Performance monitoring is an essential skill to have when running a trade or service business. This is why, in order to succeed, you need to make KPI tracking a priority.
If you haven’t heard the term before, KPI means ‘Key Performance Indicator’, a method of signposting whether you’re reaching your targets as a business and highlighting where you can improve.
The information gained from KPIs can then be used in a variety of ways to enhance how you operate. This is achieved through an accompanying process known as KPI reporting.
In our trade business specifically, we’ve developed a method for handling KPI tracking and reporting that involves a custom-designed Staff Performance Dashboard. At the end of each month, we collect relevant data from the dashboard and then review each KPI with our team members to identify how their performance is directly contributing to our bottom line. Through this system, we’re able to observe any relevant changes to our overall performance both on a macro, as well as a micro level.
KPIs can seem daunting at first, but the more transparent you make them from the beginning, the easier it will be for you and your team to start reaping the benefits of having clear performance targets to work towards.
Here’s some KPI related information to help get you started:
What makes KPI tracking effective?
KPI tracking works by providing a trade business owner with the information they can draw on to analyse, review, and assess individual employee performance against defined milestones. Through the collection of data, KPI tracking serves as a benchmark from which to drive progress towards your business goals and identify areas for fine-tuning and improvement in the future.
To achieve this, your KPIs should hit the following three criteria:
- Tie into your overall business objectives
- Measure areas that will influence the success of your business
- Identify areas requiring further action or investment.
Keep in mind, however, that while these criteria are ultimately what leads to cultivating a high-performing team, they aren’t the only thing you need to think about. Your employee’s worth should always come first, and special care must be taken to ensure that your KPIs don’t reduce them down to just a number on a page. At the end of the day, your team members are people, who should be empowered by your KPIs rather than feel like they’re being crushed under the weight of them. Value their concerns and ensure that your KPI monitoring provides adequate direction and the possibility of growth towards both a common goal, as well as their aspirations individually.
Which KPIs should be tracked — and why?
As a trade business owner, the level of KPI tracking you decide to engage in is a personal decision. To start, choose widely applicable KPIs that matter to your business and then use them to further define the goals and objectives you believe will lead to success. Keep in mind though that setting both realistic and achievable targets is essential, and the exact method for accomplishing them will likely also be guided in some part by your team culture.
To give you a better idea of what we mean, here are four examples of KPIs we track using our Staff Performance Dashboard that also include all the points we’ve just mentioned:
1. Revenue per employee (we call it: Total invoiced out)
This is a measure of what each employee brings in, calculated as a flat figure. It establishes whether a team member is meeting their basic obligation to positively contribute to the profitability of our business.
2. Profit per employee (we call it: Gross profit)
This employee performance KPI further breaks down profitability (free from expenses). It measures how much money each worker is bringing in each day/week/month over and above our set break-even point.
3. Employee billable percentage
This KPI shows us the overall ratio of directly profitable work to the internal cost each employee engages in. It takes note of both “billable” and “non-billable” time, to ensure that a healthy balance is maintained.
4. Overtime per employee
Overtime is a fact of life in trade businesses and as such, an overtime related KPI can be tracked in several ways. We keep ours simple by just monitoring how many extra hours a week our tradies are working and using that data to ensure we aren’t straying from the norm.
It should be noted that businesses that adopt a KPI tracking and reporting method similar to ours will find it to be a largely employer run system. However, it’s always important to include your employees in the process wherever possible. This is because your team members will perform better when they’re actively engaged in your business. Tradespeople know when their boss genuinely cares about them and will always contribute more positively when you make sure their achievements are recognised and celebrated.
Quick KPIs checklist
So, you’re now ready to take your first step towards KPI tracking and KPI reporting.
But before you get started, here’s a quick list of questions you should ask yourself:
- Are your KPIs easy to understand and measure?
- Does your team know why KPIs are important?
- Have you clearly communicated each KPI and your expectations?
- Have you outlined accountability and how it will be measured?
- How frequently will you track and review KPIs with team members?
- How will you store the data you generate from your KPI tracking?
- Where will you get your KPI related data from?
For our plumbing business Dr DRiP, we decided that we’d use the job management related information generated by AroFlo and its integration with our accounting software to help us gather our data. The information we export through the Reporting feature assists us in tracking our KPIs and providing our business with the intel needed to make key decisions about our future.
Whichever way you decide to tackle KPIs though, take note of the fact that they are designed to drive collaboration and continuous improvement. Never lose sight of these long-term goals and you’re destined to achieve a high-performing team.
Want to download our Staff Performance Dashboard template? You’ll get access to the metrics we use to measure the performance of our team of tradies. With this easy-to-use template, you can complete your own dashboard!
Written by Lifestyle Tradie
Lifestyle Tradie is an award-winning education program and community for trade business owners who want to make more profit and fast-track financial freedom.