1. Implementing Project Financial Management and Grants Management
  2. KPI Components

KPI Components

A key performance indicator (KPI) lets you 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 value is compared with the thresholds defined for the KPI. If the value falls within any of the defined threshold levels, then the status indicator of that threshold is associated with the performance measure.

The key components of a KPI are:

  • Performance Measure

  • Performance Status Indicator

  • Threshold Level

  • Performance Trend Indicator

  • Tolerance Percentage

Performance Measure

Performance measures are predefined criteria for performance or schedule that are used to determine if a project is on track. You can create your own performance measures based on existing custom performance measures to effectively determine the overall health of your projects. Use any of the available performance measure to create a KPI.

Performance measures are defined for budgets and forecasts, billing and revenue, costs, effort, margin, capitalization, and so on. Following are examples of predefined performance measures:

  • EAC Budget Cost (the estimate at completion burdened cost from the current baseline approved budget)

  • ITD Forecast Revenue Variance (the inception-to-date current baseline budget revenue - inception-to-date current approved forecast revenue)

  • Prior Period Margin Percentage Variance (the prior period current baseline budget margin percentage - prior period actual margin percentage)

You can rename these performance measures to make the measure names more relevant for your business needs. For example, rename EAC Budget Cost to Budget at Completion.

A performance measure is associated with one of the following time dimensions:

  • Estimate-at-completion (EAC)

  • Inception-to-date (ITD)

  • Prior Period

  • Period-to-date (PTD)

  • Quarter-to-date (QTD)

  • Year-to-date (YTD)

A 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 a 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 indicate the status of a project, such as critical, at risk, and on track. Each icon indicates the status and severity of performance.

During KPI definition, you first associate status indicators with performance statuses:

  • Critical

  • Severe

  • At risk

  • On track

  • Ahead

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 in the 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 threshold levels you defined, the closest threshold is used to determine the KPI status. For example, if a KPI value falls lower than the lowest threshold level, the status of the lowest threshold level is assigned 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.

Performance Trend Indicator

Performance trend indicators show the improving or worsening KPI value trends on the project. Each icon indicates 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 shows a negative impact.

Tolerance Percentage

A tolerance percentage is used to compare the previous KPI value with 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 the 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.

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