Understanding the Heart of Every Business: KPIs
In a new series, home improvement industry leader Brian Gottlieb will share quick tips and must-knows for home improvement business owners. In this first episode of Mentoring Minute, Gottlieb talks KPIs:
Transcript:
At the heart of every organization is something known as a key performance indicator or KPI.
So what is a KPI and how does it relate to the home improvement industry?
The Meaning of KPIs
First, let's start as if we're in the hamburger business: Suppose you have a little hamburger stand and during lunchtime you hope to flip 500 hamburgers between the hours of 11 am and 2 pm.
One KPI you might want inside of your hamburger stand is staffing. How many people do we need during these hours in order to keep up with customer demand? And maybe at the end of the day you hope to sell $5,000 worth of hamburgers. A KPI for that would come in when closing out the cash register: when I count the money in the drawer, how much did we sell?
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These are super simple KPIs for hamburger stand, but in the home improvement industry, the KPIs should be that simple too.
What a KPI does is it aligns organizational performance with individual and team performance.
Breaking Down KPIs
What happens in most organizations is that the CEO of the company typically knows what numbers are important, but we don't want the numbers to live just with the CEO. What we want to do is to drive those numbers down throughout the organization so they live with the people that are closest to the customer.
The more the people closer to the customer know whether the hamburger stand was profitable, or whether the hamburger stand was staffed properly, the more successful a company you're going to have.
My suggestion is this: take your yearly goals by department, boil it down into monthly goals, and then drill it down to a daily goal. Let the people closest to your customer know what their daily goal is—that's their KPI.
It’s easy to find, easy to track, and it will make your business a whole lot more profitable.
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