Be Sure Your Performance Indicators Are Really 'Key'

Some rather large companies (SAP, Oracle, SAS) specialize in providing software for Enterprise Performance Management (EPM) -- or one of a thousand similar three-letter acronyms (TLAs).  These firms have grown so big because their customers know it’s critical to gauge organizational performance.  But there are a million factors that go into that, and it can be all too easy to get distracted trying to measure what matters.

For manufacturing firms, the truly key performance indicators (KPI, in management-speak) are pretty obvious -- the ratio of defective products to good ones, for example.  For service firms, however, things quickly get squishy.  The trick is to be sure your measures are simple and relevant.  The following two KPIs are exactly that, according to this useful article from Accounting Software 411:

Billability:  This is the ratio of billable hours over total hours worked, and is often called the "utilization rate."  It can be calculated for individuals or groups, though you may have to adjust your timesheet format to record the information.  Most organizations try to keep their utilization rate above 70 percent -- the higher the better, obviously.

Adherence to Estimate:  This measure is the difference between your estimated total hours needed to complete a project, and actual total hours actually required, divided by the estimate you gave in the first place.  Simply tracking this KPI is a good start, and you can get the required data from any timesheet system.

In essence, Billability says something about efficiency and Adherence to Estimate indicates whether you did what you said you were going to do. Simple, relevant, and useful -- even if you don't run out to buy an expensive software program with a three-letter name.