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What Are KPIs (Key Performance Indicators)?

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When measuring success towards strategic business goals, the key is in your KPIs. Curt explains what key performance indicators are, and how to determine what you should be measuring in your organization.

Today we’re gonna talk about key performance indicators, KPIs. What is a KPI? It’s something that you can use that’s tied to a strategic goal for your department or division or your company, whatever the size of the entity is that you’re dealing with here.

The most common one that people are familiar with, if you work in a manufacturing plant, is the number of days since a lost-time accident. You don’t want to be the guy who screws that up.

You don’t ever want to have more than three, maybe five at the most KPIs for your organization, because if you’ve got fifty different goals you basically have no strategic goals because no one can focus on more than really two or three things at once. KPI’s are definitely based on strategic, important goals for your organization.

The kind of things that you can do with timesheet software, which is where I come in, is KPI’s that drive organizational behavior around billability, estimation improvement, and there some other metrics that you can get from your time data.

Let’s talk about billability: billability is what percentage of your people’s time is billable. So let’s say you got a consulting team and you do some measurements and you figure out that 10% of our time we’re actually billing clients. You’re probably gonna go out of business if that’s your number. You can work overtime to increase that in a way that’s adding value for the customer, but you’re also getting some money into the company.

Another one that’s really common is adherence to estimates. We estimated these projects to take a thousand hours or 10,000 hours or whatever it is…what percentage of the time are we hitting our estimate.

And then the next one is what percentage of our projects are profitable, but that’s a pretty important KPI for a consultancy. Are we profitable on every single project we ever do or are we profitable half the time but we make up for it on some big ones that make all the money. And if you’re not profitable on say, 10% your projects, is that on purpose? Maybe there’s reasons why you don’t want to be profitable on certain things, but you want to be conscious about that and it’s not just random. If you don’t track your time, basically you have no idea where you’re profitable and where you’re not.

So billability, accuracy of estimates and profitability or three great KPIs that I’ve seen consultancies use that come completely out timesheet data. KPIs are crucial for measuring success in companies, they’re easy to get started with, very few people are doing it well or doing it correctly. I would suggest you get out there and get on it.