Welcome to Kanselor University where we teach business owners how to build profitable and sustainable businesses. Today, I want to talk about a tool that you can use to expose the staff that are taking value away from your organisation. That tool is called KPI Key performance indicator.
I recently was invited by a client who wanted to find out why his business had been going down despite the fact that he had one of the best set of staff. When I came in, I asked him why he felt his staff were the best. He told me that they are always friendly and hardworking. I asked him what was his yardstick for measuring their level of productivity and he said he had none.
Now the yardstick I mean was what where the indicators he used to measure their performance. I wanted to know what HARDWORK meant to his business and if it equated to one of the factors that make businesses profitable and sustainable.
We established that for his business to breakeven, he needed to generate a monthly revenue of ten million. We then established that to consider a staff as hardworking, he or she must contribute at least 10% to the breakeven revenue figure of the company.
We then calculated how much each of the "HARDWORKING STAFF" he had, had been contributing and he was shocked to discover that the one he regarded as the best among them contributed less than 0.5% to the key monthly target.
It was then that it dawned on him that what his staff were doing was to become very friendly and pretend to be hardworking whenever he was around but did practically nothing when he was not there. We then established KPI KEY PERFORMANCE INDICATORS for each position in his company.
What this meant was that even if a staff washes the Business owner's car but failed to hit his metrics based on the KPI set for him, his salary was slashed. He was amazed at how people he used to think were hardworking suddenly exposed themselves as grossly incompetent and had to be fired.
KPI helps you weed out poor performers who are great actors. People who are sucking out the life from your business in terms of salary but will always give you wonderful excuse for doing nothing and will always be very busy whenever you are around. Every company that wants to become profitable and sustainable must establish clear KPI for every position in their organisation.
And no matter how nice a staff is, the yardstick for classifying him or her as a good staff must be the KPI set for his position. One KPI every staff must have is number of customer they interfaced with and contribution to Sales growth or Cost decrease.
Contact us if you need assistance with designing a KPI for your business. 08023622171