We’ve all heard the expression, “Information is power.” Solutions360 president and founder Brad Dempsey, though, says that idiom needs a couple of qualifiers for business leaders.
“The right information at the right time is true power,” Dempsey told attendees at his NSCA Business and Leadership Conference breakout session with Navigate Management Consulting partner Brad Malone. “KPIs help us measure where we are, where we were and where we want to go.”
Malone told attendees to the session, “KPIs and Workflows for Maximum Efficiency and Productivity” too often business executives rely on anecdotal evidence or wait too long to act on corrective measures that could fix a problem before it becomes too serious.
“We see all these reports, but we don’t always look at them,” says Malone. “We need to be measuring against KPIs. We often make decisions based on assumptions then try to meet those assumptions that aren’t true.”
Dempsey urged against looking at a balance sheet as the only guidepost, saying, “Financial data only measures past activity.” Malone, meanwhile, reminded attendees that having metrics is only part of the process that comes with creating efficiency.
“A metric is only good if we do something with it,” he says.
Dempsey knows many companies produce “work-in-progress” reports, but too often those remain stagnant in terms of timeline updates of ongoing projects.
“WIP reports need real-time updating,” he says. “That’s when you can do something about it to improve the job.”
Malone says too often, business leaders ask their people, “How are things going?” or “How are you doing?” when they should truly be asking them, “How much do you have left?” to get a true assessment of the state of a project and what changes might need to be made to meet the project’s goals.
“A trend isn’t changing unless we do something differently,” says Malone. “Understanding your true costs helps you better determine a break-even analysis. Billing rates need to cover things like gross wages, labor burden, allocated overhead and still leave money for profit.”
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“Are you charging 2.5 times your technicians’ salaries when you’re billing on a job? If not, it’s getting a little dangerous,” says Malone.
Dempsey knows many integrators are profitable, but that doesn’t mean they can’t make tweaks to improve their efficiency and boost their bottom lines.
“We see a lot of companies that are profitable, but that doesn’t mean they’re not leaving a lot of money on the table,” says Demspey.
Malone says business leaders need to figure out which employees are generating value and which ones are generating waste. Some of that comes from measuring processes and improving them, he says.
“Most waste gets there because people didn’t know it was in there,” says Malone. “Five minutes [of waste] at the beginning of a project can cost 10 hours at the end.
Malone noted things like parts runs can add $135,000 to a project’s cost, kickoff meetings can save about $200,000 and change orders can make a difference of $36,000. Those are all elements that can be tracked during the project’s life cycle and eliminated or scaled back if they’re caught early enough.
“We have to train the people up front to think like the people doing the installations,” says Malone.