When it comes to engineering projects, KPIs, or Key Performance Indicators, are an essential tool for measuring progress and overall success. Having well-defined KPIs allows organizations to keep track of progress against their desired outcomes, as well as to identify areas of improvement. In this blog post, we’ll discuss the importance of engineering KPIs and explore how they can be used to maximize effectiveness and efficiency. We’ll also outline the steps involved in creating a KPI-focused engineering project, as well as provide some examples. By the end of this post, you’ll have a comprehensive understanding of the value of engineering KPIs and how to use them to ensure your organization’s success.
21 important engineering KPIs
Here are 21 engineering KPIs you can use to keep tabs on your teams’ effectiveness, your business’s performance, and the progress of your projects:
1. Project timeline
An engineering KPI called a project timeline provides managers with a way to track a project based on set start and end dates. Regularly reviewing a project timeline can help you spot specific difficulties or roadblocks that might delay the project. After that, you can plan strategies with your team to avoid or reduce delays. Depending on the project type and the software used to create the timeline, each timeline has a unique appearance.
2. Code cycle time
How quickly a program code is transferred from a developer to production is indicated by the term “code cycle time.” You can use this to find and fix coding bottlenecks that might cause a delay in production. The time it takes to: will help you track your cycle time.
3. Engineering efficiency
This KPI evaluates the performance of your team across all projects. You can use it to decide whether your team needs to change, perhaps by adding new members or redistributing tasks. Engineering managers compare the cost of paying the engineering team with the number of projects they can handle concurrently to determine efficiency. Managers can measure efficiency by considering metrics such as:
4. Outsourcing rate
Your outsourcing rate is the ratio of the work you assign to independent contractors to the work that is completed by your employees. Your company’s goals will determine your optimal outsourcing rate; some companies prefer to outsource the majority of their projects, while others would prefer to have full-time employees complete them.
Here is the formula for calculating your outsourcing rate:
100 divided by the number of internal employees yields the outsourcing rate.
5. Benefit-cost ratio
Engineering managers use the benefit-cost ratio (BCR) KPI to gauge whether a team’s R&D expenditures will generate a profit for the business. A BCR of at least one indicates that the business should generate at least as much revenue as it expends on resources. For example, if you calculate your BCR and get 1. 75, that means your product should return $1. 75 for every $1 you spend on it.
Here is the formula for calculating your BCR:
Expected benefits / expected costs = BCR
6. Net present value
An engineering KPI called net present value (NPV) assists managers in estimating a project’s profitability. To create a value, it takes into account both incoming and outgoing cash flows. A positive value denotes a high likelihood that the project will be profitable for the business.
Here is the formula for calculating your net present value:
NPV = Value of Invested Cash – Value of Expected Cash Flows
7. On-time delivery
Timelines are crucial to the success of your project, and delivering your products on schedule can keep your customers happy and boost your profits. How frequently does your engineering team meet its deliverable deadlines can be determined using the on-time delivery KPI. Engineering managers should aim for high, consistent percentages.
Here is the formula for calculating your on-time delivery:
Projects delivered on time as a percentage of all completed projects multiplied by 100
8. Avoided cost
A KPI called avoided cost measures how much cash you saved during a particular process. You can determine how much money your team saved by investing in particular resources or equipment using this KPI. For instance, maintaining a machine will probably be less expensive than fixing it when it breaks.
Here is a formula for calculating your avoided cost:
Cost of repair or purchase minus (cost of lost productivity minus cost of maintenance) equals avoided cost
9. Comments per pull request
Reviewing your feedback for each pull request can reveal a variety of problems, such as the need for a thorough review of the submission or for significant changes. As the ideal number of comments varies by project, tracking this KPI requires patience and consistency. You can establish the typical rate for your projects by keeping an eye on your comments per pull request and addressing any inconsistencies as soon as they arise.
10. Payback period
You can estimate how long it would take to recoup the cost of hiring your engineering team to complete a project using the payback period KPI. Before you start the project, you can estimate your payback period and use it to create a team and set a timeline. Finding your initial investment and then using a different formula to determine the anticipated number of years to pay it back are both necessary steps in calculating your payback period.
Here are the formulas for calculating your payback period:
Initial investment = Research and development costs / revenue from each sale.
Initial investment / annual cash flow = payback period
11. Running costs
A KPI that measures running costs estimates the amount of funding required to keep an engineering team operating throughout a project. Running costs differ from project to project, team to team, and company to company, so managers typically add the total cost of their resources rather than following a formula. Factors they may consider include research, development and environment costs.
12. Cost performance indicator
After a project is finished, managers use the cost performance indicator (CPI) KPI to assess how efficiently it used engineering costs. CPI calculates a value by comparing the budgeted cost and the actual cost. Any value greater than one means the group finished the project on schedule.
Here is the formula for calculating your CPI:
Actual cost of work minus budgeted cost of work equals CPI
13. Schedule performance indicator
Similar to the CPI, the schedule performance indicator (SPI) gauges the effectiveness of an engineering budget from a cost standpoint. According to the project timeline, it compares the cost of the actual work to the budget for the same work. When the value is less than 1, the project is running behind schedule, when it is greater than 1, the project is running behind schedule.
Here is the formula for calculating your SPI:
SPI = budgeted cost of work completed minus budgeted cost of work scheduled.
14. Average downtime
Average downtime is a KPI that gauges how long a system is typically inactive. Engineering managers typically track average downtime in regular intervals. By summing up the weekly, monthly, or yearly totals and averaging them, they can determine the average downtime. They can identify increases in system issues and create plans for their resolution by monitoring average downtime.
15. Client number
Client number is a simple but crucial KPI that engineering managers should monitor. They should regularly count the number of active clients they have and assess the worth of each to the business. Having more customers can be beneficial to your business, but only if you have a good relationship with each of them. You can determine how many clients your team can handle by keeping track of them, and you can foster relationships that are good for business and for your clients.
16. Operating cash flow
Regardless of the industry sector, any engineering manager should monitor operating cash flow. It informs you of the daily revenue generated by your business based on profit and expenses. You can make sure your operating cash flow is consistent by keeping an eye on it.
Here is the formula for calculating your operating cash flow:
Operating cash flow is equal to earnings before interest and taxes, depreciation, taxes, and changes in working capital.
17. New client number
A KPI called new client number shows you how many new clients you have acquired since you last recorded your client number. Long-term profit increases can be achieved by adding new customers, but doing so requires a sizable financial commitment. You can assess whether you have the financial resources to build new client relationships by keeping track of the number of new clients you acquire.
18. Project margin
A key performance indicator (KPI) called project margin enables engineering managers to assess the estimated profit of a project in relation to its revenue. The total income received by a business is referred to as revenue, and the total income that remains after taxes and expenses is referred to as profit. Monitoring your project margin can help you make sure you make a reasonable profit without overcharging your clients.
Here is the formula for calculating your project margin:
Project margin is calculated as [(Project Revenue – Project Costs) / Project Revenue] x 100.
19. Code churn
Any code you modify or remove after 21 days is known as “churn.” All software engineering projects experience churn, but it’s crucial to look out for instances of extreme churn. Sudden increases in churn typically signify a problem, such as frequent client feedback or difficulties the development team is facing that you can assist them with.
20. Break-even point
Engineering managers in the manufacturing industry find break-even point (BEP) to be a particularly useful KPI for establishing their budgets and sales targets. BEP determines how many products must be sold to recoup the cost of development, production, and R&D. You make money if you sell more than your BEP.
Here is the formula for calculating your BEP:
Fixed costs / profit margin = BEP
21. Number of bugs
A fundamental KPI for managers of software engineering is the number of bugs. It entails keeping track of how many bugs or coding problems occur throughout a project. You might think about using a different method of development if you have a lot of bugs or notice a sudden increase. Many engineering managers use bug-tracking software to quickly and effectively find and fix problems.
What are engineering KPIs?
Engineering KPIs are key performance indicators used to track the effectiveness of projects in many different areas of the engineering industry. KPIs are metrics that assess a project’s performance and assist teams in locating and resolving particular process problems. They provide engineering managers with a way to evaluate progress quantitatively so they can keep their teams on schedule and delegate tasks based on project requirements.
20 additional engineering KPIs
Here are 20 additional KPIs to monitor project performance, spot problems, and overcome obstacles:
KPIs every engineering leader should track
FAQ
What are KPIs for engineering teams?
An engineering firm uses a clearly defined, quantifiable measure known as a key performance indicator (KPI) or metric to track its progress over time. KPIs are used in a variety of ways because engineering is such a broad field, from company-wide analysis to project-specific performance metrics.
What are the 5 key performance indicators?
Engineering KPIs are key performance indicators that are used throughout the engineering sector to track the effectiveness of projects. KPIs are metrics that assess a project’s performance and assist teams in locating and resolving particular process problems.
What are 9 KPIs?
- Revenue growth.
- Revenue per client.
- Profit margin.
- Client retention rate.
- Customer satisfaction.
