It’s hard to believe, but we will soon be entering the final quarter of the year. It’s an important time to ensure your business is on track with achieving its goals, in addition to setting your goals for the year to come. But depending on what your anticipated goals are, you may want to set something a little more specific – key performance indicators. While similar, the two can greatly differ so knowing what these differences are can surely help move your business in the right direction.
What Are Key Performance Indicators (KPI)?
A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. While goal setting illustrates a set of objectives you’d like to achieve, implementing a KPI will actually measure the success in achieving these targets. More importantly, however, is to know what type of KPI to implement, and this all depends on your type of business and what part of the business you’d like to track.
For example, if you’d like to see how your marketing efforts are assisting your sales objectives, setting an Incremental Sales KPI would prove highly beneficial. This specific KPI analyzes how your marketing efforts have increased your sales revenue during a specific campaign. The end result of a KPI will show you if the resources and budget you’ve allocated to a specific campaign, resource or individual have proven effective.
KPIs can fall under the following categories:
- Financial Metrics
- Customer Metrics
- Process Metrics
- People Metrics
How Do I Know The Right KPIs For My Business?
While setting KPIs are beneficial to your business, they can be just as detrimental to your time management if you do not set the correct ones. There are thousands of KPIs to choose from, and it can be overwhelming not knowing where to start. Here’s a tip – not only do you want to select KPIs that suit your industry, but ensure they also match your strategy. Additionally, ensure the targets or goals you are evaluating performance against are SMART (Specific, Measurable, Attainable, Relevant and Time-bound). By using this key formula you are ensuring both your goals and KPIs are achievable.
Where Do I Start?
Are you interested in incorporating KPIs into next year’s strategy? Start with these simple steps:
- Define what areas of the business you’d like to measure.
- Identify what questions the decision-makers, managers or external stakeholders need answers to.
- Select your KPIs. Consult your peers and business coach/advisor for input.
- Measure, measure, measure, don’t stop measuring when results are unsatisfactory.
Never hesitate to change or add KPIs throughout the year. After all, the main purpose of a KPI is to inform decision-making!
As a business advisor I see the issue of poor performers come up all the time. If you’re a small to medium-sized business owner you want to be out there growing and developing your business, not mired in staffing problems. Without big human resources departments and manuals of policies and procedures to follow, I know you often don’t have a roadmap on how to deal with poor performers. The reality is that regardless of the size of your business or your particular industry, at some point you will have to deal with this issue.
What are the causes of poor performance?
Poor performance can be the result of many things including:
- Not understanding expectations
- Lack of ability
- Lack of motivation
- Not a team player
- Chronically late
- Bad attitude
- Personality issues
- Non-work related problems
- Health issues
Why is employee performance so important to your business?
Employee performance affects organizational performance. A poor performer can create a toxic environment in your workplace, dragging down your entire team.
How can I avoid poor performers in my business?
Here are a few measures that I feel may help you to avoid the problem of poor performers.
- The hiring process: Choosing the right employees is crucial to a successful business but it’s not easy. If upon re-evaluation, you’ve discovered that you’ve hired several poor performers, perhaps you should consider outsourcing the hiring process to an external agency. The money you pay to the agency may actually save you money in the long run.
- Job expectations: Be clear about exactly what the job entails and what your expectations are.
- The onboarding process: Onboarding helps new hires acclimatize and orient to your business so that they can quickly become productive, contributing members of your organization. Have an onboarding plan in place for new hires and make sure that the tools they need to do their jobs are in place on their start date. E.g. workstation, computer, security pass, etc.
- Regularly scheduled one-on-one meetings: One-on-one meetings between employee and manager can potentially head off problems. Speaking about issues as they arise or have the potential to arise is always better than leaving them to fester and grow.
What can I do if I have a poor performer?
In my experience I’ve found it valuable to try and ascertain the root cause of poor performance before any action is taken. If the reasons are personal or health related and have nothing to do with the job, perhaps a leave of absence is in order. If an employee is lacking in ability, perhaps upgrading their skill set or transferring them to a different department is the answer. If the problem is attitude or motivation perhaps setting performance goals will inspire the necessary change. Try instituting quarterly performance reviews to address any performance issues and monitor improvement. If all else fails, you may have no choice but to let the employee go.
As a first step, I suggest that you review poor performance issues you’ve had in the past or are dealing with now. Evaluate what action to take in order to rectify the present situation and what changes you can make going forward in order to avoid the issues of poor performers.
Are you suffering from vacation deprivation? If so, you’re not alone. So much has been written about the importance of a work/life balance, but not enough Canadians are living it. According to Dr. David Posen, author of Is Work Killing You?, “Humans were never designed to have stress all the time. Our stress reactions were designed to be turned on and then off. That’s the healthy cycle. But today we operate in a semi-permanent state of stress. Proper vacationing is an antidote to chronic stress. It is absolutely imperative that Canadians are vacationing each year – and not just one time per year.”
I understand from many of the business owners I work with that you worry about leaving your businesses because you feel nobody else can do your work, and although that may be partly true, I can guarantee that if you burn out – you risk not having any business to run.
Make this the year that you take a vacation – consider it preventative medicine – and instead of just thinking about taking a vacation, prepare for actually taking one by following these 4 tips:
- Plan your vacation during a slow period. It will definitely reduce your stress levels about going away.
- Deal with all time sensitive issues before you go. In theory, anything that arises in your absence should be able to be dealt with by your staff or wait until you return.
- Contact your clients well in advance and let them know you’ll be going on vacation. If they have anything that requires your special attention you’ll be able to take care of it before you leave. Delegate a point person for them to contact in your absence.
- Empower your employees to step in and step up while you’re on vacation. Delegate specific tasks or duties. Leave detailed instructions about how to deal with situations that may arise. If you’d feel more comfortable with regular status reports, have a staff member email you at a predetermined interval with a report of the company’s activities during your absence. Let your staff know that they can reach out to you under certain circumstances and be clear as to what these circumstances could be.
All work and no play is a recipe for burnout. We all need time to relax, recharge and reconnect with family and friends. What are you waiting for? Start planning your vacation!
Let’s be honest, we all have our favourite clients. I know I do. More often than not, our favourite clients are also some of our best clients. These are typically the clients with whom we have great partnerships and an understanding that together, we’re responsible for success. The question is do we, or should we, treat all clients equally?
How we differentiate clients
For some, client favouritism is already built into many of our business models. It’s common practice to tier clients based on the amount of revenue they generate. We routinely see companies offering different levels of service typically called Gold, Silver or Bronze, similar in idea to consumer credit cards. The clients that spend the most have Gold cards, then Silver level, and then Bronze for “basic level”. Does this differentiation set us up to treat our clients differently instead of focussing on delivering great customer service to all of our clients? Is client favouritism itself two-tiered – clients we like and clients who generate the most revenue? How are we treating clients that don’t generate the most revenue but are still solid performers?
Can client favouritism be a bad thing?
Client favouritism is not a good or a bad thing. It’s perfectly fine to dedicate more time to the clients you have great working relationships with; the ones that are profitable, appreciate your work and do what they say they’ll do. But if you’re only focussed on your highest revenue generators and let others fall by the wayside, you may be alienating some good clients. Not all of your clients are going to be rock stars in the revenue department. However, I do suggest that you nurture solid, steady, long-term clients that deliver consistent revenue, in addition to the few rock stars. These steady clients speak about your service to others, and can be a good source of referrals, so maintaining a relationship with your clients, where each feels like they are the “only” client, is the ideal.
As a business owner, it’s always very difficult to turn away business, especially in challenging economic times. However, the reality is that not every client is a good client. In fact, some clients make unreasonable demands. You know the kind of client I mean; we’ve all had to deal with them.
In my experience providing advice to business owners, I’ve heard hundreds of stories of unreasonable clients, yet many owners are unclear as to how to improve their relationship with these clients.
I’ve outlined below some of the classic unreasonable client requests and some steps you may want to consider trying to better the relationship.
1. They expect you to be available 24/7.
Unless this is the type of service you offer, you should clearly define your boundaries. Let your client know what your working hours and days are.
2. No matter what you charge, it’s always too expensive for them.
An unprofitable client takes time away from your profitable clients. Set your pricing and be prepared to negotiate but only within preset parameters. Be prepared to say no and walk away if necessary.
3. They consistently pay slowly which has a negative impact on your cash flow.
If you’re spending a lot of time and energy chasing a client for money, this may be a client worth letting go – unless you can afford to wait for your money. This type of client will not change their paying habits until you enforce your payment terms. You may have to hold back on your deliverables to make your point.
4. They keep changing their mind about what they want.
If you have a client that keeps changing their mind about what they want after you’ve done the work, start charging them for the changes.
5. They don’t respond to your calls/emails/texts in a timely fashion.
Ask if there is another person who perhaps has more time to be responsive. Let them know that the lack of response may delay timelines and keep a paper trail in case it does.
6. They rarely turn up at meetings or cancel at the last minute.
Your time is valuable. If your client is consistently not turning up at meetings or cancelling at the last minute, start billing them for your time.
I recommend that you try to convert an unreasonable client into a good client, but that’s not always possible. When all of your best efforts fail, it may be time to fire the client.
As a business owner you may hold to the traditional view that employee turnover is equated with failure. However, the days of working your entire career at one company and retiring with a defined pension plan, gold watch and a testimonial dinner are long gone. Employee turnover is part of the rapidly changing business environment that many of you face today. In fact according to CareerBuilder’s Candidate Behavior Study, 75% of full-time employees are either open to or actively searching for new job opportunities.
Employee turnover can provide many benefits.
An Improved Workforce
Every company has a percentage of employees who are subpar or have toxic personalities. However, many retain these employees and as a result lose top performers who are overworked and underappreciated. Jack Welch, former CEO of General Electric, implemented a policy of annually evaluating staff in order to “purge” and replace the bottom 10% of performers. The reality is that even employees who are performing adequately can become complacent after a time and are frequently resistant to change. On the other hand, new employees are excited about their jobs and work hard to make a good impression. They bring a fresh perspective and new skills, which may ultimately improve efficiency and profitability.
I’ve outlined below a few ideas that I hope will give you pause to possibly reframe your views on employee turnover in terms of being a benefit to your business.
A Boost to Morale
New employees can breathe new life into your workforce. While disengaged employees can hamper productivity and morale, new employees can inspire their team members to greater heights with their enthusiasm and energy.
Typically you’d pay long-term employees considerably more than a new hire. Hiring a new employee also gives you the opportunity to eliminate or reduce high-cost seniority driven benefits and perks – number of weeks of vacation, golf club and/or gym memberships, company car, parking spaces, Smartphones, etc.
Is There An Ideal Employee Turnover Rate?
Although there’s no such thing as an ideal employee turnover rate, 10% is the rate most commonly used. However, not all employees are created equal. If you’re losing your subpar performers, then you’re doing well, regardless of the percentage but if your rate for losing top performers is high, you have a problem.
Low Employee Turnover Can Be a Problem
Low employee turnover is not necessarily a sign of a healthy company. It can be a result of poor management, fear of termination, weak performance management or being slow to release surplus labour. Although firing or laying off employees is never pleasant, you should have a plan in place on how to deal with under performing employees.
Employee turnover can be very positive for your company as long as you’re losing subpar employees and not your top performers. I recommend that you carefully review the records of the employees that have left your employ in the last year to determine whether their leaving was of benefit to your company or if you have a problem that needs to be dealt with.
As a business owner, you feel fortunate when landing a large client. This client can become your bread and butter, but this could also mean that your success is tied to theirs, and if they struggle, so will your business. Should another supplier offer your client better pricing or packages, their loyalty to your business can be compromised. Your largest client may have overdue payments or expect lower prices if they know your dependency on them. However, a greater concern is if you are spending all of your time and resources focused on your main source of income, you are likely to neglect or not seek additional clients.
There certainly are benefits to having larger clients, including the consistent revenue stream and workload, aligning your brand with their reputation, and possible referrals and references when trying to land new clients.
In my 30 years of business experience, I’ve found it critical to diversify your client portfolio with large and smaller clients. In doing so, you reduce the risk of the impact to your business if a large client leaves.
1. Advance your marketing efforts
Create a lead generation marketing plan to support your business development efforts. This might include call out campaigns, email blasts, downloads, boosting social networking posts, and pay per click.
Create an action plan for networking and building an ongoing flow of potential clients. Leverage your existing clients for new business. Participate at networking events and seek referrals from clients.
2. Foster Business Development
As the business owner, making a call to your client’s C-level person is critical in gauging the health of their business. Ensure you speak with that person on an ongoing basis and integrate your value. If they do stop working with you, hopefully you’ve laid the groundwork for working with them in other capacities (e.g. as a consultant on an as-needed basis) or keeping the door open for their possible return or referrals to other businesses.
3. Stay connected with all your clients
Here are a few suggestions I’d recommend to help you safeguard your business from the loss of a large client:
Despite your best efforts, losing a key client can be devastating for some businesses, especially when more than 30% of your business is reliant on them.
4. Join a Peer Advisory Board
It’s been proven that by sharing with other like-minded individuals, it helps to increase your bottom line. Members of Peer Advisory Boards are asked to contribute industry information or business ideas and meet on a regular basis, sharing best practices, networking, and putting forward objective recommendations. By hearing encouragement through a different perspective from other business professionals, you can help grow your business.
Through the continual development of a diversified client base, losing a large client will not devastate your business, but stand as a learning experience and opportunity for growth.