My Comprehensive List of 46 Key Performance Indicators (KPIs)
THIS IS THE LIST EVERYONE HAS BEEN ASKING ME FOR!
INTRODUCTION
As the saying goes, I wish I had a nickel for every time someone has asked me for a list of KPIs that I believe are important for AE firms to monitor. Of course, taking inflation into account, I really should ask for a dollar. Anyway, here's the list you should all be thinking about. Pick and choose those that you believe are critical for your success. I think they are all useful.
BUSINESS METRICS.
REVENUE GROWTH
Tracking revenue growth enables firms to assess the financial success of their projects and the overall business. Observing changes in revenue can help identify trends, spot potential issues, and measure the effectiveness of various strategies and practices.PROFIT MARGIN
The percentage of revenue that remains as profit after all expenses are accounted for. This not only indicates your firm's overall profitability and cost management efficiency but also enables it to make informed decisions about pricing and cost management.AGED ACCOUNTS RECEIVABLE:
Vital for managing cash flow, assessing client risk, and forecasting revenue, while optimizing your billing and collections processes. In addition, you can use this KPI to nurture positive client relationships.PROPOSALS PENDING
Essential for firms as it provides insights into their pipeline, revenue forecasting, competitiveness, decision-making, efficiency, and customer relationship management. I recommend that this KPI include proposal aging, as it adds an additional dimension, just as Accounts Receivable aging does.PROPOSAL CONVERSION RATE
The percentage of proposals submitted that result in secured projects. If you have multiple partners, it also helps identify which are the real rainmakers. When monitored by project type, it also indicates where your firm's strengths lie and what you may need to work on.INDUSTRY AWARDS/RECOGNITION
The number of industry awards and recognitions earned by the firm reflects its expertise and quality of work. It’s also a barometer for future work.
EMPLOYEE METRICS
UTILIZATION RATE
The utilization rate measures the percentage of billable hours employees work relative to their total available hours. This KPI helps firms optimize resource allocation, maximize productivity, and ensure that projects are staffed efficiently.NET REVENUE PER FULL-TIME EMPLOYEE (FTE)
This is your firm's equivalent of miles per gallon in your car. It offers insights into efficiency, profitability, benchmarking, resource allocation, growth strategy, and employee engagement and retention.EMPLOYEE TURNOVER RATE
The rate at which employees leave a firm and are replaced. High employee turnover can be costly and may indicate dissatisfaction among team members. You will likely see a correlation between this KPI and employees' overall satisfaction and engagement levels, as measured through surveys or other methods.EMPLOYEE SATISFACTION
As mentioned above, this is measured through surveys or conducted as part of an employee performance review. However, firms can regularly monitor employee satisfaction in a manner similar to a net promoter score (NPS)EFFECTIVE BILL RATE
This is an impressive piece of business intelligence that calculates the actual revenue generated by every billable hour worked by an employee. This metric can be used to identify opportunities to increase profitability, but is more interesting when evaluating the performance of each employee and comparing them to their peers.IDEAL PAY RATE
A calculation based on each employee's utilization rate, realization rate, multiple of direct salary expense (or overhead factor), and profit expectations. This single metric is so interesting that most firms allow only owners to access it.
CLIENT METRICS
CLIENT RETENTION RATE
This is the percentage of all clients who continue working with the firm over a given period. It’s also an indicator of loyalty and trust your firm has earned and correlates with Client satisfaction.CLIENT SATISFACTION
This is typically measured through client feedback surveys, testimonials, and reviews. High client satisfaction is an indicator of quality service and effective project management.CLIENT ACQUISITION COST
The average amount of money you spend to acquire a new client, including marketing and sales expenses. The only way your firm can understand this important KPI is by using proper time-tracking software that captures all marketing efforts in granular detail.CLIENT LIFETIME VALUE
The total revenue generated from a client over the entire duration of their relationship with the firm. This is always a fun KPI, as it gives you insight into how invested your clients are in your firm and helps you manage your relationship efforts.NUMBER OF NEW CLIENTS
The total number of new clients acquired over a given period, compared with previous periods, helps you understand the effectiveness of your marketing efforts.CLIENT TESTIMONIALS AND REFERRALS
The number of positive testimonials or referrals received from clients relates to their satisfaction and is valuable when marketing for new work.
Since your business success is really dependent on project success, most KPIs you will be tracking relate to:
PROJECT METRICS
PROJECT PROFIT MARGIN
Most firms have business accounting software that shows their overall profit margin. Professional Service firms really need Project Accounting software. Understanding the Profit Margin for each individual project enables you to elevate a project manager into the more desirable role of business manager, as they can now become accountable for that project's financial performance. They become the CEO of their own little company - your project. In addition, you learn about which managers and project types are most effective for your firm.BILLABLE HOURS
The total number of hours billed to clients for services rendered during any period. Comparing this over time is a measure of your efficiency.RESOURCE ALLOCATION AND UTILIZATION
Measures the effectiveness of allocating and managing resources, such as personnel, equipment, and materials, throughout the project.EARNED VALUE
One of the most valuable KPIs, EV measures project performance and progress, providing insights into the financial health, efficiency, and overall success of a project at every step of the way.ESTIMATED VS ACTUAL COMPLETE
Often, a subset of Earned Value. However, seeing estimated vs. actual values for hours and dollars for every project, phase, activity, and employee is essential for understanding performance across every category and can help you improve resource allocation and fee proposals, among other things.COST VARIANCE
This is the difference between the actual project costs and the budgeted costs. Monitoring cost variance can help firms identify inefficiencies in their budgeting and cost management practices.WORK IN PROGRESS
One of the most common KPIs as it helps firms understand the cost and potential revenue of work that has been performed but not yet billed to the client. Another layer of information is revealed when you can see the WIP's aging. Imagine executing work but not invoicing for the actual effort for weeks or months after it was performed. These insights affect your proposals and invoicing cycles.PROJECT COST MULTIPLIER
This is a factor used to estimate the total cost of a project by accounting for indirect costs, contingencies, and other factors that may affect the final project cost.PROJECT BACKLOG
The volume of confirmed projects that have not yet been completed. This KPI helps you understand the demand for your services and manage your workload effectively.AVERAGE PROJECT DURATION
Measures the average time it takes to complete a project from inception to completion. Imagine tracking this for each project type and seeing if your firm is improving its management processes over time.PROJECT ON-TIME COMPLETION RATE
The percentage of projects completed within their agreed-upon deadlines.PROJECT ON-BUDGET RATE
The percentage of projects completed within their agreed-upon budgets.PROJECT SUCCESS RATE
Measures the proportion of projects that meet or exceed predefined success criteria, such as budget, timeline, and client satisfaction. A high project success rate indicates that the firm's project management practices are effective and that resources are being allocated efficiently.RETURN ON INVESTMENT
Very few firms know the Return on Investment (ROI) of their projects. This is really unfortunate and is another reason I recommend implementing smart software platforms that can measure the financial return generated by a project relative to its cost. Tracking ROI helps you evaluate the success of individual projects and make informed decisions for the future.PROJECT QUALITY METRICS
A set of indicators that evaluate the quality of the project's design, documentation, and construction.CHANGE ORDER FREQUENCY
The number of change orders requested by the client or required by the project can impact timelines and budgets.PROJECT SCOPE CREEP
The extent to which the project's scope has expanded beyond the original agreement, affecting time and resources.PROJECT RISK MANAGEMENT
The effectiveness of risk identification, analysis, and mitigation strategies throughout the project lifecycle.SUSTAINABLE DESIGN METRICS
The extent to which the project meets sustainability goals and guidelines, such as energy efficiency, water conservation, or waste reduction.BUILDING PERFORMANCE METRICS
The post-occupancy performance of the building, including energy consumption, thermal comfort, and indoor air quality.PROJECT TEAM COLLABORATION
The effectiveness of communication, coordination, and problem-solving among team members, both internal and external.BIM ADOPTION AND UTILIZATION
The degree to which BIM is effectively used in the project's design, construction, and management processes.STAKEHOLDER ENGAGEMENT
The level of involvement and satisfaction of key project stakeholders, such as clients, contractors, and regulatory authorities.DESIGN REVIEW CYCLE TIME
The duration of design review cycles reflects the efficiency of the design and approval process.PERMIT AND REGULATORY APPROVAL TIME
The time required to obtain necessary permits and regulatory approvals can affect project timelines.PROJECT LEARNING AND KNOWLEDGE MANAGEMENT
The ability to capture, document, and apply lessons learned from completed projects to improve future performance.PROJECT INNOVATION
The extent to which the project incorporates innovative design solutions, materials, or construction techniques.AVERAGE BUDGET
Allocated to projects reflects the firm's project size and complexity.
And there you have it! 46 KPIs that will keep you busy and profitable!
