The valuable assets in a business go beyond tending to the equipment, inventory, the bricks and mortar. The people within a business, no matter what role they perform, are the most valuable asset of them all. Without a team of people, the business doesn’t function. It would be difficult to run a business if there aren’t people available to answer the phones, invoice the clients, persuade customers to upgrade, fulfil the orders, organise the advertising and balance the books. A business can facilitate more and look after more customers with the presence of a functional, happy, working team. Understanding that - the next question invariably is how to grow and capitalise on the asset of ‘team’?
What and How
Teams work better when they know exactly what is expected of them and what they need to do to achieve success in that group (each member of that group). Key Performance Indicators (KPI’s) outline and list out exactly what those success measurements are, and how the each person in that team are travelling against them.
For example in a seasoned sales team, they may be given the group goal of making 100 sales in a month, and in a team of 10 sales staff, each member is given the target of achieving 10 sales. The sales conversion target (of 10), then forms part of a KPI measurement. In addition to the conversions, the staff can also be measured by the number of other KPI’s that the business can use to clearly understand their customers.
Easy KPI’s
Sales are one of the easiest areas to provide a KPI measure against. The teams can even be divided up into Retention (working on current clients) and the New Business team (the “closers”).
The list of KPI’s in sales would therefore include metrics such as:
- Number of sales overall
- Number of customers switched/left business
- Number of customers upgraded
- Number of customers cross-sold a service
- Number of new leads
- Number of new leads converted
- Revenue per customer/client
- Ratio of new customers v retained customers
Softer (non “monetary”) sales measures may also include:
- Customer satisfaction rating
- Time spent per customer/client
- Likelihood of referral (rating)
Profitable KPI’s:
Your Debts
Sometimes the simplest of areas in a business will yield very good returns. Debtors are a great example of this, especially for a small to medium sized business. Ensuring that there is an ongoing monitor of which clients and/or customers are paying on time, and regularly is a great way to increase cash flow and prioritise your sales force. Accounts Receivable or the key Accountant for a business can be given clear KPI’s to ensure the business is on track and being paid for services rendered &/or products sold.
Below is a guideline to use in conjunction with your debtor and aged debtors reports. These are sample KPI’s a business may decide to apply, and of course, the figures will vary depending on the current terms and arrangements within a business.
Debtor KPI example:
- 70% of invoices to be sitting in the “Current invoice” column
- No More than 17% of invoices to be sitting in the “Over 30 days” column
- No More 3% of invoices to be sitting in the “Over 60 days” column
- No More than 1% of invoices to be sitting in the “Over 90 days” column
- Any invoices sitting in the “Over 120+ days” column to be given to Debt Collectors to contact the client or customer on behalf of the business (eg. sending them a letter reminding them of their obligations).
And now for the rest
Most managers would like to develop a quantifiable fiscal set of parameters (similar as those set out in sales) and apply those across the board. Areas where that can turn into a stumbling block is when approaching roles such as Administration, Reception, Accounting, Maintenance, Floor Supervision, Safety Management, Forklift Driving etc, where the job is either repetitive and/or generally viewed as the same in any business.
Growing a great team does mean understanding that there will be roles which that are steady, and have the same daily task however the people in those roles do need a direction and improvements in their area can improve the business.
For example the Accountant may be spending a week to generate invoices to clients (impacting on cash flow) and the KPI was set at only “invoice clients”. They meet that target and the business isn’t better off in that area as a result of that measurement. A suggested change in the KPI may be to add “find improvements in the invoicing system/research better systems”. That would immediately bring to the table options of more efficient systems that were found, and could potentially halve the time spent generating invoices, allowing more time to produce other important financial reports (e.g. benchmarking analysis).
Another good example is of a forklift driver. A base level KPI may be to move goods across the factory floor, which is what they do, but to reach a high standard other KPI’s can be given. The driver may be required to ensure that goods are free of damage, that the loading of goods onto pallets/shelves is done in a way that is easy for the inventory/order staff to access, equipment issues are reported immediately (for OH&S reasons). If the KPI was simply set at “moving goods” then the equipment would not be monitored, the stacking/unloading of goods for customer orders would be difficult and the goods may even wind up with damage, reducing sales and costing the business money to replace.
Catch every opportunity
The underlining theme for setting KPI’s is to not miss a chance to give the team responsibilities that are part of developing the business. KPI’s are not meant to be an exercise for a manager scrutinise each employee, pointing out what didn’t go well and what was deficient. KPI’s are a golden opportunity to find improvements and develop a meaningful work life. Finding efficiencies and improvements aren’t the sole responsibility of those in a management role . Everyone in a business can find ways to create interesting work in their role, and a great way to do that is with Team KPI’s.
Resources
If you would like to discuss KPI’s for the many different roles that you have in your business please contact Brett Burden, Senior Business Coach on 1300 971 763.
References
(1) http://www.business.vic.gov.au/hiring-and-managing-staff/staff-management/review-staff-performance
(2) http://results2match.com/kpi/key-performance-and-non-financial-indicators-kpis-my-final-checklist
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