Every company wants to have the best business performance possible. But what does that really mean? How do you calculate it? And why is this term especially important for professional services companies?
We’ll answer all these questions and more in this article.
The Definition of Business Performance
In general, business performance is a company’s ability to profit from its resources and achieve its objectives.
This is, however, a very broad definition. In practice, the term business performance usually refers to a company’s achievements. These are measured using metrics known as Key Performance Indicators (KPIs).
Examples of KPIs for Business Performance
KPIs differ depending on the industry in which a given business operates. However, the major KPIs for most professional services companies include:
- Sales/profit/employment growth
- Customer satisfaction ratings
- Traffic generated from different sources (i.e., SEO, websites, campaigns, etc.)
- Order delivery
- Delivery time
- Number of customer leads generated by the marketing department
- Improving project statistics (e.g., completing projects on time and within budget)
- Increasing profit margin on an individual project or all projects
- Improving market share
Examples of Business Performance Metrics
Regardless of the type of business you run, the most important indicators are profitability and revenue.
Beyond that, important metrics vary depending on the industry. For example, the typical business performance metrics for professional services companies are:
- Profitability (per client, project, specialist, group of specialists)
- Utilization rate (planned, tracked, and divided by billable and non-billable)
- Billable/non-billable hours ratio
- Speed of billing
- Project estimates to actuals ratio
- Customer lifetime value
- Employee retention
- Hiring speed
- Time of building new skills in the organization
Of course, these are not the only metrics — you can adjust them to your operations as long as they reflect an important business value.
Benefits of Measuring Business Performance
If you don’t measure the KPIs in your business, they might as well be nonexistent. In other words, without metrics, you don’t even know whether they are valuable.
Measuring KPIs, and business performance in general, is the first step to understanding your business on a more granular level and, as a result, quantifying its performance.
But why quantify performance in the first place? Imagine an average CEO. Let’s call him Josh.
Josh managed a company employing 50 people, so he had quite a lot on his hands. Every month, he received a summarized report from his accountants showing that his company earned $500,000 with a profit margin of about 20%. It may look similar to this one: [KM1] However, one day Josh noticed that his margin had dropped in the previous month despite the rising sales. Therefore, he started to analyze the costs generated by the entire company. After weeks of hard work, he discovered that half of the projects had not generated any profit in the last few months. Even worse, their costs had been steadily increasing for quite a while. Meanwhile, a few major projects were generating bigger profits and better margins, allowing their less successful counterparts to slip through the cracks.
Had Josh kept track of each project on a monthly basis, he would have noticed the poor financial performance of some of them. As a result, he could have saved some people lots of work and focused on acquiring projects that would help his business grow.
That’s why, above all the other reasons, business performance is so important.
Apart from that, business performance can also give you:
- The ability to discover any arising problems before they impact the company’s performance.
- The chance to identify which projects are more or less beneficial.
- The opportunity to improve the company’s profitability.
- Improved transparency both for individuals and their managers.
- The ability to track the progress of an individual project, as well as the entire company.
- Access to valuable indicators of challenges and opportunities within the company.
Additionally, measuring business performance is greatly important for services companies. They can use this method to monitor their projects better and improve their profitability on a micro-scale.
Therefore, don’t be like Josh. Instead, focus on measuring business performance.
How to Measuring Business Performance
Business performance is all about metrics. However, to implement them, you need to know what to measure in the first place. Fortunately, you can use our ready-to-implement guide to measure business performance.
1. Select the Objectives
Before you start measuring business performance, you need to know which metrics are most important for you, your project managers, and your business.
Even in the smallest companies, there are dozens of different processes that can be measured, from particular projects to the efficiency of employee performance. Now it’s time to determine which of them are key metrics.
How to Choose the Right Objective
Ultimately, every company, regardless of specialization, strives to achieve three ultimate goals:
- Profitability: A sign of a company’s growth and success.
- Staff satisfaction:: Employee acquisition and employee retention.
- Market demand: Sales and acquiring the largest market share possible.
These three objectives are surely familiar to your business.
Now, you can take a closer look at them to identify metrics you can use for measuring business performance. For example, relevant professional services KPIs for profitability include:
- Margin rates
- Profits from particular operations (e.g., projects)
Then, you can measure the condition of the market for staff using relevant business metrics such as:
- Available skills and vacancies
- Turnover rate
- The growth rate for your teams
Last, but not least, take a closer look at the market demand and customer needs. You can measure these types of business goals with indicators such as:
- Customer satisfaction
- Acquisition rate of new customers
- Profit per customer over the years (for long-time cooperation)
- Customer loyalty
Of course, you can add your own metrics to this list. Every company has to adjust the indicators to its operations.
2. Monitor the Progress and Optimize It
After defining your objectives for business performance, you can start monitoring your company’s progress.
However, you can’t just go to a meeting and tell your project managers to report everything they do. That will only cause chaos and misunderstandings. Instead, you need to:
Provide the managers with a business intelligence tool that will allow them to gather and exchange information without any additional effort. Then, you can set up specific business processes to access the data whenever you need.
Define the business metrics they should pay attention to. Different managers may have different understandings of terms your business should measure. To avoid confusion, define the terms you wish to focus on and give the entire company access to this knowledge.
Create a measurement methodology. In other words, make sure that your project managers measure the same business metrics in the same way. If you’ve chosen the right tool in the first step of this list, you probably have such business intelligence insights right there.
3. Adjust the Predictions
Whether you monitor a single project or the performance of the entire company, at some point, you will find something that simply didn’t go according to plan. That means it’s time to adjust your predictions and metrics — or even your business goals altogether.
Whenever your business objectives are not being met, you first need to analyze and adjust the project process. By analyzing the metrics for business performance, you can spot any reliability, accuracy, and validity issues that need to be addressed for the project to meet its goal.
If the changes that caused the predictions to be misleading were not internal, you should focus on external factors. If your business is in the middle of a crisis — or a great opportunity — you may want to update your business goals instead of the projects.
If all else fails, you may want to take a closer look at the performance metrics you’ve chosen in the first place. If they are not reflecting the situation well enough, you can choose other key metrics to help you gain a better understanding of your company’s operations.
How to Improve Business Performance
If you’ve made it this far in this article, you already know how to measure business performance. But what if you already did that and it turned out that you have a lot of things to work on?
In that case, we have a few tips on how to improve your company’s performance.
Track and Improve Statistics
Business performance is based on the data gathered from your business during its daily operations. Therefore, tracking the operational metrics is absolutely essential for it to be efficient.
However, tracking statistics may have many faces. For example, you should:
- Track worked time and compare it with planned hours.
- Keep track of the project calendar and project progress.
- Analyze allocations and avoid benches, overtime, and other undesirable situations.
- Monitor any other performance indicators you find crucial for your projects.
Of course, we don’t recommend doing all of these things manually. Instead, you can use BigTime’s reporting features to automatically monitor business performance with all the key indicators.
Get Everyone on the Same Page
People in your company, whether they are specialists or managers, come from different backgrounds. As a result, they may understand key terms differently — and you should prevent that from happening.
Before you focus on the technical aspects of business performance, explain to your team the key indicators you are looking to measure. If necessary, show them the formulas and factors that affect the results in the statistics. With that information, your employees will know exactly what aspects of their work they are to improve.
Focus on Transparency
Business performance is all about knowing what the company’s goals are. If you are planning on measuring it, you need to understand the underlying data.
To do that effectively, you need to have a single source of truth that can provide you with all types of information you may want to measure. Whether it’s employee working hours, projects, or budgets, you have to compare and analyze the relevant data to get a bigger picture of the operations and identify trends that could impact them.
Of course, that cannot be achieved in meetings or through a series of emails.
To ensure that the information flow is swift and seamless, familiarize yourself with Professional Services Automation (PSA) software. When chosen carefully, it can gather data from different departments and managers, providing executives with everything they need to make the right decisions.
To successfully predict the future, you need to know how projects and other endeavors are completed in your organization. Therefore, you need to plan them properly.
Remember that planning is not limited to the schedule of a project. For maximum business performance, your business should also pay attention to:
- Resource planning
- Time off
- Budgeting and planning for finances
- Project planning
- Project portfolio management
Work With the Right People
Business performance depends on the business leaders responsible for projects and other operations. Without their skills, your calculations may be misleading.
However, having the right business leaders at your side is not enough to successfully measure business performance. To help them do their work properly, you also need a transparent resource management plan, as well as a tool that will provide them with information on their work — both planned and tentative.
Communicate With Stakeholders
To avoid any confusion in the future and ensure customer satisfaction, you need to put your customers’ needs first. Therefore, communication with your stakeholders is essential for your business.
Every time you start a new project, accept a new deal, or move on to another stage of an endeavor, make sure you and your stakeholders are on the same page. Specify the requirements, define milestones, and create a schedule to ensure you can deliver projects on time without wasting resources.
Monitor Business Performance With BigTime
Staying on top of business and employee performance is not easy, but you don’t have to track progress alone. With BigTime, all the key information is available at your fingertips. The system can also convert the data into graphics, charts, and other advanced reports, giving you an overview of the company’s operations.