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What is KPI in Software Development?

In this article, we are going to focus on the question, “What is KPI?” We are going to look at how Agile Development Teams use KPIs during software development.

What is KPI?

KPI stands for Key Performance Indicator. A KPI is a measurable value that describes how well you are achieving key objectives.

KPIs assist individuals, teams, and organizations to track the various aspects of a project.

Below is a list of 4 aspects that key performance indicators (KPIs) help measure.

  • Progress -KPIs help to track your headway towards your set goals. They are useful because you can quickly determine if you are on or behind your schedule.
  • Performance –Monitoring your performance during the execution of your plans can help you make the right adjustments to achieve your goals. KPIs illustrate all the data in such a way that you can discover issues at a glance.
  • Resource Allocation – Sometimes effectively keeping track of all your resources is difficult. KPIs make it easy for you to discover resources that are over or underutilized including everything in-between.
  • Costs – Costs like labor, inputs, operating fees, etc, can often spiral out of control without any additional profit for you. Therefore, it is important to use the right tools that help you accurately track your expenditures.

You use KPIs to measure your success at achieving key objectives/targets.

Different industries tend to use different KPIs to measure the achievement level of their key objectives.

How to make Good Key Performance Indicators (KPIs)?

The anatomy of a good KPI consists of four organs:

The Measure

This is the aspect or quantity you are evaluating. A good KPI has a measure that is clearly defined without any vagueness. A good measure is something like,” Number of new customers for the fiscal year 2021.”

The Target

Your KPI’s target must match with its measure. A target is usually a quantity or ratio that you want to achieve by a certain time. An example of that would be “Target of 10000 new customers for the fiscal year 2021.”

The Data Source

A KPI needs a reliable and accurate data source. Without this, all your data is untrustworthy and would not be able to represent your project’s progress.

The Reporting Frequency

Different KPIs have different reporting needs. However, a Good KPI must have a large set of data to analyze so the more frequent your reports the better it is. Common reporting frequencies are monthly, quarterly, etc.

Here is an example of a KPI’s inner structure.


KPI
MeasureNumber of new users by the end of 2021
Target10 000
Data SourceCRM
FrequencyMonthly

Also, a good way to remember all the attributes of a good KPI is to use the SSMAAART mnemonic.

  • Simple
  • Specific
  • Measurable
  • Achievable
  • Ambitious
  • Actionable
  • Relevant
  • Time-bound

These are the properties that indicate a good KPI.

4 Key Performance Indicators (KPIs) in Agile Software Development.

Velocity KPI

According to Wikipedia, velocity is the rate of change of an object’s position with respect to a frame of reference and it is a function of time.

In Agile Software Development, Velocity is the amount of work the development team completes during each sprint. Work is measured in the number of story points or hours.

Velocity is calculated from the performance of the team during previous sprints. However, to have an accurate velocity, you need the data of at least 4 previous sprints.

In the beginning, the data from the Velocity KPI is unreliable. However, as the team gets more experienced and more data is available, the KPI becomes a good estimation to predict the team’s throughput in future sprints.

The longer you track the velocity, the more reliable it becomes.

Different development teams have different velocities, therefore velocity is not a measure of a team’s productivity. You should not compare between development teams’ velocity to determine the more productive team.

Sprint Burndown KPI

A sprint burndown KPI shows you how much work has already been done and how much is left. The sprint burndown shows the rate at which tasks are completed.

The ideal workflow on a sprint burndown is a straight line that uniformly reduces the undone work to zero.

In software development, Story Points means the same as tasks/jobs.

The sprint burndown helps the development team finish their tasks on time during a sprint. It enables you to see if the development team is on track to complete the set objectives.

With a burndown, a team can easily monitor their progress and if anything is wrong, they can quickly identify and correct it.

A sprint burndown is like a count down towards a sprint’s end. It is useful because it displays the progress towards the objective instead of listing already completed tasks.

Cycle Time KPI

Cycle Time KPI measures the units of work completed per certain time. In other words, it measures how much time the development team needs to complete a task.

The product owner or the scrum master measures the overall performance of a development team using the Cycle Time KPI. They also use the Cycle Time to predict future deadlines and project milestones based on past performance on similar tasks.

Cycle Time includes the time spent on completing a task and also the times the task had to be revised.

With the Cycle Time KPI, you can detect bottlenecks and irregular tasks in the workflow due to their uncommon cycle times. After detection, you can begin solving them.

Although shorter cycle times usually imply better performance, development teams who deliver in a steady cycle time are valued most.

Cumulative flow KPI

A Cumulative Flow gives insight into the overall status of your Agile project.

The cumulative flow KPI shows what percentage of work has been:

  • completed
  • in the backlog
  • in progress
  • etc.

at certain points in time. A cumulative flow is like an advanced version of a burnup chart.

With a cumulative flow KPI, you can detect bottlenecks in your project. Additionally, you can monitor the overall progress towards your ultimate goal.

A Cumulative Flow KPI is kind of like a project status dashboard.

Conclusion – What is KPI?

KPIs are useful not only to industries but can also be used on an individual basis.

In software development, using the right amount of KPIs will give you the information you need to guide your project to a smooth completion. The key is to choose the right combination of KPIs that help you focus on your main objectives.

To summarize, KPIs are metrics designed to indicate if you are hitting the right keys on your project. If not, they can help you identify exactly where your mistakes are.

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