I am a big believer in the power of the 8 key areas of business to transform your company’s intrinsic value. If you’ve followed me for any length of time, you know this to be true. It’s important to improve each area in order to grow your business. But how do you track and measure progress? Over the past few weeks, I’ve been sharing the KPIs, KRIs, and PIs that we use to measure the performance in my own businesses. Today, I’d like to continue with a look at our employee KPIs. For this subject, I just had to talk to our number one people person, COO, and CFO, Mrs. Amy Ahrens.
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By now you should be noticing a trend. In just about every area of our business, we have a number of indicators. Some of these indicators are simply performance indicators (PIs), meaning they offer good information but success in that specific category isn’t crucial to the success of my businesses. Then we have key performance indicators (KPIs). These are key—as the name implies—to the company’s overall success. Finally, we have key result indicators (KRIs). KRIs show exactly what you’ve done and how your team’s efforts have improved your business. Each of these indicators can be further broken down into past, present, and future indicators.
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When it comes to our people, Heritage has about 10 indicators that we track. During our discussion, I asked Amy to define some of the past, present, and future people KPIs we watch. She told me that we can look to the past with our employee churn rate. This is basically how long it takes to hire new team members and how long they remain in their position. Similarly, we are able to examine present performance with revenue per employee. We’ll explore this in more detail later. Finally, we look to the future of our people with our training investment per employee. We want to continue education and training in our team to ensure that we’re helping them to grow and that we remain at the forefront of our industry in terms of expertise.
In each of the 8 key areas, there are many indicators. However, as we’ve already established, not all indicators are key performance indicators. With that in mind, I wanted to learn a little more about the indicators that were crucial to the success of our businesses. So, I asked the expert. Amy explained what she believes are the two most important people KPIs at Heritage.
As a business owner, you should already know what your company’s mission and core values are. More than this, your team should know them and they should permeate the culture. At Heritage, we want our entire team to be moving in the same direction, executing our goals in unity. This is such an important part of who we are, that I would say this indicator is 1 of the 3-4 critical success factors for our company.
What we’re actually tracking here are the decisions and actions that we are making. Do they display a commitment to our mission and values? This is tracked in our individual employee review. The team member completes a self-evaluation, and the supervisor walks through an evaluation that we customized around our core values and meeting, exceeding, or failing to meet expectations in those regards.
Each team member’s direct supervisor tracks this KPI and they do so on a couple of different timeframes. If the employee is new, the review takes place after the first 90 days are up. Everyone else is reviewed on an annual basis. The supervisors keep written or digital files on the team members in their leadership circle and ultimately report to the Chief Operating Officer (Amy Ahrens) for accountability.
The other KPI that we really place a high level of importance on is the revenue per employee. What this is, is the total revenue divided by the total number of employees. The reason that we track this is that it is a leading indicator of whether we need to become more efficient within the team we have, to increase profitability, or need to hire someone so that we don’t run into a capacity challenge.
This is a KPI that, as the COO/CFO, Amy tracks directly. It doesn’t need to be complicated. Amy uses a super simple calculation that can be pulled from the P & L for the total revenue and the total number of employees. She does this each year and just monitors it manually through a spreadsheet calculation.
As business owners, we want to attract top talent to our teams. However, keeping them once you’ve brought them on is equally important. That’s why we track employee job satisfaction. We want to have the best team possible, and we want each team member to love their job. A happy team is a productive and efficient team. We want our team to feel like they have the opportunity to move within the company and to be developed so that they can pursue their passions.
As we’ve gone through the 8 key areas, I’ve tried to identify a few of the KPIs, KRIs, and PIs that have a universal appeal. These are indicators that should be tracked in any business, regardless of your industry. Like I said before, we only have about 10 indicators for the entire people category. Some of them are unique to Heritage, but others work on that universal level. Here are the top 5 people KPIs that all business owners should be tracking in their companies.
When employees set goals for themselves, do they achieve them within the time you both agreed on? You can use a standard of measurement like this – always exceeds time, always meets on time, or consistently achieves before the goal. This also applies to your team as a whole. When your team conducts their Strategic Planning, how likely are you, as a team, to meet the goals you’ve set? This will give you a glimpse of your team’s overall alignment. Sometimes there’s a need for further training and education. Other times, you may just have the employee in the wrong position for their talents.
Just as I mentioned earlier, this is a great indicator of whether you need to become more efficient within your team. You may have to increase profitability or hire someone so that you don’t meet capacity problems.
This is so important. There can be no room for compromise. If there is, then your core values aren’t really values. Everything you and your team do needs to reflect your mission and values. Once you’ve created a company culture, your mission and values become second nature.
This speaks to your marketing message for the team needs, the interview process, your expectations, benefits, salary offerings, etc. How often you have to hire and replace people can really affect your business’ momentum. You really want to have team members that know what they’re getting into and truly love your mission and values. If your employee churn rate is high, then you need to examine your business. Something is broken.
I know, I said that this was unique to Heritage. In many regards, it is. However, I truly believe that you will get more than you give when you track this and make it a priority in your business. There isn’t a lot that keeps me up at night, these days. But this is one that really gets to me. If I have a team member that’s struggling with sickness, family issues, or anything else that life can throw at them, it really upsets me. Because of this, I want to do all that I can to let them know that they are valued and loved. If they have a goal, I want to help them to reach it. So, employee job satisfaction is so important to the overall health of your team.
Folks, people matter. You can have the greatest systems in the world, but without good people operating them, they’re useless. The business suffers. Your team suffers. The customers suffer when you don’t have great people on your team. If you don’t have these people KPIs in place or if you aren’t sure how to implement them within your systems, reach out to us. We do this each and every day. We can help.
I know life is hard but life is good. People can be so frustrating. Managing people is one of the toughest parts of business ownership. However, it doesn’t have to be. With the right team and know-how, you can make tracking your business’ people performance at least financially simple.
Are you starting a KPI journey of your own? You don’t have to set out on your own. Schedule a meeting and let the team at Financially Simple share their experience and expertise with you. A better business is only a click away!