.

For example, assume the Financial category contains three KPIs, and two of those KPIs use the same performance measure with two different threshold definitions. If the KPI status falls in the critical and on track ranges for the two KPIs that use the same performance measure, and the KPI status is on track for the third KPI, then the overall project health is critical. If the KPI status is on track for the two KPIs that use the same performance measure, and is critical for the third KPI, the overall project health is still critical.

Can I track KPI values at the task and resource level?

Yes. You can track key performance indicators (KPIs) that have a percentage measure format. Tracking by task and resource for a project enables you to identify problem areas on the task structure and resource structure during KPI analysis.

What happens if a KPI value exceeds the threshold limits defined for the KPI?

An up or down arrow appears in the Exceeds Threshold column of the KPI History table, and the closest threshold is used to determine the key performance indicators (KPIs) status. If KPI values fall outside the threshold ranges, consider extending the upper and lower threshold ranges.

Where do the currency type options for a key performance indicator come from?

The currency type appears for a selection only if the currency type is enabled for summarization for the project unit.

Where do the calendar type options for a key performance indicator come from?

The calendar type appears for a selection only if the calendar type is enabled for summarization for the project unit.

How can I evaluate project performance if KPIs are not tracked?

You must use the Review Project Performance page to perform more detailed financial performance analysis for a project than is possible on the Project Performance Dashboard. You can review amounts at the task or resource level, and drill down to individual expenditure items.

Manage Trend Indicators

KPI Trends: How They Are Calculated

Trend indicators show whether the trend of a key performance indicator (KPI) is favorable or unfavorable for a project. When you define KPIs you specify a value for tolerance percentage. The tolerance percentage is taken into account while calculating trend indicators for a KPI.

Note

KPI trends may not be useful if KPI values are generated often. The reason is, if the tolerance percentage is 10 percent and KPI values are generated every day, the values decrease by 1 percent each day. In this scenario, no change is observed in the trend as the decrease is well within the tolerance. However, if you generate KPI values at the start and end of the month, a significant change is observed in the trend.

Settings That Affect KPI Trends

The trend indicator that appears for a KPI is based on the defaults set in the performance trend indicator setup. The different trend indicators available are:

You can change the sort order of the trend indicators based on how you want to sequence KPIs in a table based on the performance of KPIs in a project.

How KPI Trends Are Calculated

Trend Indicators are calculated based on the percentage increase or decrease in a KPI value, while taking into consideration the tolerance percentage specified while creating the KPI. The following example illustrates how trend indicators are calculated for a KPI.

Consider a scenario where KPI values are generated for the first time on January 15, 2011, and again on February 15 and April 15. KPI trends are calculated when there are at least two values that exist for a KPI.

Note

All values in the following tables are percentages unless specified otherwise.

KPI Values Generated on January 15, 2011


KPI

Tolerance Percentage and Trend Indicator Setting

Current KPI Value and Status Indicator

Previous KPI Value and Status Indicator

Trend Indicator

PTD Actual Spent Labor Effort Percentage

5

Up is Favorable

70

On Track

-

-

PTD Actual Spent Equipment Effort Percentage

5

Up is Unfavorable

30

On Track

-

-

PTD Actual Invoice Amount

5

Up is Favorable

$5000

Warning

-

-

Actual Billable Cost Percentage

2

Up is Favorable

90

On Track

-

-

PTD Actual Margin Percentage

2

Up is Favorable

30

On Track

-

-

After generating KPI values on January 15, 2011, the most critical KPI is PTD Actual Invoice Amount. The overall project health status is Warning, because the most critical KPI, PTD Actual Invoice Amount, has a status of Warning.

KPI Values Generated on February 15, 2011


KPI

Tolerance Percentage and Trend Indicator Setting

Current Period KPI Value and Status Indicator

Previous Period KPI Value and Status Indicator

Trend Indicator based on Previous Period

PTD Actual Spent Labor Effort Percentage

5

Up is Favorable

71

On Track

70

On Track

Unchanged

PTD Actual Spent Equipment Effort Percentage

5

Up is Unfavorable

29

On Track

30

On Track

Unchanged

PTD Actual Invoice Amount

5

Up is Favorable

$4800

Warning

$5000

Warning

Unchanged

Actual Billable Cost Percentage

2

Up is Favorable

91

On Track

90

On Track

Unchanged

PTD Actual Margin Percentage

2

Up is Favorable

30.2

On Track

30

On Track

Unchanged

This table shows how the trend indicator is calculated based on the previous period. Although the KPI values for the current period are different from the previous period, the difference in the values is not significant enough to change the trend indicator, based on the tolerance percentage defined for each KPI. For example, the PTD Actual Spent Labor Effort Percentage is 71 percent, compared to the previous period KPI value of 70 percent. If the current period KPI value is more than 73.5 percent, which is more than 5 percent higher than the previous period, then the trend indicator is Up, Favorable. If the current period KPI value is less than 66.5 percent, which is more than 5 percent lower than the previous period, then the trend indicator is Down, Unfavorable.

The overall project health status is Warning, based on the most critical of all KPI statuses. After generating KPI values on February 15, 2011, the most critical KPI is PTD Actual Invoice Amount.

KPI Values Generated on April 15, 2011


KPI

Tolerance Percentage and Trend Indicator Setting

Current Quarter KPI Value and Status Indicator

Previous Quarter KPI Value and Status Indicator

Trend Indicator Based on Previous Quarter

PTD Actual Spent Labor Effort Percentage

5

Up is Favorable

75

On Track

71

On Track

Up, Favorable

PTD Actual Spent Equipment Effort Percentage

5

Up is Unfavorable

25

On Track

29

On Track

Down, Favorable

PTD Actual Invoice Amount

5

Up is Favorable

$3500

Critical

$4800

Warning

Down, Unfavorable

Actual Billable Cost Percentage

2

Up is Favorable

91

On Track

91

On Track

Unchanged

PTD Actual Margin Percentage

2

Up is Favorable

28.5

Warning

30.2

On Track

Down, Unfavorable

This table shows how the trend indicator is calculated based on the previous quarter. The current KPI values are compared to the latest generation date of KPIs for the previous quarter.

Note

It is possible that the previous period trend and the previous quarter trend are calculated based on KPI values from the same generation date. This occurs when the previous period generation date is the same as the latest generation date in the previous quarter.

The first three KPI values changed enough since the previous quarter to change the trend calculator. For example, the current quarter value of PTD Actual Invoice Amount is $3,500, which exceeds the threshold tolerance of 5 percent from the previous quarter KPI value of $4,800. Therefore the KPI is in a Critical status, and the trend indicator is Down, Unfavorable. If the current quarter value is greater than $5,040, which is more than 5 percent higher than the previous quarter, then the trend indicator is Up, Favorable.

A project manager might review the KPI values, statuses, and trends shown in this table and determine that a transaction was not billed, because the KPIs that are based on revenue and invoice amounts have both dropped.

The overall project health is critical because of the status of the PTD Actual Invoice Amount.

FAQs for Manage Trend Indicators

Why did the trend indicator show a downward trend when KPI performance is improving?

While defining key performance indicators (KPIs), you can determine if a positive increase between the current and previous KPI value is a favorable or unfavorable trend. Therefore, an upward trend may not necessarily indicate that KPI performance is improving.

For example, for a KPI based on a non-billable percentage of total costs, a low value for non-billable costs is preferred. Hence, a downward trend is favorable.