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      KPIs for Remote Development Team: How to Measure Efficiency of Your Remote Engineers

      “What gets measured gets managed.”

      This quote is said to be from Peter Drucker, a leading management consultant from the 20th century. But the actual words go something like this: ‘What gets measured gets managed — even when it’s pointless to measure and manage it, and even if it harms the purpose of the organization to do so.’ And the credit goes to the journalist Simon Caulkin for coming up with those words.

      Drucker, in turn, put it like this: ‘Moreover, because knowledge work cannot be measured the way manual work can, one cannot tell a knowledge worker in a few simple words whether they are doing the right job and how well they are doing it.’

      We’re totally on board with Drucker here. People are more than just numbers, and there are various factors that can impact how effective software developers are. Plus, you can’t quantify passion, creativity, and commitment to company values with numbers.

      Yet, when it comes to catching hiccups in a project, it’s crucial to use and scrutinize metrics and KPIs consistently. So, how do we do it in software development?



      What is a KPI in the remote development team?

      In software development, a key performance indicator, or KPI, is like a scoreboard for your team’s success. It’s a set of numbers and metrics that tell you how well your software project performs. Instead of guessing or hoping for the best, KPIs provide concrete data to show whether your team is meeting its goals.

      For example, one KPI might track how quickly your team resolves issues or fix bugs. This helps you gauge the efficiency of your development process. Another KPI could measure user satisfaction, indicating whether people are happy with your software.

      In a nutshell, KPIs are the numbers that keep your team on track and help you build high-class software.



      Why are KPIs important in software development?

      KPIs are crucial in software development, especially when working with remote teams or outsourcing projects. Here’s why KPIs are so important:

      • KPIs find and fix problems in making software, ensuring everything runs more smoothly and leading to better results.
      • KPIs are progress reports for software projects. They tell everyone how things are going, like a snapshot of the project. This helps manage the work better and plan for the future, so everyone knows what’s happening.
      • By keeping an eye on how things are going and making things better as you go along, you can avoid extra work and costs. It’s like fixing things before they become big problems, saving time and money.
      • KPIs also help make smart choices. Instead of guessing, use data to decide where to put our energy for the best results.

      In essence, KPIs in software development represent a strategic roadmap. They navigate distributed agile teams through challenges and keep the work cost-effective, ending up in the delivery of high-quality software products.



      When is it efficient to introduce KPIs to a remote software development team

      Introducing KPIs will make sure you’re on the right track. But when is the best time to start using them? Use these three signs to decide:

      1. It’s not a quick project. If your project is a marathon, not a sprint, that’s the perfect time for KPIs. They work best when you have a bit of time to see progress and make improvements.


      2. You have clear milestones and deliverables. This way, you know where you’re going and can measure progress along the way.


      3. There’s at least a high-level project plan. Before you hit the road, it’s good to have a plan. Having at least a high-level project plan means you’re ready to start using KPIs to keep things on course.

      So, if your project is more like a journey than a quick ride, with clear milestones and a roadmap in hand, that’s the efficient time to bring in KPIs and set up a smoother, more successful trip.


      Types of KPIs for software developers team

      Before we move to the custom software development KPIs, let’s take a short look at what matters for any project:

      • Schedule compliance: Keeps the development progress aligned with the planned schedule, highlighting reasons for deviations such as missing requirements or technical risks.
      • Accuracy estimate variance: Indicates how much the actual efforts deviate from the initial estimate, helping determine the remote development team’s velocity.
      • Budget variance: Tracks deviations from the planned budget, especially when involving unplanned expenses for specific tasks.

      But just like with any project, details compose the whole picture. It is essential to break KPIs down to the level where production happens, finances flow, and customers use the software.

      First, let’s take some time to explore the efficiency and workflow metrics and what decisions they help make on the way to successful delivery.


      Productivity and workflow software development KPIs


      How to measure


      Developer Productivity

      Measure the output or work completed by a developer in a given timeframe.

      Introducing a new task-tracking tool allowed developers to easily see their assignments, resulting in a 20% increase in tasks completed per week.

      Velocity (Development, Sprint, or Team Throughput)

      Calculate the amount of work completed in a specific time, often used in Agile methodologies.

      Implementing agile methodologies led to a steady rise in sprint velocity, moving from completing 15 story points to consistently achieving 25 story points per sprint.

      Progress and Performance Tracking Metrics

      Monitor the progress of tasks and overall team performance against set goals.

      Early identification of a critical bug allowed the team to address and fix it, preventing potential delays in the project timeline.

      Sprint Burndown

      Track the progress of a sprint in a Scrum framework by showing the amount of work remaining in the sprint.

      The total work estimated at the sprint start is 100 story points. Day 1: 90 story points remaining. Day 2: 80 story points remaining. The ideal trend is a linear downward slope indicating steady progress.

      Release Burndown

      Track the progress of a release cycle in Agile development by showing the amount of work remaining until the release.

      Plot the story points remaining. The chart will show a downward trend, ideally reaching zero by the end of the release cycle.

      Cycle Time and Lead Time

      Measure the time it takes to complete a task or deliver a product feature.

      Streamlining development processes reduced cycle time from two weeks to one week per feature.

      Wasted Effort Metric

      Identify and quantify efforts that do not contribute to the project's progress.

      Identifying and eliminating redundant tasks and unnecessary processes allowed the team to dedicate more time to essential project elements.

      As you can see, we focus on executing tasks and regular monitoring. However, remember that the remote software development team’s motivation and comfort are always as important as their expertise and speed of accomplishing projects.

      Software development performance and code quality KPIs

      Checking how well the code performs and its quality is crucial. It helps start things like code reviews and testing on time. Plus, since distributed agile teams change, having good code becomes even more important. Gone are the days when developers wrote code just for themselves — now, it needs to be neat, accurate, and well-organized.



      How to measure


      Code Quality Metrics

      Evaluate the quality of code based on predefined criteria.

      Improved code quality resulted in fewer post-release issues and increased customer satisfaction.

      Code Coverage

      Identify the share of code covered by automated tests.

      High code coverage contributed to a robust and reliable software product.

      Code Stability

      Assess the stability and reliability of the codebase.

      Ensuring code stability reduced the frequency of system crashes and errors.

      Code Simplicity

      Evaluate the simplicity and readability of the code.

      Simplifying code improved maintainability and reduced the likelihood of introducing errors.

      Code Churn

      Measure the frequency of code changes, additions, or deletions.

      High code churn prompted a review, leading to more stable and efficient code practices.

      Customer satisfaction KPIs in software development projects

      Keeping customers happy usually comes down to two things: how easy your software is to use and how well it solves problems. If any metrics show issues in these areas, the responsible remote development team gets a heads-up that improvements are needed.


      How to measure


      Customer Satisfaction

      Conduct surveys or gather feedback on user experience.

      Achieving a 90% customer satisfaction rating.

      User Adoption Rate

      Monitor the rate at which users adopt new features.

      80% of users adopt a new feature within two weeks.

      Net Promoter Score (NPS)

      Measure willingness of customers to recommend.

      NPS of 8 or higher, indicating strong advocacy.

      User Retention Rate

      Track the percentage of users who continue to use.

      95% retention rate over a six-month period.

      Customer Support Response Time

      Measure time taken to resolve customer queries.

      Responding to 95% of customer inquiries within 24 hours.

      Feature Usage Metrics

      Monitor the usage of specific software features.

      70% of users regularly utilize freemium features.

      Conversion Rate

      Track the percentage of trial users who become customers.

      Achieving a conversion rate of 15% from trials.

      Financial KPIs in software development projects

      Finally, money matters, too. Software development isn’t just about pure coding; it includes steps like project discovery and business analysis. This means the whole project can bring in financial profit. That’s why we keep a close eye on financial metrics — to make sure the team did the job right and made the project a success.


      How to measure


      Return on Investment (ROI)

      Calculate the ratio of net gain to cost of investment.

      Achieving an ROI of 20%, indicating a profitable project.

      Cost per Feature

      Evaluate the cost associated with developing each feature.

      Keeping the average cost per feature below $1,000.

      Revenue Growth Rate

      Calculate the percentage increase in overall revenue.

      Achieving a revenue growth rate of 15% per quarter.

      Development Cost Ratio

      Compare development costs to overall project budget.

      Keeping development costs below 30% of the total budget.

      Customer Acquisition Cost (CAC)

      Calculate the cost to acquire a new customer.

      Maintaining a CAC below $50 per new customer.

      Profit Margin

      Determine the percentage of profit relative to revenue.

      Maintaining a profit margin of 25% or higher.

      Time to Payback

      Measure the time it takes for a project to generate profit.

      Achieving payback within 12 months of launch.

      These financial indicators tell us how the project is doing now and how it could make more profit in the future. Again, any differences can be specific to each case, showing problems in different parts of the project.



      When KPIs might not be useful

      KPIs are powerful, but they shouldn’t stifle creativity and innovation. Use them as guiding principles, not rigid constraints. Allow flexibility within the development process, balancing the pursuit of KPI targets with the need for exploration and creativity.

      We recommend seeing KPIs as tools that inform decision-making rather than strict rules. This approach ensures that development teams can adapt, experiment, and foster a culture of continuous improvement.


      How to avoid micromanagement when placing KPIs

      Implementing KPIs is like steering a ship — you want to set the course without becoming too controlling. So, we offer ten steps to make sure you empower employees with this tool rather than constrain them:

      1. Lay out why KPIs matter and how they tie into the bigger picture. When the remote development team understands the ‘why,’ they’re more likely to sail in the right direction independently. 
      2. Get your team’s input on setting targets. When they have a say in the destination, they’re more invested in the journey. 
      3. Keep the focus on what needs to be achieved, not how to get there. This allows your team to chart their own course and find creative solutions. 
      4. Drop anchor regularly with team check-ins. Open communication minimizes the need for constant oversight and keeps everyone on course. 
      5. Harness the power of trust. When your remote development team feels trusted, they navigate their responsibilities with confidence and skill. 
      6. Arm your crew with the tools and training they need. This empowers them to navigate challenges without waiting for your command. 
      7. Hoist the flag for every achievement. Celebrating successes builds morale and motivation without having to keep an eagle eye on every move. 
      8. Be ready to adjust the sails with changing winds. Flexibility in adapting KPIs ensures that your journey stays on course, even through unexpected waves. 
      9. Lead from the helm, striking the right balance between guidance and letting your crew steer. The way you lead sets the tone for the entire project. 
      10. Instead of handing out maps for every challenge, encourage your crew to plot their own course. Fostering a culture of self-sufficiency turns your team into seasoned navigators.

      These ten steps will help you chart a course with KPIs, making your remote development team sail toward success without feeling like they’re under a watchful eye at every turn.


      Manage the measurable, nourish the immeasurable


      In the world of software development, success isn’t just about hitting numbers; it’s about the passion, creativity, and commitment that drive projects forward. While these aspects might not fit neatly into spreadsheets, they are the heartbeat of any successful endeavor. However, the strategic use of KPIs is essential to keep projects on track and tackle challenges effectively. KPIs act like a roadmap, helping distributed teams in agile navigate complexities without losing the human touch.

      If you’re looking to ace the KPI realm, especially in the remote work setup, consider teaming up with Timspark, the experts in optimizing KPIs for remote engineers. Let’s collaborate and turn your software development journey into a data-driven success story. Ready when you are!