In project management RAG—or red, amber, green—statuses act as a KPI traffic light: red is an alert, amber (or yellow) signals caution, and green means you’re in the clear.
Within this article, we’ll walk through how you can establish your RAG statuses and tolerances. We’ll also explore how to know if you need to revise those tolerances and what circumstances might call for this editing.
You’ll have to determine what you’re measuring or evaluating first—which should be pulled from your scorecard. Following that, you’ll need to determine a measure owner and a KPI target.
You’ll also have to decide whether you’re going to evaluate more than one series in a measure. A series is a way of displaying information in a measure, like a “target” and an “actual.” Many organizations only evaluate their KPIs based on actuals, but some also look at the year-to-date actual or the end-of-year forecast.
Regardless of what you decide on, you need to think about whether your target will change from one quarter to the next or if it will stay the same. For example, if you’re examining changes in revenue with a goal of one million dollars in net profit, it may change drastically each quarter: $250,000 in quarter one, $500,000 in quarter two, and so on. On the flip side, you might be trying to keep the employee retention rate at 90%, which would not and should not shift over each quarter.
If you’re not sure how to get started with this process, don’t worry—we’ve created a step-by-step toolkit, which you can download for free. (You’ll find it at the end of this article.)
It’s important to have a starting place for your tolerance ranges. This is a good place to begin:
But keep in mind that this is only a guideline. There are many situations where you will need to modify this to make your RAG statuses fit better in line with the KPI you’re measuring—which leads us to our next question.
Your amber status might need to be tighter—perhaps within 3-5% of your target (instead of 10%)—in the following situations:
Your amber RAG statuses might need to be looser—perhaps within 20% of your target (instead of 10%)—for these reasons: