TimeLog Project and corresponding business systems can be a great platform to change company processes using key figures (also called KPIs – Key performance Index) and have an ongoing follow-up.
You can e.g. have an ongoing measurement and follow up on contribution rate, invoicing percentage, the company pipeline, active support cases or something different - and over time improve company performance within chosen areas.
My role models for working with KPIs are professional athletes: They set up goals, they are patient, systematic and they often work with statistics for their own and opponents performances (benchmarking) – and they go on until they have reached their goal.
Here I give you 8 advices on how KIPs are best implemented in small and medium-sized companies on the basis of data from business systems.
1. Make the complex simple
A key figure, KPI or whatever you call it, is a simplification of a complex phenomenon. If the company has a revenue problem it is obvious to focus on the invoicing percentage of the single consultant or department. The invoicing percentage is simply the percentage of the invoiced normal working time of the employee. Behind the key figure lays a number of complex processes – why could that project not be invoiced, why do we have so many internal tasks, why do we have a lot of illness in the consultancy department etc. To improve the invoicing percentage you need to optimise all these processes.
But, it is managerially difficult to communicate and work with all details. It is therefore better to focus on the key figure and ask for results - and let the organisation work towards the result on different levels. The good manager sets up the direction and asks for results. The bad manager interferes in all kinds of daily processes, which are better handed over to the mid-level manager or the individual employee.
It differs from company to company which key figures are relevant. In TimeLog we typically see key figures relating to revenue, project management, sales or employee time (illness, flex etc.). The relevant key figures depend on the company strategy and maturity.
2. Choose your battles
We often see that when a company starts working with key figures they choose maybe 6-10 key figures to work with. That is way too many for the employees. It is complicatedhaving overlapping data and it is difficult to communicate. Choose a few key figures and use time and energy on implementing this in your company.
Sometimes we hear the argument that choosing overlapping data limit the employees in sub optimising their behaviour towards a key figure. That might be true, but my estimation is still that a few well-chosen key figures work better.
3. Use the same key figures on different levels
If you choose to focus on 3 key figures, e.g. invoicing percentage, illness percentage and active support cases, then use them on all levels in your company: For the individual employee, the individual department, the entire company and as a part of the board reporting.
If the key figures are not relevant in regards to the board, then you might not have chosen the right key figures - in this case you have no coherence between the tactical and strategic level.
4. Patient insistence
The easiest part is to choose key figures. The hard part is to stick to these and continuously work with the same 3 key figures 9 month after they were agreed on a management seminar. But that is what it takes!
Therefore you need to have focus on the key figures, preferably on a weekly basis. It does not matter if it is during weekly meetings, in status emails, on the noticeboard or during the manager’s 5-minute talk during breakfast Friday morning. The crucial thing is that the key figures are present and relevant to all employees.
Both internally in TimeLog as with our customers, we have seen that this patient insisting on one or a few key figures changes the company.
5. Visualise the key figures
It is often an advantage to pull key figures from the business system and save them in Excel. In this way you can cut to the bone and only communicate exactly what you want.
In the same way, it is a good idea to visualise the key figures using graphs or illustrations. Do not underestimate the work with visualization. Sometimes small changes, e.g. showing the difference week for week instead of the actual numbers provides a way better visualisation of the progress.
6. Work with the processes – but keep the key figures
When the key figures are determined the underlying processes need to be improved. This can happen in many ways depending on what key figures you work with and your company's character and maturity. It is crucial to stick to the key figures and then try something out and see what works.
My experience is that if you have a key figure, the figure itself will give results. Often it takes a reprioritisation rather than a change of processes in the company.
7. Remember that your employees adjust their behaviour
You need to remember, if you measure your employees using fixed key figures, they will change their behaviour according to the key figures. It is the goal with key figures, but keep an eye on sub optimising where employees adapt their behaviour in a certain degree so that it is a disadvantage to the company.
An example of sub optimising from one of our customers: The customer implemented the key figure external-%, which was calculated on the basis of the employees' share of external hours. It was a tough measurement. Each week an overview was hung up, based on each employees' performance according to the key figure, and it was used in staff development interviews etc.
The result was that the employees no longer tracked their time used on internal projects above 37 hours. If they did not do this, they would have a higher external-%. This was not in the interest of the company, because it did not get a real picture of the costs on internal projects.
The example shows that you need to carefully choose key figures and have in mind that the employees adjust their behaviour according to the key figures. But the morale is more that good key figures cannot be a replacement of attentive management.
8. Choose speed rather than precision
Some key figures have an integrated delay. E.g. the invoicing percentage is known lather than the external-%. Therefore, it is easier to work with external-% and make it more relevant for the employees on a daily basis. If the company almost always invoice all external hours or seldom has problems with customers accepting the project hand over, it is better to use invoicing%.
Key figure suggestions where TimeLog Project is useful
If the abovementioned has given you some ideas on how you can work with key figures or KPIs, then here are some key figures that TimeLog Project provides you with. But, do not choose too many.
Invoicing percentage: The invoicing percentage indicates what share of the employees' time is invoiced. In TimeLog Project the invoicing percentage is calculated on the basis of the employee’s normal working time.
External % / Utilisation: Utilisation - or external % - indicates what share of the employees' normal working time is spent on customer related tasks. External % is almost the same as invoicing percentage with the exception that not all external hours are invoiced. Sometimes the employee can decide how many hours are booked, other times not. The advantage of the key figure external% compared to the invoicing percentage is also that there is no delay from the hours are tracked to they are invoiced.
Deprecation: Shows how much of the value created by the employee is deprecated.
Registered / invoiced value: Revenue on employee or department level.
Contribution margin: Contribution margin on employee or department level.
Employee Retention. How good the managers or the entire company are to hold on to the employees. It is especially on department level the key figure Retention is used. A department with bad Employee Retention is typically an indication of bad management.
Illness percentage: What share of the individual employee or departments normal working time illness accounts for. The Illness percentage is a good indication of the atmosphere in a department.
Project Profitability: Project Profitability is a key figure for the individual project’s performance. Project Profitability makes it possible for you to compare large and small and completely different projects - and again the strength is that something complex is made simple. Project Profitability can be configured in many ways, but an option is to motivate project managers to use workforce with low costs (students, outsourcing, etc.), where it is possible.
Invoicing time: How many days pass from a month or project is ended to the invoice is send? It is clear that from a cash position perspective it is crucial to invoice as soon as possible.
Active support cases (Help Desk): The key figure shows how many active support cases there are in the company’s Help Desk system. The key figure is a great example of a strong simplification and something that everyone understands: Do we have our customer support in control or not? What is the quality of our products?
Support quality (Help Desk): What share of the support cases are solved within the quality goals the company works with?
Pipeline (CRM): The individual sales person or department’s pipeline. The prerequisite to use the pipeline as a key figure is to have objective criteria for when a lead goes from a forecast of 20% to 30%. You can e.g. have a set of rules that a lead can never go above 20% if they have not received a written offer etc.
Events (CRM): How many phone calls, offers or equivalent have the sales persons sent out.
And now back to the athletes. If you are an archer and want to be among the best in the world, you do not focus on one goal one week and another the next week. You know that you probably need to shoot 500.000 arrows before you are ready for the competition. You put together a plan for the coming year; you plan how many arrows you need to shoot per day, you measure and maybe expect to see results within 3 months. You keep up and do not give in.
It is the same with companies. The difficult part is to limit the number of key figures, measure systematically and evaluate and communicate the same key figures week for week.
But, if you want to be an Olympic champion, that is what it takes.