41 Important Engineering KPIs (With Definitions)
As an engineering manager, you can monitor your team's progress and ensure teams stay on track using key performance indicators, or KPIs. Measuring the many elements involved in an engineering project can present a challenge, but KPIs can help. Tracking KPIs enables you to manage your processes efficiently, which may help you increase your revenue and achieve company goals. In this article, we explain what engineering KPIs are and list 41 KPIs you can use to guide your project, your teams and your company to success.
What are engineering KPIs?
Engineering KPIs are key performance indicators used in many areas of the engineering industry to monitor the efficiency of projects. KPIs are measurements that determine how well a project performs and help teams identify and resolve specific issues within the process. Sometimes called metrics, they give engineering managers a way to measure progress in a quantifiable way so they can keep their teams on schedule and assign tasks based on project needs.
21 important engineering KPIs
Here are 21 engineering KPIs you can use to monitor the efficiency of your teams, the success of your company and the status of your projects:
1. Project timeline
A project timeline is an engineering KPI that gives managers a way to monitor a project based on established start dates and deadlines. Checking a project timeline regularly can help you identify specific challenges or obstacles that could affect the timeline of your project. You can then work with your team to strategize solutions to prevent or minimize delays. Every timeline looks different depending on the project type and the software used to create the timeline.
2. Code cycle time
Code cycle time shows you how quickly a program code transfers from a developer to production. This can help you identify and resolve coding bottlenecks that could slow your production time. You can track your cycle time by determining how long it takes to:
Issue a pull request from your initial commit
Have your first review
Merge documents from your first review
Deploy to the server after the merge
3. Engineering efficiency
This KPI determines the effectiveness of your team in all projects. You can use it to determine if you need to make changes to your team, such as adding members or redistributing tasks. Engineering managers calculate efficiency by comparing the cost of paying the engineering team with the number of projects they can handle at once. Managers can measure efficiency by considering metrics such as:
Code cycle time
Number of program bugs
Frequency of software deployment
How long it takes to merge documents after a review
4. Outsourcing rate
Your outsourcing rate is the amount of work you hire out to independent contractors compared to the amount of work your employees perform. Your optimal outsourcing rate depends on your company's goals, as some prefer to outsource most of their projects while others would rather have full-time employees completing them.
Here is the formula for calculating your outsourcing rate:
Number of external staff / number of internal staff x 100 = outsourcing rate
5. Benefit-cost ratio
Engineering managers use the benefit-cost ratio (BCR) KPI to determine if a team's research and development costs will profit the company. A BCR of at least one means the company should make at least as much as it pays for its 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
Net present value (NPV) is an engineering KPI that helps managers determine the profitability of a project. It considers ingoing and outgoing cash flows to produce a value. A positive value indicates a high potential the project will profit the company.
Here is the formula for calculating your net present value:
Value of expected cash flows - value of invested cash = NPV
7. On-time delivery
Project timelines have an important role in the success of your project, and the on-time delivery of your products can keep your clients satisfied and increase your profits. You can use the on-time delivery KPI to determine how often your engineering team meets its deadlines for deliverables. Engineering managers should aim for high, consistent percentages.
Here is the formula for calculating your on-time delivery:
Number of projects delivered on time / total number of projects delivered x 100 = on-time delivery
8. Avoided cost
Avoided cost is a KPI that determines how much money you saved during a specific process. Using this KPI, you can calculate how much money your team saved by investing in certain equipment or resources. For example, if you pay to maintain a machine, it likely costs less than if the machine breaks.
Here is a formula for calculating your avoided cost:
Cost of maintenance or purchase - (cost of repair + cost of lost productivity) = avoided cost
9. Comments per pull request
Reviewing your comments per pull request can determine multiple issues, such as the need for a more comprehensive review of the submission or for extensive changes. Tracking this KPI takes time and consistency, as the ideal number of comments varies by project. By monitoring your comments per pull request, you can determine a normal rate for your projects and address any inconsistencies as they appear.
10. Payback period
The payback period KPI can help you determine how long it would take to recoup the cost of paying your engineering team to complete a project. You can estimate your payback period and use it to help you create a team and establish a timeline before you begin the project. Calculating your payback period involves figuring out your initial investment and then using a separate formula to determine the estimated number of years to pay it back.
Here are the formulas for calculating your payback period:
Research and development costs / profit of each product sold = initial investment
Initial investment / annual cash flow = payback period
11. Running costs
Running costs is a KPI that determines how much money it takes to keep an engineering team functioning throughout a project. Running costs vary by project, team and company, so managers typically add the total cost of their resources instead of using a specific formula. Factors they may consider include research, development and environment costs.
12. Cost performance indicator
Cost performance indicator (CPI) is a KPI managers calculate after a project's completion to determine its efficiency in terms of engineering cost. CPI compares the budgeted cost and the actual cost to determine a value. Any value greater than one indicates the team completed the project under budget.
Here is the formula for calculating your CPI:
Budgeted cost of work - actual cost of work = CPI
13. Schedule performance indicator
Schedule performance indicator (SPI) is similar to CPI, but it measures the efficiency of an engineering budget from a cost perspective. It compares the cost of the actual work to the budget for the same work according to the project timeline. A value of less than 1 means the project is behind schedule, 1 means the project is on schedule and more than 1 means the project is behind schedule.
Here is the formula for calculating your SPI:
Budgeted cost of work performed / budgeted cost of work scheduled = SPI
14. Average downtime
Average downtime is a KPI that determines the average length of time a system is not functional. Engineering managers typically track average downtime in regular intervals. They find the average downtime by adding weekly, monthly or yearly totals and averaging them. By tracking average downtime, they can determine increases in system issues and develop strategies for resolving them.
15. Client number
Client number is an easy and important KPI for engineering managers to track. They should determine their number of active clients regularly and evaluate the value of each one to the company. Increasing your client base can help your business, but only if you have a strong relationship with each one. Monitoring your number of clients allows you to figure out how many your teams can handle and nurture relationships that benefit both the company and your client.
16. Operating cash flow
Operating cash flow is an important KPI for any engineering manager to track regardless of industry sector. It tells you how much money your company makes daily based on profit and expenses. Monitoring your operating cash flow can help you ensure it remains consistent.
Here is the formula for calculating your operating cash flow:
Earnings before interest and taxes + depreciation - taxes - changes in working capital = operating cash flow
Read more: How To Calculate Operating Cash Flow
17. New client number
New client number is a KPI that tells you how many clients you have gained since the last time you recorded your client number. Accepting new clients can help you increase your profit in the long run, but establishing a relationship involves a significant investment. By tracking your number of new clients, you can determine if you have the financial resources to develop new client relationships.
18. Project margin
Project margin is a KPI that allows engineering managers to measure the estimated profit of a project relative to its revenue. Revenue refers to the total amount of income a company receives, while profit is the total remaining revenue after taxes and expenses. Tracking your project margin can help you ensure you earn a fair profit without charging your customers too much.
Here is the formula for calculating your project margin:
[(Project revenue - project costs) / project revenue] x 100 = project margin
19. Code churn
Churn is any code you rewrite or delete within 21 days of writing it. Churn occurs as a part of all software engineering projects, but it's important to watch for high levels of churn. Sudden increases in churn usually indicate an issue, such as frequent client feedback or development team challenges you can help them address.
20. Break-even point
Break-even point (BEP) is a KPI that engineering managers in the manufacturing sector find particularly helpful in determining their budgets and sales goals. BEP calculates how many products you need to sell to cover the cost of research, development and production. If you sell more than your BEP, you make a profit.
Here is the formula for calculating your BEP:
Fixed costs / profit margin = BEP
21. Number of bugs
Number of bugs is a basic KPI for software engineering managers. It involves recording the number of bugs, or coding issues, that arise during a project. If you have a lot of bugs or notice a sharp increase, you may consider taking an alternative approach to the development process. Many engineering managers use bug-tracking software to help them identify and resolve issues quickly and efficiently.
20 additional engineering KPIs
Here are 20 more KPIs that can help you monitor your project performance, identify issues and overcome challenges:
First pass yield
Internal rate of return
Planned maintenance percentage
Number of software releases
Product support cost
Average fee per hour
Existing client revenue
Repeat business rate
Number of software developers
Cost of downtime
Net profit margin
Return on assets
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