Time data is necessary to understand customer acquisition cost (CAC), a critical key performance indicator (KPI) in any marketing organization. CAC measures how much it costs for a company to acquire one customer, and is a true indicator for predicting future growth and sustainability. The CAC is derived from hard costs, like sales and marketing tools, as well as salaries and labor costs. Simply calculated, CAC is the sum of these sales and marketing expenses divided by the number of customers acquired, over a time period of interest. More finely calculated, employee time data can enable CAC insights around certain projects or activities, so that you can see where your most profitable areas and inefficiencies lie within your company. Using time data to fine-tune CAC indicators can help you optimize specific activities and streamline processes to decrease your CAC over time, thereby increasing the relative value of new customers.
Engineering, Scientific, and Technical Services KPIs
Engineering, scientific, and other technical services teams rely on KPIs that relate to their business delivery goals, such as:
- Estimate to actual ratio measures the time it takes to complete a project versus what was estimated. This ratio can be calculated at the department, team, or team member level to identify areas for improvement.
- Design to development ratio compares the time spent in the design phase to the time spent in development. Assuming that project types remain relatively stable, this ratio becomes more predictive over time as project history data accumulate. Teams can then rely on this ratio to better predict development schedules, given the time spent to complete the design.
- Profit per project uses project costs (including direct and labor costs) to calculate profitability at the project level.
Customer Service KPIs
Any organization that serves customers should know, in real time, the actual time spent on customer service and support activities. When the cost of supporting specific customers – or specific customer profiles – is accurate and clear, it can be coupled with revenue figures to create actual and average per customer (and per customer profile) profitability metrics. These metrics empower the organization not only to optimize support operations for profitability, but also to make strategic decisions about targeting customer demographics that will be most profitable. Employee time data play a critical role in creating these customer service KPIs:
- Service center cost measures the total cost of serving and supporting customers, including both direct and labor costs. Usually, labor costs far outweigh non-labor costs, and therefore become the primary focus.
- Account activity cost measures the cost of each type of activity performed in account management or customer service. Activity cost KPIs help reveal which activities best serve customers for the least cost and effort, helping to manage overall service center costs without diminishing customer satisfaction.
- Customer retention percentage looks at the percentage of customer accounts that remain active over a time period. Teams that serve customers exist to keep customers in the fold. Employee time spent on account management or customer service can be tracked by customer group or even on a per-customer basis, if necessary, to uncover areas for improving retention.
A core mission of finance is to relate relevant expenses to revenue over a given period of time. Employee time data cover both, as employees are a company’s greatest asset and often its biggest expense. Many of the KPIs described above use employee time data to track important expenses that the financial team will want to understand. Other important financial KPIs include:
- Billable time: Finance must consider the time employees spend on activities to determine whether those activities generate revenue. One KPI that examines revenue generation is billable time, usually a ratio of billable time to overhead time. Comparing billable time to overhead allows finance leaders to spot revenue trends, to better guide decisions on where to invest and where to cut costs.
- Customer attrition rate: Protecting revenue is as important as generating it. Finance will also examine employee time spent to reduce the customer attrition rate, the rate at which customers defect from your company over a given time period. This KPI is the counterpart to customer retention; the extent to which you can directly relate employee activities to retention will determine your control over attrition.
- Customer profitability: The profit you make from service a customer requires understanding how you and your employees spend time across customers each day. Although it can be a tricky metric to pin down, customer profitability helps you identify how to improve services and ultimately improve customer relationships. Accurately allocating costs to each customer is necessary to calculate this KPI.
Strategic and Purposeful Reporting
To move from data to actionable information, you must communicate the right information to the right parties at the right time. The right information drives performance. Accordingly, the only relevant employee time data reports will be those that provide input to relevant KPIs. Different parties will care about different KPIs, and therefore different reports.
Reports should tell a story; the story of how your organization will move from where it is to where it wants to be. For this reason, KPI reports must compare a current state to a desired future state, revealing the path to that destination. Such a report might tell the story: “Our projects must be executed more efficiently, so that we can meet our profitability goals,” or, “We retain far more revenue from key account calls than any other account management activity.”
Reports should be visually clear. Any story is more compelling with illustrations, and reports are no exception. Visual reports such as graphs or charts can convey information more directly for better comprehension. Visual representation is best when it is a compellingly clear summary and offers detail as a choice rather than overwhelming the viewer with everything all at once.
Reports should be real-time. Certain performance indicators must report what is real, right now. A speedometer needle that lags your actual speed by two minutes would be useless, if not deadly. You will have KPIs that need to describe your current course and speed without significant lag. This requires dynamic reporting, with system-generated updates automatically available to the viewers on-demand.
Reports should be both point-in-time and over-time. Making sense of current conditions requires not only clarity on where you are, but also an understanding of where you’ve been and what you’ve been doing. This means some reporting of past performance is necessary to see trends in the data and provide context. For example, reporting on projects at different project stages is useful to answer questions like: “Does the length of a project planning phase correlate to length of the execution phase?” The answer could yield major improvements in forecasting project performance and profitability. With the right business tools and consistent processes in place for data collection, you can create reports that answer the important questions and tell the important stories.
Quality of Data
In order to produce meaningful results, your data must be accurate as well as timely. The way you gather data is as important to ensure accuracy as how you analyze it. Your employee time tracking and reporting platform must enable employees to easily enter their information and have systems in place to reduce errors. Choosing a platform with automated features that simplify time tracking will significantly improve the accuracy and timeliness of your data insights.
While automation helps make data collection easier, an intuitive user interface is also important to ensure accuracy. If users find it difficult to enter accurate data at the right time, they may fail to do so, and the reports that depend on such data will suffer for it.
When looking for a platform that can increase the quality of your employee time data, consider these valuable attributes:
- Visually intuitive to the user
- Automated functions that encourage data collection, like auto-fill time entries or data synchronization to another system
- Integration with other platforms to enhance or enrich data
- Project monitoring tools
- Real-time visibility of project time and resources through all phases
Accessibility and Usability of Data
Workforce data needs to be accessible on-demand by the business’ finance and operations leaders and any other stakeholders that need real-time, authoritative reports. “Export-and-email” won’t suffice; the data may be obsolete by the time it is viewed, and will certainly become obsolete as additional export-file versions proliferate.
The strategic growth of an organization requires a consistent and understandable view of what’s happening now and what’s happened in the past few days, month, year, or even decade (if that much data is available). To drive the right actions, information must be accurate, detailed, and updated continuously over time. It must be available to those who need to see it, but not to those who should not. It must be easily broken down and in different ways to answer the questions most relevant to your business.
The key to collecting meaningful insights from your employee time and expense information is a clear and efficient system that works for your specific organization. Consistent, accurate, accessible, and digestible data will enable a wealth of different insights for your business and allow you to make informed decisions to drive growth. In short, a single source of truth regarding all time and expense information is crucial.
Journyx is a cloud-based time tracking software for businesses that need to easily and accurately track employee time and resources for project accounting, billing, payroll, compliance, and more. Our time tracking and resource management solutions offer a high level of customization and flexibility and are designed especially for organizations that deliver project or client-oriented work. For more information about Journyx products and benefits, click here.