Posted on August 18, 2008 - by Pete
Key Performance Indicators
All businesses have Key Performance Indicators (KPIs). The purpose of a KPI is to provide a number that can quickly and easily give you a feeling for how well your business is doing. For example, I have a friend who sells Cellular Phones and Service. One of his KPIs is number of people walking in the door. Since he knows how much, on average, he makes every time someone walks into one of his stores, when his foot traffic starts to increase or decrease, he knows that he needs to adjust his business plan accordingly – either increase marketing, hire additional staff, reduce costs, whatever.
Now, this may surprise a lot of people who work with architects and engineers, but Architecture and Engineering are businesses also. Therefore, we need to have KPIs in order to manage our activities. One of BJG’s most important KPIs is Utilization. Utilization is the ratio of time working on projects to total time worked. BJG has a companywide target Utilization Rate of 62%. However, the Target Utilization Rate for individual BJG Staff Members varies significantly. The maximum Utilization Target is about 80% and the lowest is 5% or so for administrative staff. While the 80% maximum may seem low, it is important to consider that Total Time includes Vacations, Personal Time Off, Mandatory Training, etc. so 80% really doesn’t leave a lot of time for non-billable tasks when one is at the office.
What makes Utilization effective as a KPI is that is that I can track BJG’s profitability fairly accurately by tracking Utilization. When Utilization drops, it is time for us to ramp up our marketing. When Utilization gets too high, we know that we need to hire more staff or our current staff will start to burn out. The other great thing about Utilization is that we can get results immediately and in real time – as long as people fill in their time sheets. I can plot companywide Utilization and compare it to monthly revenue and/or profitability and the graphs align nearly perfectly.
Another of BJG’s KPIs is Employee Retention. At BJG we strive to be the employer of choice for talented, motivated and ambitious design professionals - we work hard to make this a great place to work. If I am doing my job as the company’s president, BJG’s staff are engaged and excited about their jobs. Engaged employees generally don’t leave so I can track how I am doing keeping employees satisfied by tracking employee retention.
In addition to the above, BJG has a few other KPIs that we track such as client satisfaction, revenue factor and core value conformance. All of these help us run our business which, in turn helps us better serve our clients. When our business is running smoothly, we can really focus on being Responsive to our clients’ needs.
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