NAPEO
JUNE/JULY 2023
Performance metrics can provide valuable insights into different aspects of your business from financial health to client satisfaction. However, it can be challenging to determine which metrics are essential and which ones are merely background noise.
Performance metrics are the key performance indicators (KPI) that track and measure the effectiveness of the services your business provides, your strategy, the growth of your business, or how satisfied your clients are with the partnership. By tracking and analyzing performance metrics, your business can identify areas of improvement and optimize services to deliver maximum value to your clients.
When selecting the metrics to track, consider their relevance to your business goals, as well as their consistency over time. Some metrics, like revenue growth rate or client retention may be relevant regardless of your business strategy. These metrics provide insights into the company’s financial stability and client satisfaction which are critical factors for any business.
So don’t throw out the metrics that have provided you with consistency no matter where your business has been or where it is going. There are things you want to monitor through KPIs or performance metrics no matter the strategy. Sometimes the consistency of the metrics tells the story.
H3 HEADING
The story is told from the different aspects of your business including financial, operational, risk compliance, and sales and marketing metrics. Then as you determine your strategy each year, develop new performance metrics to tell you if the strategy is working or if you need to redirect. Each teams’ goals should align with the business strategy and should have their own performance metrics. Metrics are not always easy to develop and do not always provide the whole landscape so make sure you monitor regularly to determine if a shift in the information needs to happen so your assessment is objective.
Here are some examples of performance metrics that could assist your company:
Financial metrics:
- Revenue per Employee
- Revenue Growth Rate
- Gross Profit per WSE
- Number of Internal Staff to WSE’s
- Operating Expenses as a percentage of Gross Profit
- Client Retention
- Fixed vs. Variable SG&A expenses
- SG&A expense allocation (where are you spending your money, marketing, personnel, facilities, etc.)
- Financial Ratios (Quick Ratio, Current Ratio, Debt to Equity, Working capital, etc.)
Operational Metrics:
- Productivity (production output)
- Quality (Accuracy of service provided)
- Errors
- Customer Complaints
- Net Promoter Score (NPS)
Sales and Marketing Metrics:
- Cost to Acquire a Client (CAC)
- Customer lifetime value (CLTV)
- Customer satisfaction score (CSAT); focuses on customer acquisition and sales techniques aimed at generating revenue
“When selecting the metrics to track, consider their relevance to your business goals, as well as their consistency over time.Some metrics, like revenue growth rate or client retention may be relevant regardless of your business strategy.”
As you continue to explore your performance metrics and what your business needs are, here are a few thoughts to help you understand the importance of creating the full story.
Create performance metrics that help create accountability within an organization. When employees have clear KPIs tied to their roles and responsibilities they are more likely to understand what is expected of them and be motivated to achieve their targets. KPIs also help managers hold employees accountable for their performance and provide feedback and coaching as needed.
Create performance metrics that allow decision making to be quick and accurate. KPIs provide data and insights that can support decision making at various levels of an organization. They help leaders make informed decisions based on actual performance data rather than relying solely on subjective opinions or intuition.
Create performance metrics that allow for continuous improvements in your organization. These KPIs can be used to drive a culture of continuous improvement within an organization. By regularly reviewing and analyzing KPI data, organizations can identify areas for improvement, implement changes, and track the impact of those changes over time. It can help improve the effectiveness and efficiency of your organization.
Create performance metrics that allow your organization to mitigate risk. Compliance risk involves assessing the likelihood and potential impact of non-compliance with laws, regulations, policies, and industry standards within an organization.
Performance metrics may be numbers, ratios or percentages of something but in the end, they help you read the story of how your organization is performing, staff are performing, or goals are being met. The numbers can tell you anything but make sure they are telling you the right things so you don’t get lost in the numbers.
This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice oe assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.
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