The Key to Unlocking Masterful Key Performance Indicators, Part 2: Four KPIs You’d be Remiss Not to Track

In part one of this article, we covered what KPIs are and why they’re important for your business, detailing the important terms to stick to and how to they can enhance your business practices. In this article, we discuss the cost-accounting KPIs that you should already be tracking, and why it’s important to pay attention to them in the first place.

1. Percentage of billable time

What it is: This could also be referred to as “billability” or “utilization rate”. This is the amount of time during a week (even a month or a year) that your employees are making money for the business. For this reason, absolutely crucial to use a time tracking system that lets you keep track of specific work/tasks that are or are not considered billable to the customer. That very information will give you insight into successful projects as well as unsuccessful ones so that you can plan ahead for the next quarter or year.

So what’s the formula?  Find the percentage of billable time by dividing the number of billable hours of the employee (or use the sum of a group of employees) by the total amount of hours worked for that specific time period.

# of profitable projects / # of projects

Why it’s needed: This KPI gives you valuable information when you’re both managing employee projects and balancing the books.  If your percentage of billable time dips under your quarterly quota, your employees are spending too much time on internal work. The flip side of this is that once your percentage of billable time gets too high, your employees are probably neglecting administrative tasks necessary to keeping your business running in an organized fashion (like logging time in the first place). This data gives you the insight to find the happy medium where your billable time is at the highest percentage it can be, without sacrificing necessary internal work on your business.

2. Percentage of accurate estimates

What it is: This is an area where many companies chronically underperform, and improving it can also be difficult. Despite that, the metric itself is pretty easy to understand–it’s simply the percentage of projects that were completed within the estimated amount of time. This equation looks like:

Projects Completed on Time x 100, then divide that sum by the Total Projects = Percent of Projects Completed on Time.

Why it’s needed: Projects that get out of scope of budget or time don’t make anyone happy–it drains the profits of the employer and the client has to adjust their budget as well. The key to improving this particular KPI is understanding that projects often break down in respective positive feedback loops. Imagine it in this scenario:

Your business carefully tracks time for two projects, and you note that in each of the projects, the first phase or two ( the “requirements”, “design”, or “specification” phases, depending on your industry) take approximately 10% of the total project length. That means when it comes time to estimate the length of phase three, and the design phase takes 2 months, you can give a fairly accurate estimate that the project will be completed in 20 months total.

3. Burnout metrics

What it is: This isn’t exactly a KPI in and of itself; rather, it’s a category of metrics that you can track to see how likely it is that your employees are going to get burned out (or see how likely it is that your employees will get burned out). If you find yourself struggling with lagging productivity in previously successful employees, or with an unusually high turnover rate for your industry, burnout could be the culprit. Consider these metrics:

• How many employees are working over 40 hours a week
• How many weeks out of the month or year employees work over 40 hours a week
• How much vacation time people are using (or not using, as the case may be)

Why it’s needed: If your employees are burned out, they aren’t performing at their best, which directly affects your profitability as a company. And high turnover is not only expensive, but decreases employee performance.. You can imagine that spotting burnout early on and preventing it entirely would have measurable positive effects for your company. For more on spotting employee burnout and fixing it, check out this article at Entrepreneur.com.

4. Underwork metrics

What it is: Much like burnout metrics, this isn’t a specific metric as much as it is a set of metrics. If you want to see if your employees are getting away with doing too little work, here are a few places to look:

• How many employees are working under 40 hours a week
• How many weeks out of the month/year employees are working under 40 hours a week
• Profitability on a per-employee level

Why it’s needed: If you’re struggling with profitability, it’s important to find out where and what’s causing it. If you’ve reviewed the obvious places like your billability and the accuracy of your estimates, then the next place to look is whether your employees are chronically underworking.

The whole point of KPIs is to keep your focus on what’s important so that you can grow your business and keep your customers (and employees!) happy. Paying attention to these metrics can put you on the right path.

Is there one you’ve been neglecting, and if so, what are you going to do to fix that

About the Author: Curt Finch is the CEO of Journyx. Journyx strives to be relentlessly creative and to build tools that help you spend your time on things that matter. After all, time is all we have. Founded in 1996, Journyx offers customers two solutions to reach the highest levels of profitability: Journyx – project, time and expense tracking software – and Journyx PX – resource management software that provides work and financial forecasting for a complete picture of project and budget status, employee time and availability. Connect with Curt on Google+.

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