Part 27: Measuring KPI & KFI – How Small & Mid Sized Companies Grow

In this discussion of: “How Small and Mid Sized Firms Grow” we will discuss good hiring practices and dealing with non performers.

All well managed companies measure their key performance indicators and their key financial indications or metrics. Although KPI and KFI metrics vary from industry to industry the basic concept is the same, to have an analytical measure of performance to go with a subjective determination of how one is performing. This allows both the manager and the individual to find our where one is doing well and where improvement is needed. They should be measured on an ongoing basis as just one snapshot in time is not enough. Almost every function in a company has metrics that can and should be measured. All well managed larger companies have their own KPI’s and KFI’s that they rely on, although the data must be valid or the conclusions will be worthless. It’s the garbage in and garbage out (GIGO) scenario.

Key performance indicators for a sales person typically includes such things as the number of telemarketing conversations (TC) and the number of job orders (or contracts) one has received, assuming that TC is the way one obtains job orders. Metrics can determine both productivity and efficiency levels. Productivity would measure the number of TC’s one has made. The efficiency is the conversion of job orders or contracts one has obtained as a fraction of their TC’s. This can then be used to compare these values to others with similar responsibilities to determine how they stack up as well as if their trends are moving up or down over time.

Let’s assume one made 100 TM in a week on average and this rose from 80 to 120 over some period of time and their conversion ratio was that for every 4 conversations 1 job order was obtained that would be a 25% conversion ratio that has fallen from 28% to 22% over the same period. One would then compare this to like people and if those people averaged 80 TC’s and this was fairly constant, this person’s productivity was higher then average and improving as well. On the other hand if the group’s conversion ratio was 30% and rose from 28% to 32% during this same period we might conclude that our sales rep was not only below par but trending down while the group was moving up. This would zero in on the problem as one of efficiency and not productivity.

Similarly KFI measures might include things like sales, margin rates, fixed costs, profit, rates of return (ROS), debt/equity, etc. Thus sales might be rising but if margin rate and ROS was falling we would be seeing growing sales but falling profitability and ROS. This is not what one would like to see and a game plan for remedial action should be undertaken.

In our next discussion we will discuss the concept of opportunity loss.

We welcome your questions as to the challenges you face in order to grow.

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Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.


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