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A project manager's responsibility is to lead a project to a successful completion, which includes finishing the project on time, a happy customer, a proud team, etc. But it also includes financial results, right?

A project manager is preparing correct estimations and a project plan and controls their execution - these estimations and the project manager's control skills largely determine whether the project will be profitable at all. A project manager is able to organize and motivate the project team to complete the project earlier and so to increase the profitability of the project. A project manager is able to avoid or mitigate the risks and thus avoid time and financial losses. If the project is completed later than it was planned, then what is the financial impact of this failure? etc.

So what are commonly used financial indicators of a project and a project manager's efficiency (EBITDA, ROI, profitability, etc)?

The question assumes that the company earns money by doing projects for customers, for example a vendor of custom software.

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  • I think this is very much a misunderstanding of what project managers do. It is the business leadership's job to determine how to run their business effectively. Project managers control projects for things like schedule, scope, and budget. This seems like an X/Y problem with your organizational leadership rather than a valid PM question.
    – Todd A. Jacobs ♦
    Commented Dec 7, 2020 at 17:05
  • @ToddA.Jacobs A project manager does cotrol schedule, scope and budget, but a project manager also largely influences estimates and a budget, takes into account risks and thus have much influence on the financial part of a project.
    – Daniel
    Commented Dec 7, 2020 at 17:16
  • I think this is an X:Y question and we need to identify the X. Earned Value Management is the standard measure of a project. I'm not sure what "efficiency" means or how to define the efficiency of a project manager. I'm deeply suspicious that the term is an anti-pattern. PM's are exception handlers, and should not be "efficient". Projects should be 100% efficient.
    – MCW
    Commented Jan 6, 2021 at 11:26
  • @MarkC.Wallace I guess you mean that a PM doesn't participate in estimations, planning the project, indentifying risks, instead they are just given the scope, the time, the resources and have to complete the project? In this case PMs are really more like exception handlers. But for companies that do projects to earn money, the project is like an investment, and PM has much influence on ROI.
    – Daniel
    Commented Jan 6, 2021 at 16:47
  • Risk management is the way adults manage projects, but efficiency is the ratio of input to output - I'm not sure how to measure either of those values, and I'm not sure that either the measurement or the ratio is meaningful. Is a hastily drawn plan (low input to nominal output) higher efficiency than a thorough plan? Risk management is anti-efficient, since the input generally provides no output. "Planning is everything, the plan is nothing". I just get the sense that the answers aren't going to be suitable for the purpose driving the question.
    – MCW
    Commented Jan 6, 2021 at 16:51

2 Answers 2

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A lot depends on the commercial context, the business need being served and presumably the nature of the PM role as well. You have tagged this question with "Scrum" but in Scrum there is no project manager and the Product Owner is the person who is expected to be responsible for delivering business value.

Irrespective of the means of delivery, most businesses are more interested in measuring product outcomes and ROI rather than project success. The fact that one project finished on time or on budget may be of little significance if the product it developed is a loser. On the other hand a project that bust its budget and took unexpectedly long might yield a world-beating product. In business terms the former looks like failure; the latter is a success.

In the case where the project is your product, for example you are selling software development, systems integration or consulting services, then different considerations might apply. Individual project profitability isn't necessarily the measure of success however. Service providers sometimes run projects at a loss, either in the expectation that they may get more business in future or just because a loss-making project is preferable to the fixed costs of no project at all.

In short, trying to measure a project's success is probably the wrong thing to do. Measuring products and value streams is better. In any case, success or failure should not be attributable to one person but to a team.

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  • My question is more about vendors of custom software. Even if they are doing a Scrum project for a customer they are doing it in order to earn money and the question is about measuring the effectiveness of those projects in terms of money.
    – Daniel
    Commented Dec 7, 2020 at 13:30
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As noted here, it doesn't really matter which financial indicator is used, as long as it's objective and measurable.

The other key point is, that for a Project Manager to be held responsible to avoid and mitigate risks (as well as all the other magic you attribute to us) they need the authority, not only the responsibility.

More often than not, it's the PjM's responsibility to keep all the balls in the air, yet they don't have the authority to make it happen, and therefore the success (and more often than not, failure) depend on how fast and cooperative the "authorities" are, once the PjM identifies an issue.

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  • Thank you. I know about KPIs, but they aren't applied like you said - you need a well thought-out system of KPIs and this system KPIs must be effective. This is what my question is about - what financial indicators to select, which are good for software development projects for example.
    – Daniel
    Commented Dec 7, 2020 at 13:39

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