Jun 2018 What are KPI’s and why are they so important for your Landscape business?
A KPI is known as a Key Performance Indicator. It is a measurement of the way your business is performing.
A good KPI tells you whether your business is heading along the right path or not, toward your vision and goals.
In this article, I will explain and give examples of KPI’s you can use for some of the key areas of your business to ensure your business develops the way you intended.
Boost staff morale and productivity
It is important that our staff enjoy their work, the environment they work in and are continually productive while maintaining company standards. Setting KPI’s for every employee is a crucial component to ensuring productivity and morale remains high.
How does that happen?
Because every team member will be clear about what key objectives they are expected to achieve each day/week or month and you and them will have a defined method of measuring those expectations.
The problem in many businesses is, many employees don’t clearly know what is expected of them. It can often be a grey area, so they may work at an average pace because no-one has set definitive targets or objectives for them each day and each week.
Here are some examples of KPI’s for employees:
- An Estimator has to quote a certain total dollar amount each month, e.g. $300,000 in projects.
- A Site Supervisor has to meet the project budget, by completing parts of a project the budget shows in man hrs and materials each day and each week.
- A Maintenance Manager has to complete 3 garden reviews each week.
When employees know what is expected of them each week in quantifiable terms, they will be more driven to meet those KPI’s. There will be a sense of ownership in their work and recognisable evidence of their contribution to the team. This boosts productivity and morale.
Each employee should have 2 – 5 KPI’s, they should complete each week/month. Their KPI’s should be achievable, measurable, properly explained and agreed apon. When starting out setting KPI’s, set fewer rather than many. Too many will probably de-motivate the employee they were intended for.
Increasing Profits
Other important KPI’s are to know your biggest costs in your business and to set targets to reduce them.
Expenses like overheads, materials, subbies and site wages are the 4 biggest costs. Site wages and materials being the biggest two. Get to know one of these major costs in relation to income each month. An example might be: Income for the month is $100,000 and site wages are $37,000, so the percentage of wages to income is 37%. An aim would be to reduce site wages by 1 or 2%. The reasons for higher site wages are – poor planning, mistakes, poor directions on site and under- estimating.
So let’s say you start giving more attention to all of those things just mentioned. How do you know if you and your Site Supervisor are succeeding? By setting and tracking the site wages %. This % will tell you if you are succeeding and reducing your site wages cost. If you do this and succeed, you can potentially make tens of thousands of extra net profit per year.
So the site wages KPI you set could read like this – reduce site labour costs from 37% to 35% each month or for each project.
(It can be monitored on your project budget/actual sheet and in your P&L each month).
You can set up and monitor key KPI’s for all areas of your business. But if you are not utilising KPI’s at the moment, I suggest you create some simple ones for staff first and later set one for making more profit.
KPI’s will help you know if you are moving towards the goals and expectations you have determined for your business, and they allow your employees to work each day knowing exactly what is expected of them while feeling more motivated to achieve.