HOW DO YOU measure your company’s performance?
The way not to do it is by following your gut feeling. Running a successful business requires a thorough analysis on the work, sales, and financial results. And it can’t be done without tracking relevant business metrics.
Business metrics, also called KPIs (key performance indicators) display a measurable value that shows the progress of a company’s business goals.
They’re usually tracked on a KPI dashboard. Business metrics indicate whether a company has achieved its goals in a planned time frame.
There are hundreds of different key performance indicator examples, but there’s no use in measuring all of these. Depending on your business goals, you should track business metrics that really show how your business is doing.
Tracking irrelevant KPIs will distract you from focusing on the things that truly matter. This way, you’ll end up stressing about the numbers that have no actual impact on your company’s development. So it is highly important that you not only track business metrics but also choose the right ones to perceive.
Examples of business metrics:
Up next, we’ll explore 12 popular business metrics that reflect on your company’s performance and indicate growth or decline.
We chose to put this metric first as it can tell a lot of things about your company. Month-over-month sales results show whether people are interested in buying your product/service, are your marketing efforts paying off, are you still in the competition, and much more.
When evaluating your sales revenue and setting goals, it is important to remember that sales results are affected by multiple other factors. The person tracking the sales KPIs should also be aware of recent changes in the market, previous marketing campaigns, competitive actions, etc.
How to measure:
Sales revenue is calculated by summing up all the income from client purchases, minus the cost associated with returned or undeliverable products.
How to improve:
The most obvious way to grow your sales revenue is to increase the number of sales. This can be done by expanding your marketing endeavours, hiring new salespeople, or making discount offers that are hard to resist. Growing your sales revenue should be a long-term strategy rather than a quick (and temporary) boost in sales.
This business metric indicates how efficient your company is at generating profit compared to its revenue. Basically, this number tells you how big a sum of? each dollar earned translates into profits.
The Net Profit Margin is a good way to predict long-term business growth, and see whether your income exceeds the costs of running the business.
How to measure:
Calculate your monthly revenue and reduce all the sales expenses.
How to improve:
You can improve your company’s Net Profit Margin by increasing your revenue.
The easiest way to do this is by raising the price of your products/services and selling more. Another method is to lower your sales and production costs while keeping up with the competition. Both of these tactics require thorough market research and long-term business strategy, and can’t be done overnight.
The higher your Gross Margin, the more your company earns by each sales dollar. You’ll be able to invest it in other operations. This metric is especially important for starting companies as it reflects on improved processes and production. It’s like the equivalent of your company’s productivity, translated into numbers.
How to measure:
The Gross Margin equals your company’s total sales revenue minus its cost of goods sold, divided by the total sales revenue.
Alright, let’s put it into an equation.
Gross Margin = (total sales revenue – cost of goods sold) / total sales revenue
How to improve:
Gross Margin can be improved by making both your sales and production processes more efficient.
Who wouldn’t love to see their company grow month-over-month? But sometimes, sales are highly dependent on the season and the mood of the customers. Sales Growth Year-to-date indicates the pace at which your company’s sales revenue is increasing or decreasing.
Monitor your sales growth over various time periods – monthly, yearly, and long-term metrics will give you a better understanding of where your company stands. Make it a goal to accelerate your sales growth every month, or at least keep it at the same percentage, month over month.
How to measure:
Check your monthly sales revenue and the number of new deals.
If your sales team work in multiple teams, you can also track this business metric by every team. This way, you’ll get a better overview of each sales department’s achievements.
How to improve:
Similarly to Sales Revenue metric, this KPI can be increased by investing more resources in your marketing and sales activities. Sales Growth can also be boosted by positive media coverage or a new product launch.
Have you ever thought how many small things contribute to acquiring a customer?
The Cost of Customer Acquisition (CAC) is calculated by dividing all the costs spent on acquiring new customers (marketing expenses) by the number of new clients acquired in a specific time frame. If you spent $8000 on marketing in September and acquired 40 customers in this time frame, your CAC is $400.
The Cost of Customer Acquisition should always be measured together with the Customer Lifetime Value. If a new client is worth the average of $1400 to you, acquiring them for $400 is a reasonable deal.
How to calculate:
The easiest way to calculate the average Customer Lifetime Value is to multiply the average value of a sale by the number of repeat transactions and the average retention time in months for a typical customer.
Calculating the CLV depends on your product specifics – are you selling on a monthly basis, is it a big one-time transaction, or do people return to make repeat purchases? Here’s a great infographic by Kissmetrics, explaining the CLV in-depth.
How to improve:
Evaluating the Customer Lifetime Value of various client segments can help you understand which segments bring in a higher profit. Let go of clients who are decreasing your net profit and difficult to convert, and focus on the most rewarding audience.
Having loyal customers is beneficial in many ways. It helps to grow your sales, and spread the word about your product. The Retention Rate shows the number of clients who keep using your product over an extended time period and make repeat purchases.
How to measure:
Here’s a quick formula for calculating the Retention Rate
Retention Rate = ((CE-CN)/CS)) X 100
CE = number of customers at the end of a certain time period (1 year, for example)
CN = number of new customers acquired during the same time period
CS = number of clients at the start of the time period
How to improve:
The customer loyalty can be increased over time by providing excellent customer care, and delivering high-quality products.
Net Promoter Score reflects on the quality of your product and the level of customer satisfaction. It shows how many people are likely to recommend your product/service to a friend.
According to Net Promoter Network, there are three levels of customer advocacy:
How to measure:
This marketing metric can be measured on a ten-point scale by conducting customer surveys and interviews. The easiest way is to ask this question in the follow-up email of a product order or new subscription. It takes some time to gather data and evaluate the results but it gives you many insights into how to improve your product/service.
To calculate the Net Promoter Score, subtract the percentage of Detractors from the percentage of Promoters.
How to improve:
Provide the very best customer service and deliver high-quality service. Offer benefits and information that your customers didn’t even expect to receive to make their user experience as good as possible.
As you company grows, you’ll be able to invest more resources in marketing and sales. Soon, you’re going to have hundreds of new leads each month. But not all of these leads have the potential to become a customer.
That’s why you need to measure the number of qualified leads per month.
This business metric shows whether you’re targeting the right market with the highest potential of attracting new customers. If the number of qualified leads is declining, it means you need to re-evaluate your marketing campaigns and sales strategy.
How to measure:
You can categorize your new leads into three distinct groups:
How to improve:
Instead of targeting millions of people, focus on a niche audience that has the highest probability of being interested in your products.
Leads do not turn into customers on their own. They need to be contacted by your sales team who will convert them into paying clients.
The Lead-to-Conversion business metric reflects on your sales team’s performance. Moreover, it might indicate the quality of your product – if leads fail to convert, they might be unimpressed with what you’re offering.
How to measure:
To calculate the Lead-to-Conversion KPI, divide the number of monthly new leads with the number of monthly new customers.
How to improve:
To improve this metric, you first need to find the cause behind the low sales conversion rates. It might be a poorly-performing sales team, but it might also be a bad product-market fit. Here’s a great article by ConversionXL on how to improve your conversion rate.
One of the best indicators of your company’s reputation in the monthly website traffic. The more people hear about your product, the more likely they are to check out your web page.
See the complete list of over 35 digital marketing KPIs.
How to measure:
Use a free marketing tool such as Google Analytics to track your monthly website traffic as well as the traffic sources, to understand how people find your site.
How to improve:
The easiest way to do it is to increase the advertising budget. But there are many free and more efficient tactics: getting free press coverage, sharing valuable advice on social media channels, betting on search engine traffic with SEO, etc.
Every business has goals and milestones. Maybe you’d like to double your sales revenue by the next quarter, or maybe you’re planning a new product launch. All of these big goals are actually projects that can be divided into milestones to mark their progress.
Checking the number of met and overdue milestones gives you a quick overview of your team’s capacity. If you constantly fail to meet the milestones, it might be time to hire some extra hands or align your ambitions with reality.
How to measure:
Set up various project milestones and keep track of whether they’re met in time.
How to improve:
If your company’s team constantly crosses deadlines, it’s should raise a red flag. There are three reasons to look out for: unreasonable expectations, insufficient resources, and low productivity. After you’ve discovered the problem, focus your energy on solving it. Moreover, ensure that you’ve set the right priorities.
Improve your work productivity with a business management software. See the complete list of 30+ Team collaboration tools.
Happy employees = productive employees. New research suggests that we work 12% more effectively when we’re happy at work.
Keeping the satisfaction level high leads to the long-term commitment to the team and company. That’s why it’s important to regularly check whether your employees are happy and feel rewarded for their work.
How to measure:
Conduct team surveys or use an HR tool to collect quick feedback on the teamwork and personal satisfaction levels.
How to improve:
The fastest solution to increased employee satisfaction is introducing some new perks, e.g. free coffee in the office. But the long-term solution to motivating your team is being a good example, and practicing what you preach. Companies with a strong sense of mission project it on their team, making everyone more motivated.
While there are many more important business metrics that companies can and should measure, these 12 will give you a quick overview of the current state of your business.
Which business metrics do you measure and what are the best tools for doing it? Share your thoughts in the comments section!
The Justice Department is supporting a federal judge's ruling that the Affordable Care Act (ACA) is unconstitutional in a case that could eventually be heard by the U.S. Supreme Court. In the meantime, all ACA coverage and reporting obligations for employers remain in place.
"The Department of Justice has determined that the district court's comprehensive opinion came to the correct conclusion and will support it on appeal," said Kerri Kupec, spokesperson for the Justice Department.
On Dec. 14, in Texas v. United States, district court judge Reed O'Connor ruled that because Congress eliminated the penalty on individuals without ACA-compliant health coverage effective Jan. 1, 2019, the ACA's individual mandate requiring people to have health insurance "can no longer be sustained as an exercise of Congress's tax power." O'Connor, who sits in the Northern District of Texas, then struck down the ACA in full, concluding that the individual mandate is so connected to the law that Congress would not have passed the ACA without it.
For now, employers should remember that the ACA is still the law and the Justice Department's stance does not change their present compliance obligations. Employers with 50 or more employees, still have to offer health care coverage to at least 95 percent of full-time employees and properly report offers of coverage, so they are not penalized.
The team that wins this year's NCAA Final Four basketball tournament is most likely NOT going to be the team with the most talented INDIVIDUAL players. It's going to be the team with players that know their position, and trust their teammates to know their positions as well.
Successful businesses do the same thing. They would rather have a group of fundamentally sound people that can work with, and rely on, each other; than a business consisting of one or two super stars.
Assessments, like the DISC Behavioral Profile, help individuals verbalize their preferred manner of doing things to their co-workers. With that knowledge, businesses are able to get not only the right people on the bus, but get the right people in the correct seats on the bus.
Hiring a world-renown violinist does you know good if you put them in the trumpet section.
3 things to do before new overtime rules drop
Nothing's final yet, but employers shouldn't play the waiting game.
By: Ryan Golden
Published: March 14, 2019
It's been nearly 15 years since the U.S. Department of Labor (DOL) last updated its minimum salary threshold that dictates in part whether an employee is exempt from overtime under federal law — and despite a sign of movement last week, there's yet more waiting to do.
DOL's Mar. 7 announcement revealed that a new proposal is imminent, offering some clarity in the fallout of the Obama administration's attempt to change the rule in 2016. The Notice of Proposed Rulemaking (NPRM) will suggest a new overtime exemption threshold of $35,308 a year or about $679 a week — much less of a jump than the Obama-era $47,476 proposal. The rule hasn't yet been published in the Federal Register, and it will be subject to a 60-day public comment period once it is.
The agency has published an unofficial version of its NPRM, however, and while they don't expect drastic alterations, there's still a ways to go before a final rule is implemented. Alfred B. Robinson, shareholder at Ogletree Deakins and former acting administrator of DOL's Wage and Hour Division (WHD), said in an interview that he estimates the implementation date could be between the third and fourth quarters of 2019 — and that doesn't include any litigation that could be beset the new rule.
But experts also were clear that employers shouldn't play the waiting game; they listed several things for employers to place on their to-do list in the meantime.
#1: Start auditing (GPBG can do this for you!)
Under the new salary threshold, more than 1 million U.S. workers would be newly eligible for overtime pay, DOL said in its statement on the rule. Employers need to remember that the threshold isn't the sole arbiter of classification; workers also must a duties test to qualify for overtime exemption.
The rules exempt employees who (1) earn more than $35,308 and (2) work in specifically-defined executive, administrative, professional, computer and outside sales roles. Employers might consider auditing their pay practices with respect to both the Fair Labor Standards Act's salary test and its duties tests. "It is a really good time to conduct an audit of the job duties of the employees you're classifying as exempt," Tammy McCutchen, former WHD administrator and shareholder at Littler Mendelson, told HR Dive in an interview.
The duties test aspect is important, because there's a chance employers have misclassified some of the workers who make a salary above the current salary threshold, but whose job descriptions or day-to-day work may not actually pass a duties test. "I always tell employers to review their employment practices in this regard," David Miller, attorney at Bryant Miller Olive said in an emailed statement. "The hassle and cost of the review is insignificant compared to what they’ll pay in trouble and treasure if they’re sued — even if they win."
While it's not yet clear which industries will be most heavily impacted by the salary threshold increase, a 2016 WHD analysis of the Obama-era rule showed that education and health services, professional and business services, and financial activities sectors had the highest number of potentially affected workers.
#2: Decide how to handle pay increases
As the Obama-era rule approached its effective date, many employers raised base salaries for certain employees in order to put them over the new threshold. When the rule was enjoined at the 11th hour, experts warned employers and HR departments about rolling back those increases, for fear of hurting morale or worse.
The new proposal may prompt similar action, according to Miller, given the more modest increase put forward. "This is simplistic, of course, because there are other considerations that would go into that decision, such as the administrative burden of recordkeeping and calculations associated with overtime and employee morale," he said. "My expectation is that more employers will be willing to give the necessary raises to maintain the salary qualification under this rule than under the much more expensive and burdensome Obama proposal."
At the same time, the rule would allow employers to count "certain nondiscretionary bonuses and incentive payments" as up to 10% of an employee's salary when determining whether they're exempt. That's an important tool for employers, Robinson said, because the rule will count payments that are made annually. Under the Obama administration's rule, those payments had to be made quarterly or more frequently to be counted toward the threshold, he explained.
But there are other considerations employers and HR should make when assessing, on an individual basis, whether to raise a worker's wage or pay overtime, Myrna Maysonet, partner and chief diversity officer at Greenspoon Marder LLP, said in an interview. Now might be the time to evaluate whether an employers is truly paying competitive wages in its market, particularly if the business only operates within a specific region, state or city. "A lot of this stuff is market driven," Maysonet said. "What the market supports in Orlando may not be the same as what is supported elsewhere." Some states and cities also already have overtime thresholds that are higher than the new — and old, for that matter — DOL proposal. New York City, for example, has a threshold of $1,125 per week ($58,500 per year) for employees companies with 11 or more employees.
Maysonet suggested that employers and HR professionals might want to talk to in-house executives, accountants and department heads in charge of budgets before communicating any changes.
#3: Submit a comment
Until a rule takes effect, it's not yet final, sources stressed. But many encouraged employers to be involved in the upcoming public comment process.
"The whole point of notice and comment rulemaking is that it is exactly that," Susan Harthill, partner at Morgan Lewis and former deputy solicitor of labor for national operations at DOL, said in an interview. "I would encourage employers to participate in the process."
McCutchen made similar comments, noting that until a new rule is final, there's still a chance the Obama administration's enjoined rule can come back. "We need to keep up the pressure," she said. "We need to comment."
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Attention Leaders (Business Owners, Executives, Managers, Supervisors)!
Here's a brilliant tool for your toolbox. Super quick read, even quicker listen if you get the audio book. "The Way of the Shepard" by Dr. Kevin Leman and William Pentak.
Here's a fantastic summary of the book from Executive Coach and Organizational Consultant BG Allen:
1. Know the Condition of Your Flock
a. Follow the status of your people as well as the status of the work.
b. Get to know your flock, one sheep at a time.
c. Engage your people on a regular basis.
d. Keep your eyes and ears open, question, and follow through.
2. Discover the Shape of Your Sheep
a. Your choice of sheep can make flock management easier or harder.
b. Start with healthy sheep, or you’ll inherit someone else’s problems.
c. Know the SHAPE of your sheep to make sure they’re in the right fold.
3. Help Your Sheep Identify with You
a. Build trust with your followers by modeling authenticity, integrity, and compassion.
b. Set high standards of performance.
c. Relentlessly communicate your values and sense of mission.
d. Define the cause for your people and tell them where they fit in.
e. Remember that great leadership isn’t just professional; it’s personal.
4. Make Your Pasture a Safe Place
a. Keep your people well informed.
b. Infuse every position with importance.
c. Cull chronic instigators from the flock.
d. Regularly rotate the sheep to fresh pastures.
e. Reassure the sheep by staying visible.
f. Don’t give problems time to fester.
5. The Staff of Direction
a. Know where you’re going, get out in front, and keep your flock on the move.
b. When directing, use persuasion rather than coercion.
c. Give your people freedom of movement, but make sure they know where the fence line is. Don’t confuse boundaries with bridles!
d. When your people get in trouble, go and get them out.
e. Remind your people that failure isn’t fatal.
6. The Rod of Correction
a. Protect: Stand in the gap and fight for your sheep.
b. Correct: Approach discipline as a teaching opportunity.
c. Inspect: Regularly inquire about your people’s progress.
7. The Heart of the Shepherd
a. Great leadership is a lifestyle, not a technique.
b. Every day you have to decide who’s going to pay for your leadership—you or your people.
c. Most of all, have a heart for your sheep.
Medical Marijuana is becoming a reality in North Dakota in the not-so-distant future. An employer’s first place to start, regarding the Medical Marijuana issue, is a solid and consistent policy.
Good day fellow employers, HR Professionals, and life-long learners! Click the "read more" link to watch a webinar put on by glassdoor.com titled, "Culture Advice from Top Company Leaders." The webinar focuses on building alignment around company culture. Company leaders featured in the webinar:
JB Kellogg, CEO at Madwire
Lane Rankin, CEO at Illuminate Education
Cassie Whitlock, Director of HR at BambooHR
Scott Dobroski, Director of Corporate Communications at Glassdoor
Here is a super "clean" eBook on the 7 Drivers of Employee Engagement. Short and to the point. They say those 7 drivers of engagement are:
Here's the full eBook, enjoy!
ebook_7_Drivers_EngagementHere's a sweet infographic (which I did not even know was a word until this morning) show a timeline regarding Performance Reviews. Very interesting. Props to BambooHR.
PerformanceReviewMisperceptions