Engineering KPIs: Setting Team Metrics for Performance Alignment (2024)

Imagine that you have recently been promoted to Engineering Manager and will now lead a team.

Isn’t it exciting? Sure, it is, but with greater roles come greater responsibilities. Particularly the responsibility of setting Key Performance Indicators (KPIs) for your team and aligning them with leadership goals.

Rob Zuber, an engineering leader and founder with over two decades of experience, writes in his article:

What Rob means to communicate is that metrics are powerful tools for optimizing work and gaining insights into work being done and areas of improvement. However, a successful engineering team understands the connection between operational metrics and broader business goals. They use engineering KPIs as indicators or tools to meet the larger leadership goals.

To see yourself as a leader or manager of a team involves aligning the overarching goals with your team’s operational metrics. In this piece, you’ll learn about all of it, plus get to know about the most important KPIs for yourself as well as the engineering team.

Defining the Engineering Leadership Goals

The first step towards defining engineering leadership goals is to establish clear and achievable objectives that align with the organization’s mission and strategic direction. These goals include enhancing product quality, increasing team efficiency, fostering innovation, and improving customer satisfaction.

For instance, when Lindsey Bleimes, VP of Engineering at Nubank, was asked about what defines a successful engineering organization, she responded:

As an effective engineering leader, how can you define specific and measurable goals to build a creative and engaging team of engineers? Well, here are the most important KPIs that’ll help you achieve this for your team:

KPIs for Investment and Capacity

For any organization, the engineering team is the largest investment, so it’s important to ensure that this investment is in the right direction. The two KPIs that will help you measure the investment and capacity are effort allocation and calculating new hires’ ramp-up time.

• Effort allocation: Effort allocation significantly tracks the amount of work done by your team. It can be measured by counting story points, filling out time cards, or tracking actual code work done by aggregating PRs, commits and the like and associating that to projects logged in an issue-tracking system like Teamhood.

• New-hire ramp-up time: New-hire ramp-up time measures how much time it takes for a new hire to get on-boarded quickly to your systems and processes and how soon they can work independently and deliver on time. You should aim to reduce new-hire ramp time to boost efficiency and productivity, and this can be tracked by looking into pull requests by new engineers and the turnaround time.

KPIs for Quality

Once you know your engineering team is building the right products and features, it’s important to ensure that the software being developed consistently provides value to your customers. Quality metrics measure the consistency of your deliverables.

Any issues later on will eventually come back to the engineers and your team. Hence, it’s important to monitor quality metrics to minimize customer impact and ultimately maximize customer satisfaction and retention.

The most important KPIs to measure quality are:

• Bugs: Bugs are mainly the issues in your product features and codes. By understanding the number and severity of bugs that exist per product or feature, and comparing that with product or feature usage against your customer base, you can prioritize fixing those bugs, and where to focus your team’s efforts.

• Time to Resolution: Time to resolution will track the time it takes to fix bugs, failures, and other issues. It helps gauge how quickly the team responds to customer problems. You can also monitor metrics like net bugs, which compare the number of reported bugs to those fixed. We can see how effectively the team manages incoming issues and ensures product quality is a priority.

• Uptime: Uptime refers to the duration when the product runs efficiently and will be directly measured against the product’s downtime. Your focus for this KPI should be to maximize uptime for customer satisfaction. Prolonged downtime can lead your customer to switch or have a negative brand image; hence, figuring out bottlenecks and optimizing the number of tickets helps enhance uptime.

KPIs for Process

To help your team build the right things and continually deliver the intended value to your customers, you’ve got to have an efficient workflow process. Measuring process efficiencies will allow your team to move faster and increase the predictability of the delivery for the go-to-market.

For example, utilizing DORA metrics like cycle time & lead time, deployment frequency, and task resolution rate will help in determining the process efficiency for your engineering team.

• Cycle time or lead time: Cycle time and lead time are ways to see how fast you can give customers new features. The faster the lead time, the quicker you give value. Shorter cycle times can show smaller tasks or work getting done faster.
• Deployment frequency: Tracking how often your team deploys helps you determine how quickly you can provide value to customers.
• Task resolution rate: Most projects are divided into smaller tasks handled by your team of engineers. It’s helpful to measure how many of these tasks are completed compared to how many are created over time (resolution rate).

KPIs for Progress & Deliverability

Sales and Marketing teams play a larger role in promising key product features to the market, but ultimately they rely on the engineering team to deliver. Hence, your plan for progress for when the product will be ready to launch is crucial to keep everyone in alignment. The KPIs that can help you track this are the Sprint Burndown report and predicted ship date.

• Sprint burndown report: Sprint and release burndown charts track work progress and remaining tasks alongside the ideal progress line. The release burndown covers progress across all sprints, while the sprint burndown focuses on the current sprint. These reports are effective for your team if they have consistent sprint durations, making data collection and analysis simpler.

• Predicted shipping date: A predicted shipping date estimates when a release, project, feature, or product will be ready to launch. It allows everyone in the company to plan their work effectively, especially sales and marketing. While these predictions can sometimes be uncertain, especially if they’re based solely on intuition and experience, it’s still better to give an estimate and adjust it later than to provide no estimate at all.

KPIs for Customer Satisfaction Rate

The most important KPI for engineering to measure customer satisfaction rate is the CSAT score. The CSAT measures the performance and usability of the product by your customers. It directly reflects on your team’s ability to meet user expectations and deliver quality software.

For example, conducting regular user surveys or analyzing customer feedback to assess satisfaction levels helps measure the software’s performance.

Additionally, a lot of companies use the Net Promoter Score method to get feedback from their clients. The NPS method recognizes the likelihood of your customers to refer the product, service or feature to others and provides a positive word of mouth for the business.

Setting the right KPIs for your engineering team

Once you have set your eyes on the larger leadership goals and defined them as per the team’s ability to perform operational work. You will then need to set the KPIs for your engineering team to achieve those objectives. Consider the unique characteristics of your team, such as size, composition, and project scope, when selecting KPIs.

Focus on engineering productivity metrics that directly impact the desired outcome, such as quality, or customer satisfaction, and ensure that your team’s efforts are directed toward the most significant areas of improvement. Let’s look at key metrics for planning, software, and QA engineers in your team and highlight differences in their role performance.

Identifying KPIs for a Planning Engineer

A planning engineer on your team is someone who figures out the best and most cost-effective ways for your projects. They work with a team of other engineers, workers, and architects to build new products or improve what’s already built.

They might look for ways to grow, decide how to use resources wisely for years to come, or pick which new technologies to invest in for success. Hence, setting the Key Performance Indicators (KPIs) for your planning engineer involves selecting metrics that measure the effectiveness of project planning processes:

Project schedule adherence: This KPI measures the extent to which project tasks are completed within their planned timeframe. It reflects the team’s ability to adhere to the schedule outlined in the project plan.

If a construction project has 100 tasks scheduled for completion within a year and only 70 tasks are finished by the end of six months, the project schedule adherence would be 70%.

Schedule Variance (SV): SV indicates the deviation between the planned schedule and actual progress. A positive value indicates tasks are ahead of schedule, while a negative value suggests delays.

If a software development task was scheduled to be completed in 5 days but took 7 days, the SV would be -2 days, indicating a delay.

Cost performance index (CPI): CPI assesses the efficiency of cost spending with work accomplished. A value greater than 1 indicates cost efficiency, while less than 1 suggests cost overruns.

A CPI of 1.2 means that for every dollar spent, $1.20 worth of work was completed, indicating efficient resource utilization.

Earned Value (EV): EV represents the value of work completed as per the project plan. It quantifies progress by assigning a value to completed tasks.

If a construction task is worth $10,000 and 50% of it is completed, the EV would be $5,000, reflecting the value of the work completed.

Planned vs. Actual Progress: This compares planned progress against actual progress to identify variances. It helps in understanding whether the project is on track or behind schedule.

If the project plan outlines completing 30% of the work by a certain date, but only 25% is completed, there is a variance of 5%, indicating a delay.

Resource utilization: This KPI evaluates the percentage of available resources actively engaged in project tasks. It indicates whether resources are optimally utilized.

If a team has 10 members but only 8 are actively working on project tasks, the resource utilization rate is 80%.

Lead time: Lead time measures the time taken from the initiation of a task to its completion. It helps in assessing the efficiency of task execution.

In manufacturing, lead time refers to the time taken from placing an order to receiving the product. If it takes 10 days to manufacture and deliver a product, the lead time is 10 days.

On-Time delivery: This KPI assesses the percentage of tasks completed within their scheduled timeframe. It indicates the team’s ability to meet deadlines.

If 80 out of 100 tasks are completed on time, the on-time delivery rate is 80%.

Risk management effectiveness: This KPI evaluates how effectively risks are identified, assessed, and mitigated throughout the project lifecycle.

If a project faces unexpected challenges, the effectiveness of the risk management process can be assessed by analyzing how quickly and efficiently high-risk issues are resolved.

Identifying KPIs for a Software Engineer

Other engineers’ KPIs typically revolve around project management and strategic decision-making. But for a software engineer on your team, KPIs involve focusing on metrics like code quality, efficiency in completing tasks, and meeting project deadlines. They will also include measuring lines of code written, code review completion time, and the number of bugs fixed.

For software engineering KPIs, the focus is on the technical aspects of development compared to overall project planning, resource allocation, and long-term organizational strategies. The most commonly used KPIs for them are listed below:

1. Code quality: Code quality metrics assess the readability, maintainability, and efficiency of software code. It reflects your engineer’s ability to write clean, error-free code. Utilizing code analysis tools to measure metrics such as cyclomatic complexity, code duplication, and code comments to ensure high-quality code.

2. Bug fix rate: This KPI measures the rate at which your engineers identify and resolve bugs in the software. It reflects their efficiency in debugging and problem-solving. If they identify and fix 10 bugs in a week, the bug fix rate would be 10 bugs per week.

3. Time to resolution: Time taken by the engineers to resolve reported issues or tickets. It indicates the efficiency of problem-solving and customer support processes. If your engineer resolves a reported issue within 24 hours of its discovery, the time to resolution is 24 hours.

4. Feature delivery rate: This KPI measures the speed at which new features or enhancements are delivered to customers. It reflects your engineer’s productivity and ability to meet project deadlines. If your team delivers 5 new features in a month, the feature delivery rate is 5 features per month.

5. Code review effectiveness: Assesses the thoroughness and impact of code reviews conducted by the engineers. It ensures code quality and knowledge sharing within the team. Analyzing the percentage of identified issues addressed in code reviews and the improvement in code quality over time.

6. On-time delivery of software releases: This measures the percentage of software releases delivered on schedule. It reflects your engineer’s ability to manage project timelines and dependencies effectively. If 90% of software releases are delivered on schedule, the on-time delivery rate is 90%.

7. Innovation and creativity: With this, you can assess your engineer’s ability to innovate and propose creative solutions to technical challenges. You can recognize engineers who introduce novel ideas or technologies to enhance product functionality and performance.

8. Technical debt reduction: Measures the progress made by engineers in reducing technical debt, such as outdated code, inefficient algorithms, or architectural deficiencies.

Identifying KPIs for a QA Engineer

QA engineers in your team are the ones who test the product and software features built by the engineers. Setting KPIs for your QA engineer will involve metrics revolving around testing best practices and methods including test execution and automation strategies.

Below, you can find a comprehensive list of commonly used OKRs for a QA:

1. Defect detection rate: This measures the percentage of defects identified by QA engineers during testing compared to the total defects present. It reflects the thoroughness of testing and the effectiveness of your QA processes. If your QA engineer identifies 80 defects out of 100 total defects, the defect detection rate is 80%.
2. Test coverage: This KPI will evaluate the percentage of the software codebase covered by test cases. It ensures that critical functionalities are adequately tested, minimizing the risk of undiscovered defects. If test cases cover 90% of the software codebase, the test coverage is 90%.
3. Test execution efficiency: This KPI measures the speed and efficiency of QA engineers’ test execution. It reflects their ability to identify defects promptly and facilitate faster feedback loops. If your QA engineer executes 1000 test cases in a day, the test execution efficiency is 1000 test cases per day.
4. Defect resolution time: This will track the time developed teams take to resolve defects reported by QA engineers. If it takes an average of 2 days to resolve defects reported by QA engineers, the defect resolution time is 2 days.
5. Test case effectiveness: This assesses the quality and relevance of test cases created by QA engineers. It ensures that test cases accurately reflect user requirements and cover critical functionalities. You can analyze the percentage of test cases that identify defects and the alignment of test cases with user stories or requirements.
6. Regression test efficiency: This will measure the effectiveness and coverage of regression testing conducted by QA engineers. It ensures that software updates or changes do not introduce new defects or regressions. You can monitor the percentage of defects identified through regression testing and the time saved by automating regression test suites.
7. Test automation coverage: This KPI evaluates the percentage of test cases automated by QA engineers compared to manual test cases. It improves testing efficiency and enables faster release cycles. If 70% of test cases are automated, the test automation coverage is 70%.
8. Compliance with quality standards: This ensures adherence to quality standards and regulatory requirements relevant to the software domain. It mitigates legal and compliance risks associated with software products. You must conduct audits or assessments to verify compliance with industry standards (e.g., ISO 9001, GDPR, HIPAA).

Strategies to Align Metrics With Leadership Goals

Once you have successfully set the KPIs for yourself and the team, there needs to be an ongoing effort to keep those in sync and measure against your leadership goals. Here are a few strategies you can adopt to remain relevant and adaptable for your engineering team’s KPIs:

• Gain insights into your engineering team’s strengths, weaknesses, and capabilities. Consider factors like skill sets, experience levels, and project preferences to tailor metrics that resonate with team members.

• Communicate the strategic goals and priorities of the organization to your engineering team before setting the operational metrics for them. It will help them understand how their contributions impact the overall success of the company.

• Involve your engineering team in defining team-level metrics that support the identified KPIs. Encourage input from team members to ensure buy-in and commitment to the chosen metrics.

• Implement systems and project management tools to create engineering KPIs dashboards to track and monitor progress toward the defined metrics. Regularly review performance data with the team to identify milestones accomplished and areas for improvement.

Teamhood’s Performance metrics feature will bring you and your team a clear picture of how well everyone is doing and what needs to be improved to keep things more efficient.

• Offer constructive feedback and support your team members based on their performance against the aligned metrics. Provide resources, training, and mentorship to help team members achieve their goals.

• Encourage a culture of continuous improvement within the engineering team by encouraging experimentation, learning from failures, and implementing best practices. Revisit and refine team metrics and KPIs regularly as needed to ensure relevance and effectiveness.

• Acknowledge and reward team members who consistently meet or exceed performance expectations aligned with engineering KPIs. Recognition can be in the form of bonuses, promotions, or public acknowledgment of achievements.

• Continuously evaluate and refine the alignment of team metrics with engineering KPIs based on evolving organizational goals, market conditions, and industry trends. Be flexible and willing to adjust strategies as needed to maintain alignment and drive success.

Other Strategies

Apart from these, efficiency for your KPI engineering inc can be measured by using other strategies. For example, encourage open communication and cross-functional collaboration to streamline workflows and improve problem-solving capabilities.

Implement agile methodologies such as Scrum or Kanban to promote iterative development cycles and allow for quick adaptation to changing requirements. To further enhance productivity, you can provide access to cutting-edge tools and technologies. Moreover, invest in continuous learning and development opportunities to keep your engineers relevant and updated with industry trends.

Jessica McKellar, founder and CTO of Pilot, says:

With Teamhood, tracking your engineering KPIs becomes effortless through customizable dashboards and reports. Contact us today to discover how you can fully utilize our platform to generate data-driven KPI reports.