It’s easy to understand the impact incorrectly measuring a job can have on production—as wasted materials, time and labor speak directly to the bottom line. The same is true when you incorrectly measure (or do not measure at all) the job performance, skill capacity and productivity of your production employees.
Metrics, which are quantitative goals assigned to individuals and company departments, give you the information to make job performance evaluations that are effective and consistent across the board.
Metrics are all about tying performance to a standard that can be documented and measured. Some contractors who take this approach use sophisticated software and technology to calculate the data, while others rely on handwritten logs and verbal reports. Despite these differences, the stumbling blocks—and benefits—remain constant.
Leads per month – determines how good business will be in three months
Gross profit per month – shows how much is actually being produced and how productive each project manager is
Customer satisfaction – company must have high customer satisfaction scores for employees to receive their bonuses
Attitude – in addition to peer interaction, this is measured via a telephone interview conducted by office staff with the client after each project
Gross margin – set your margin for each aspect of your business and make sure it is met
Job delivery – On budget and on time, 100% of the time
Customer satisfaction – the company must survey and review feedback to determine if your target has been met
Job profitability – you must meet your target gross profits for each division
School rules – timeliness, appearance, honesty and values, as measured through observation by co-workers, notes in daily logs and the customer sign-off at the end of the job
You might experience turnover in the beginning, perhaps losing some of your most senior, dedicated staff who aren’t used to this way of life.
You will have to share at least some financial information.
You will have to pull out of the day-to-day operations and move away from micromanagement.
Your employees will take on more responsibility as all of you start analyzing data. Managers will have to work hard to reward people for what they do correctly rather than just telling employees what they do wrong.
But getting past the stumbling blocks will lead to great benefits:
- Introducing job performance metrics will weed out the under-performing employees and leave you with only the cream of the crop
- You will see company morale boosted
- You will see your efficiency level increase dramatically
- In some cases you will be able to do the same revenue—with half the overhead
Measuring Performance by Department
First and foremost, you cannot begin to define the measures until you have figured out what will affect the performance of the business as a whole, such as:
- Sales volume
- Gross margin
- Net profit
- Customer satisfaction
Then you have to determine what performance benchmark each department has to meet to achieve the goal. These departmental benchmarks then are drilled down to reflect each individual’s role. Employ no more than three or four metrics per department because anything beyond this can be unmanageable. It may take a couple months of scrutinizing your recent production and financial history to determine your benchmarks, and keep in mind that a consultant can be a big help.
Operations managers must input their weekly performance numbers on scorecards stored on the company’s computer. The scorecards can be formatted Excel forms, so employees get real-time calculations with ratios that show where they stand based on monthly, quarterly and annual goals set forth during planning sessions. The overall company numbers are presented at a weekly staff meeting.