As you implement more technology in your landscape business, you can easily become overwhelmed by the amount of data at your fingertips.
“Paralysis by analysis is a real malady today because you’ve got so much stuff that you’re just inundated with on a daily basis, and you get a lot of disparate data that’s not necessarily cohesive that tells you a story, and that doesn’t provide a clear picture,” says Steve Steele, financial and business practices leader with Wilson360. “I think a lot of times with that, owners don’t know what’s important to track.”
Steele will cover what key performance indicators to track to sharpen their decision-making and drive company-wide growth during his session, “Turning Data into Action: How to Move from Data Overload to Data Mastery” on Monday, Nov. 3 at 9:45 a.m. at ELEVATE.
“I’m going to show people that I don’t think they necessarily need tons of data to get quality KPIs,” Steele says. “I’m going to show them where to get the data that you need to generate the most critical KPIs and the ones that give you the most insight. Finally, I’m going to provide some tips on assessing their own systems to help them understand whether they’re KPI-ready. Because you can’t just assume just because you have data, that it’s the right data.”
Steele will help owners determine which pieces of data they can work with, allowing them to focus on the metrics that truly matter.
“Tiny changes in numbers can mean really big changes in the way the organization functions, whether it’s in profitability or the productivity outputs of the company,” Steele says. “Understanding what you can do to affect those changes can move your company ahead a lot faster, but it also helps you understand at a very high level whether you’re doing a good job.”
Becoming KPI Ready
Before KPIs can be useful, you need a strong foundation in place. Steele says a common mistake is if your underlying processes aren’t strong, it undermines the results you get with your data.
“You have to make sure that your systems are KPI ready, and that you know that the underlying data is believable and good,” Steel says.
One way you may not have the best data is if you don’t have processes in place for it to be entered into the system on a consistent basis.
“There might be lag between data going into the system and the data that you’re using to make a decision,” Steele says. “You could have mismatches in terms of cost and revenue. That’s a really big one. One month that might look like I’m killing it because I’ve got a really high gross margin, but what I didn’t know is I had all the revenue in that month and didn’t get all the expenses in the next month.”
Another example of poor processes impacting your data is if your crews utilize paper time sheets. Steele says crews will typically write down what they think you expect to see, versus tracking exactly how long it took them to complete a job.
“As an owner, every decision that you make on pricing is tied to how much time you think it takes to perform the tasks on that job,” Steele says. “So it’s a very, very critical measure that you might not be in line with on your reporting systems.”
Choosing Effective KPIs
Steele acknowledges that every company has different opinions on what’s important but on the production side of the business, every key metric boils down to profitability, efficiency and growth.
For profitability, you want to see how your divisions are moving in terms of gross margin or net contribution margin.
Good KPIs for efficiency include actual-versus-budgeted and gross profit per hour, which tell you if you remain efficient or are getting better in terms of producing a product.
With growth, top-line revenue and your customer retention rate are strong KPIs that can help you determine if you are getting better or worse, or if you’re staying the same. It can also shine a light on a weakness your business might have.
“Maybe your sales people are selling 30% revenue dollars every year, but you’ve got a big hole in the bottom of the sales bucket because your client retention is terrible,” Steele says. “I have to make up a ton every year just to get back to where I was, and now I’m not meeting my goals on the top line, even though my sales team is really doing a good job. That helps you highlight the weakness you’ve got in terms of your service delivery for the client base.”
Steele recommends sitting down as a team to determine the most relevant data to focus on as a team.
“You limit KPIs when possible to the data that’s easily accessible, easily compiled and easily shared, because the more manual intervention that’s required to calculate a KPI, the less likely it is to be regularly updated and the less likely that the results are to be trusted,” Steele says.
The right KPIs need to be targeted to the right group because the numbers can tell you something different than what you’re wanting to focus on.
For instance, if you’re holding crews accountable with actual-to-budget hours, Steele says this is a great KPI, but it may not be the best KPI to use over time if your hours are not 100 percent correct.
“A better KPI may be something like gross profit per hour,” he says. “How is that crew generating gross margin dollars as a function of the hours it takes them to do the work?”
Reviewing KPIs
Once you have selected your KPIs, you need to make sure they measure the right outputs and result in behavior changes at the team or individual level.
Depending on the KPIs selected, you may be reviewing it on a daily basis or longer time frames.
“If you’ve got a three-week job, you may be looking at gross margin weekly just to make sure that you’re staying within the budgeted levels of the job,” Steele says. “With maintenance, it’s a much longer time frame. Things like gross margin may be more difficult to look at because it’s going to vary greatly from the beginning to the end.”
Steele adds that it’s important that KPIs are role-based. Everyone should own a number that they can control and that has a significant impact on the company as a whole.
“They should be centered on what the individual team can directly control or impact,” Steele says. “There’s nothing worse than giving somebody a measure that they’re being rated against that they don’t have any control over.”
Narrowing your focus to specific KPIs provides a common goal and clarity to your team.
“At a high level, it really results in a greater level of ownership overall for the people that are responsible for that metric,” Steele says. “I think from a company standpoint, it results in better accountability and understanding of the individual or team impact of the whole organization.”
Ready to use KPIs to gain data-driven clarity? Register for ELEVATE and we’ll see you in Phoenix, Arizona!
