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Hey, do you know that 9 out of 10 employees around the world hate their jobs and even worse, they’re looking to get out? According to a recent poll, 87% of all the employees worldwide hate their jobs and are actively looking for a way out and that’s not good for business and it’s not good for you. But the good news is that in today’s video I’ll be talking to you about the top 10 key performance indicators you can start using today to instantly increase productivity and morale and more importantly, your bottom line profits.
Speaker 1:
Hey everybody. Welcome to 7 Figures and Beyond, I am your host Leo Landaverde. I am an author, business coach, and CFO and I’m on a mission to help business owners with a blueprint for growth so they can quickly scale to 7 figures and beyond, maximize profits, and maximize the value of their business for a huge payday when they sell their business. Let’s do this.
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All right everybody let’s get into it. The top 10 key performance indicators. The first five are to measure employee input, which is more important. The next five are to measure employee output without the input, the output will be wrong. And number one, it’s appreciation rate. Now, to put it plainly is saying, “thank you.” When was the last time you said, “thank you” to your employees for anything? If you have managers who manage employees, when was the last time that they said, “thank you”?
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Are you tracking that? Does that matter to you? Do you have a culture of appreciation? Gratitude, I have found working with businesses, it’s very important. It’s an intangible in a company and it’s part of your brand equity saying, “thank you” and saying proper praise and praising employees for the work they’ve done goes along way.
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Number two, absenteeism. Is employees not showing up to work at your company it problem? Are you aware if employees are not showing up to work? Because what it does, it creates a domino effect. When employees are not showing up to work and you’re not keeping track of that, there may be underlying issues that are not being addressed. Is absenteeism the cause of employee unhappiness? Are they unhappy for some reason and they’re retaliating by not showing up to work? That’s something that you should track and it’s very easily tracked through your payroll reports. You know when employees turn in their time sheets, they should be able to tell you when they’re off. Now, if they were offered a valid reason then it’s fine. But you should need to track absenteeism as a measure for employees.
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Number three, glass door rating. There’s a website out there called Glassdoor.com and it’s sort of an outlet for employees or former employees or disgruntled employees to really tell you how they feel about you and your company, for the world to see. Do you track that? Are you even aware that if your company has a rating in Glassdoor? If not, you better start checking it now. For larger companies, what it does it allows them to get a feel for what’s going on with the morale as a company. The larger the company, the larger the amount of employees you need to track and it’s important to know how the world perceives your company and they will also rate you as a CEO. Do you know what that rating is? You need to check.
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Number four, number of vacation days used. On the surface it may appear that this KPI may not be very insightful because it keeps track of when… How many hours have employees taken off or their earned but unused vacation time. But it is something that you should be paying attention to. For instance, if an employee goes on over six months and hasn’t taken any time off, well what that is telling you that they’re not really practicing work/life balance. You don’t want to have employees who are burned out. Burnout, it’s a real thing among fast growing companies and if employees are not experiencing some time away from work to replenish, your business as a whole will suffer. And the first thing that goes is productivity. So, number of occasion days used, you need to be tracking.
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Hey, by the way, please comment below and let me know which of the KPIs that we’ve gone over so far you’re currently using or which one has impacted you the most and you’re willing to start using it right away for your business. Please comment below and let me know what you think.
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Okay. Number five, employee happiness score. This is different than the number one that we talked about, appreciation rate, because that one comes from you. This one comes from the employees. So,, employee happiness score is asking your employees to rate how happy they are while working for you anonymously. So on a scale of 1 to 10 with 10 being I am so happy, I’m going to bring all my friends to work here, and number one, I can’t wait to get out. How do you fare as a company? Have you ever tracked that? And if you’re never done this, I encourage you to do it.
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Number six, revenue per employee. From here on out from 6 to 10 we begin to measure employee output. So revenue per employee is defined as taking the revenue that you have generated for any length of time. Let’s say his last month, last quarter, last year, and you take that number and you divide it into the number of full time employees that you have. Say for instance, if you generated a million dollars last year and you have 10 employees, that would mean that your revenue per employee, it’s $100,000. Now, is that a good thing? Is that a bad thing? It depends, right? Numbers in financial terms matter as they compare to other numbers. So perspective is everything. So, that’s number six.
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Number seven, net profit per employee. Similar to the one before but this one is take the net profit for the last period, whether it’s last month, last quarter, last year, and you divide that into the number of employees. Now say for example that your net profit was $100,000 for the period, say the last 12 months. And you divide that by the same 10 employees, now your net profit per employee it’s 10,000. Now here’s when you start to really drill down into your numbers and the first question that I would ask you as a business owner is, do you need 10 employees to support a million dollar’s worth of revenue? You may or you may not. But are you happy with $10,000 net profit per employee?
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Now what I want for my clients is as much net profit for employee because it shows efficiency. If you could get the job done with 6 employees rather than 10 your net profit per employee will be much higher. But it all begins with awareness. You need to know what those numbers are and if you haven’t tracked them before, I encourage you to start kind of looking at your numbers, but that presupposes that your financials are up to date and that you’ve been keeping up with your bookkeeping. If your bookkeeping is not up to date these numbers will be meaningless. So before you do all this calculations, I encourage all my clients that really know their numbers and they need to be fully reconciled and you have to have a good bookkeeping.
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Number eight, employee billable percentage. This one is very important if you are in the business of having your staff built for work done. That’s your business. Now, for instance, I’m talking about accounting firms, engineering firms, law firms, who’s sole business is billable work. And so let’s kind of look at the formula here. So you take… The formula is equals total weekly billable hours divided into total weekly hours logged or worked, times 100. So in this particular example, say somebody worked 30 hours of billable work that you turn around and bill to your client, but they actually log 40 hours worth of work. So they work nine to five, five days and that comes to .75 times 100, that’s 75%. Now the only way to know this in context is what is your historical weekly total billable hour percentage? If it is higher than 75% I think you’re doing great, but if it is lower, you need to start to wonder how efficient, how productive your employees are. You will never have 100% billable product. It’s just impossible. It doesn’t work that way. But you should leave room for activities that are not billed to clients and your clients would respect that. And if you want quality of life for your employees, you can not expect them to bill a hundred percent of everything that they work. It’s unsustainable. And will lead to real employee problems. So, that’s number eight.
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Okay, number nine is over time. Now, over time is defined as the time that is above and beyond the regular pay. So if you have a 40 hour work week and somebody was 45 hours, the five extra hours typically get paid at time and a half. So if you pay somebody $10 an hour, using this as a basic example, overtime hours will be at $15. So if somebody works 60 hours in a week, the first 40 will be regular time, regular pay at whatever rate that you’re paying your employees. And the other 20 would be overtime. Now why is that important? It’s a cost basis. So you are allocating funds to pay your employees. So it indicates to me if you’re paying way too much overtime that you have productivity issues. You got to watch your overtime and the best way to do that is look at your payroll register every time you run a payroll. Now if you run a payroll weekly, look at a weekly, if you run it semimonthly, then do that. And the aggregate of all those payrolls is what makes up your monthly payroll cost. So there is the employee portion, the wages, and there is the payroll taxes. And together there’s the cash that is required for you to fund your payroll.
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So as a rule of thumb, you should not have more than 10% of your total wages as overtime. I’ve seen many companies in which their overtime goes out of control, so you got to watch it. So if you don’t watch it, it’ll get out of control and it’ll be bad for you. Number 10, employee capacity, expressed in this formula. Weekly capacity minus total hours logged or worked similar to the prior a KPI. But this one is a little more concern about burnout. So say for instance that the weekly capacity of an employee was 40 hours, as a normal regular 40 hour week. But they are working say, 39 hours of billable work, and they’re still adding on more hours to finish the work that is no longer billable. And I’m specifically speaking to those companies who do billable work to employees, high end, white collar work, or even anybody who is actually doing billable work. But if you start to notice that this is reaching a hundred percent again, it will be unsustainable.
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You got to be concerned about burnout. And it’s very closely related to when somebody is already working beyond their capacity the quality of that output will not be as good just because they’re going to be tired. So remember, weekly capacity minus total hours booked is how you get your employee capacity.
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