In the age of big data, companies in all industries have found it imperative to utilize many different metrics to track their performance and stay ahead of the competition. In the service industry especially, business activity is dispersed over time and distance in the field. Key performance indicators (KPIs) are one way that field service managers can monitor remote team progress and translate large amounts of data into actionable insights. Although KPIs are best when tailored to a given individual organization, there are four core KPIs that all field service managers should track in order to foster continuous business growth.
1. Employee Productivity
When it comes to service teams in the field, employees make all the difference. Enthusiastic, productive employees will complete projects on time and on budget, and will positively engage with customers throughout the entire process. Employees who are inefficient or sloppy in their work can cost a business both money and its reputation.
This KPI, defined more specifically as company value added per employee in dollars, allows field service managers to track and control labor costs by pinpointing employee-related inefficiencies. According to Ken Kelly, President of Kelly Roofing, by analyzing hours worked vs. dollars produced, a manager can identify and eliminate non-productive employees, unprofitable systems and poorly performing crews. To calculate this KPI, you will need to know the number of employees engaged at your company, as well as be able to calculate total value added, which can easily be derived from a profit-loss statement. Then, you can just divide value added by number of employees to determine productivity.
Increasing productivity should be a primary goal for service companies because when productivity increases, so do profits. Other methods of increasing profits, such as cutting costs by decreasing salaries or minimizing capital investment, are only effective in the short term. In contrast, boosting employee productivity through the use of incentivization or team productivity apps can help sustain long-term company growth.
2. Project Overrun
The service industry typically operates on tight margins. An ability to successfully predict the cost and time that a project will require is important for preserving those margins and minimizing the chances that resources and revenue will be lost. By definition, project overrun refers to the percentage that a project’s actual cost is above the budgeted cost. It can be expressed in terms of actual time / planned time or actual cost / planned cost. Any time a project is overrun, it conveys a lack of project governance and can negatively impact a company’s bottom line.
Tracking this KPI will allow service managers to optimize revenue generation because they will be able to determine why project budgets are not being met and make adjustments for future. Project overrun can also be calculated on a per employee basis in order to evaluate why certain teams are consistently not meeting deadlines. For example, work defects are often one reason why projects run over budget, since employees must go back to job sites and expend extra time and resources to remedy the issue. Teams that consistently experience project overrun may need to be retrained or managed more carefully.
3. Customer Satisfaction
Customer satisfaction is a difficult KPI to track because it is a qualitative, reputation metric, but when measured properly, it helps field managers evaluate how clients perceive the quality of service provided. The best way to capture customer satisfaction data is to create a survey and disseminate it to customers, usually with some reward attached for its completion. The survey should ask customers to rate on a scale of 1 to 10 how satisfied they were with the end result as well as with the employees in the field. It should also ask whether or not they would recommend the business to friends and family.
Customer satisfaction scores of 8 out of 10 or higher may indicate loyalty and increase the likelihood of repeat business or of a referral. Conversely, a negative result, especially a score of under 5 out of 10, should be investigated further. Unsatisfied customers point to a weakness in the quality of service provided, and can even be an indication of limited future growth if the current business model remains unchanged.
If customer satisfaction is lacking, utilizing field force management software can increase transparency, build trust and set a high standard of professionalism. For example, when on-site work can be documented with before and after pictures and shared in real-time with customers, any issues that arise can be addressed instantly. Field service management software can also store customer information and keep it up to date so that remote teams know exactly what to expect before going to a site.
4. Net Profit Margin
Service companies must be vigilant in monitoring the different projects that they decide to undertake; otherwise, they can get sucked into projects that are too risky or not profitable enough and end up shrinking their profit margins. Net profit margin is defined as net profit before taxes divided by net sales, and it conveys what percentage of revenue from a given period of time was actually profit. When a company’s net profit margin is 5% or greater, it usually means that they are pricing their services properly and exercising cost control.
Profitability KPIs are especially important for smaller service businesses, since margins can be especially tight during volatile early growth. Understanding how effective a company is at generating profit on each dollar of revenue brought in allows managers and executives to make more informed short and long term financial decisions. As a business is able to to grow its net profit margin, it’s better able to weather unpredictable issues and more comfortable taking business risks.
The four KPIs outlined above offer an excellent starting point for a service company to begin to track its progress and make appropriate adjustments. It’s important to tweak each KPI to fit your individual business, as well as to begin implementing them slowly in order to integrate the high costs of collecting and analyzing data. Finally, field service managers should remember to not only crunch the numbers but also to undertake customer and employee focused qualitative assessments in order to get a holistic picture of their businesses’ health.
Jackie Carney is a content marketing journalist at Repsly. Her experience in the field of startups has prepared her to create interesting and valuable content for a diverse group of readers.