KPIs can help your agency grow, but only if you link the right insights to them. How do you do that for the KPIs ‘average profit per hour’ and ‘performance’? This blog post will set you on the right path.Have the feeling you’re missing something? It’s possible. Because this is the sequel to a previous blog post which explains how you calculate the ‘average profit per hour’ and ‘performance’ in your agency.
Once you have calculated the ‘average profit per hour’ and ‘performance’, three big questions remain.
- Why do the results of KPIs differ between staff types?
- How often and what do you measure?
- And how do you adjust processes based on high or low KPIs?
We answer all three of these questions.
1 The difference between roles explained
Brief refresher: with performance you calculate how efficiently billable hours are filled in. In an ideal scenario, everyone works perfectly within the budget and all hours worked are billable, each and every day. In that case, performance comes out at 100%.
Of course, this is an unrealistic scenario. In practice, there is often a difference between experienced staff on the one hand, and young staff in junior roles on the other.
A team leader (who briefs and manages designers, developers or copywriters, for example) generally works faster than a junior, resulting in greater efficiency. But staff in such roles often carry out more non-billable work, such as team management and internal consultations. As a result, their billability comes out at under 100%. If you only take billability into account, then it will appear that the team leader is not very profitable. It is only when you combine billability with efficiency that you get the full picture.
With a starter or intern, the situation is different. They are generally less efficient. They often need more time for projects than you can bill for. But starters are generally also keen to prove themselves and often work overtime.
Conclusion: you can gain insight into efficiency only by combining both factors.
2 How often and what do you measure?
It is extremely tempting to chart KPIs per individual member of staff. But this is the wrong reflex, because an employee’s dedication is just one factor that influences your average profit per hour and performance. In addition, it is not the absolute values of individual scores that are revealing, but particularly possible fluctuations in the figures.
Individual scores do not provide an answer to the crucial questions. What types of projects are the most profitable? With which kind of client are you most effective? Which activities (design, strategy, development or something else) are the most and least fruitful?
You can derive these insights from the evolutions and comparisons of the results. For this calculate the KPIs per year, per quarter and per month, in various ways:
- Per project
- Per project type
- Per client
- Per sector
- Per department
- Per employee
3 What the figures do and don’t tell you
Have you calculated the average profit per hour and performance, but found that these are on the low side? There can be a variety of reasons for this:
- A project has been sold too cheaply.
- A client asks for extra work without paying for it.
- It is inherent to the function: certain job types are predominately active in the pre-sales phase, so few billable hours can be recorded.
- Staff are punching above their weight and are doing work that is too difficult for their skill set.
The reverse is also true: high profit per hour and performance scores can expose challenges:
- Top rates appear positive, but can also be a sign of
- One or two employees who score markedly higher than the rest of your team can make you vulnerable. If they were to leave, your agency’s margins would be under pressure.
- Your rates are not in line with the market. In particular, a high efficiency ratio combined with few new projects can point to excessively high pricing compared to the competition. In that case, you are too dependent on a small number of clients.
- Everything is running smoothly. Yes, it can be that simple. Then it is simply a matter of continuing to follow up and maintaining the existing momentum.
With these KPIs you will achieve your goals
Calculating KPIs alone does not help your agency grow. For a start, both the frequency (more than once a year) and the way in which this is done (not individually) are crucial. But above all, by linking the right insights to the results, you can adapt your processes proportionately and achieve your objectives.
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