Few things are as important to your business as what you decide to measure — your Key Performance Indicators, or KPIs. For what you measure, you can improve. That adage comes with a corollary: What you fail to measure, you are less likely to improve and in fact, have no idea about.
The term KPI is just business shorthand for something you're keeping an eye on to see how well you're doing. The subject could be your business, your team, or even your own good self. It's a measure of performance over time toward a specific objective.
Informally, we all use them. You might say to yourself, "That's the third person who's mentioned how cool I look in this shirt. I should wear this more often." In this case, looking good is the goal, and you had three separate positive indicators, which you tracked. You are taking action based on your measured KPIs, hoping to boost your performance even further.
The formal use of KPIs, however, can be much more insightful and powerful. It's a systematic and focused approach, and it can make a meaningful difference to a company by driving behaviors and decisions that lead to greater profitability.
Let's start with the No. 1 KPI all businesses formally measure: cash flow into its bank account. That's a good one! An important one. But it's just a starting point. When that KPI starts to surge or wane, you need to know why. Other KPIs can give you that vital information and tell you many things about your business, such as which products or services are the most profitable (sometimes, it's not the ones you think), which employees are most valuable (same) and which systems may need to be reimagined.
At AQUA Live Spring Training in Chicago, a group of thoughtful, successful pool and spa business leaders got together to discuss what KPIs they use and why. Their answers formed a good analytical foundation for Building a Better Business.
CASH FLOW
Everyone keeps an eye on how much money they have, but digging deeper into the numbers through financial KPIs can produce valuable insights. Mallory Bjekich-Wachowski works at All Seasons Pools & Spas in Chicago and provides consulting through Toolbox for Excellence, where she helps company directors develop a set of productive KPIs.
"Typically, I'm working with a manager, possibly an owner, and usually they are looking at daily average sales in July or June — what they're selling versus their overall goal. They have that target for a month based on their yearly goal. That is a pretty common KPI.
"It's super helpful to break that KPI down to a granular level. So we are trying to make an extra $10,000 this month — well, where does that come from? Some of it will come from chemicals.
"The idea is to turn a big sales goal into something you can achieve. It's really hard to communicate to a staff of 18-year-olds that our goal this month is to sell an extra $10,000. But if you can tell them, we need to sell 10 more buckets of borates this month, 10 more buckets of shock, 10 more buckets of phosphate remover, and you'll get a bonus if you do, they can understand that. And with a financial incentive on top, they can do it."
A prominent member of the panel and a leading thinker on KPIs and business leadership in the industry is Dennis Marunde, president at Arvidson Pools & Spas with three locations in suburban Chicago. Dennis uses a variety of cash flow KPIs that compare cash flow history for any given time period in the company, going back 10 years, and "that can help to make you more profitable simply by comparing yourself now to what you've done in the past, but it helps in other ways you might not think of.
"For instance, working with your bank. The more I know about my financials and the more I can express to the bank my understanding of or command of those financials and the different types of profitability measurements that they're looking for, which is another type of KPI, the more confident they are in us. And believe it or not, that has an impact on your interest rate and your ability to obtain financing when you need it."
What's important, Mallory says, is to get started. "I think the goal for most companies is to start somewhere with one, or maybe two KPIs in each department and look at something because if you don't have a direction to where you're going, if you don't have a target, how do you know if you are reaching it or if you're even making progress?"
"You don't, because you kind of get lost in the day to day."
A KPI driving 5-star reviews provides double the company benefits.
OUR FAVORITE KPIS
5-STAR REVIEWS
The point of KPIs is to affect change — to produce alterations in behavior that will help the company make more money. A big part of that is motivating employees.
Dennis has selected 5-star reviews as a good, simple, easy-to-track KPI that will have a meaningful impact on Arvidsons. By measuring it and rewarding it, Arvidsons has gotten more 5-star ratings, and improved not only the company's customer service, but also the wider perception of it throughout the community. That's two big wins.
It works because the possibility of success and reward is always present in the work day, he says. "When you're looking at influencing employees, timing is so important. Your employees are going to lose focus if your incentives are all based on an annual project or result. It's best if they are as immediate as possible. Most things happen on a monthly basis, but some things happen immediately. The 5-star review KPI is a good one because it serves as a constant reminder of what we're trying to achieve."
Arvidsons also sends out customer surveys and tracks those results through a customer survey company (GuildQuality.com), which provides regular reports.
TECH BILLABLE HOURS
"That's a big one for us," says Renee Huston, co-owner of Patio Pleasures. "Tech billable hours — we compare the invoiced hours from customers to our employee payroll hours, and then we factor in drive time, some shop time and some downtime. It really helps us get a sense of, 'Okay, are we staying busy?' Looking at that tells us if we're being efficient with our day, which is important because there's such a huge expense tied to the service department. That's just the nature of the beast right now.
"Our goal, especially during the peak season, is to reach 80% billable hours. Obviously during the fall and winter months, that dips down, and we're more like 50% to 60%, but tracking this KPI makes everyone more aware of their time. It answers the question: 'Am I utilizing my time well?"
A fleet gas bill spike should prompt further investigation.
FLEET FUEL BILL (SIMPLE, FAST AND EFFECTIVE)
"A good KPI that's quick and easy to use for a snapshot during the year is just my gas bill," says Jane Merritt of Anchor Pools. "I look at that compared to the trucks and revenue. I'll just take a quick 5-minute look, especially during the season.
"Maybe I look at that and say, 'Okay. Everything's kind of in line.'
"Or maybe I look at that and say, 'Oh crap, I need to really delve into this and figure out what's going on.'"
YEAR-ON-YEAR SALES
"I look at weekly trends, year over year, on where we're at with service equipment sales," says Steve Smith, sales manager at All Seasons. "That's a good KPI for us. I look at sales compared to our history, to see if we need to activate maybe a special campaign for heaters or for pumps."
"Our guys sell in the field if the opportunity's there, and I can share the numbers with them to keep them motivated. I try to do it in a positive way: "If we're down, we're down, let's get better. And if we're up, that's great, let's keep pushing."
The effect of missing crew members at the jobsite is tangible and profound. Tracking attendance as a KPI helps everyone understand what's at stake.
ATTENDANCE
This is probably the thorniest KPI of all, for obvious reasons, and especially for service and construction as compared to retail, where covering for a missing team member can be easier. Still, tracking attendance and tardiness, as Arvidsons did recently, has produced valuable insights and even benefits. Dennis recounts the impact:
"It was eye opening. Tracking that showed us what happens to your productivity when a service tech is gone or somebody doesn't show up for construction. Usually it's a good half hour at least trying to reconfigure how the crew's going to look that day and all that sort of stuff.
"We found that at the start of the season, we were at 83% perfect attendance. (Perfect attendance means being where you're supposed to be, on time, according to the schedule. And we reward employees for each month of perfect attendance with a gift card.) By the end of the year, even though the incentives were still in place, we'd gone from 83% to 39% perfect attendance.
"We know attendance impacts our performance, so that gave us an opportunity to have discussions: Why did this happen? Is that burnout? Why are we getting lax? What is this doing to our overall performance? Because it's important for employees to know: If you were off, you caused somebody else a problem, and it cost somebody else time. We're processing the data on attendance and still trying to figure out — how do we improve our overall execution by working on attendance?"
It's tough to address any employee using a lot of sick days, but the attendance KPI creates awareness and the opportunity for discussion which gives the manager the opportunity to explain what happens when a part of the team is missing.
"I think the sick day issue is probably everyone's hardest one," Mallory adds, "but just drawing attention to it and measuring it with a KPI helps. It gives you an opportunity to just have that conversation with an employee or even with a manager and say, 'Hey, we don't know what the solution is for you, but this directly correlates with our productivity.'"
INDIVIDUAL SALES, WITH INCENTIVES
"Individual KPIs really open your eyes to where training is needed," says Tom Sekulski from All Seasons. "You find some people that are producing double what others are with not a whole lot of difference in experience. And that also gives you the tool to be able to incentivize and to come up with some bonus programs. So say their goal was to sell $30,000 worth of stuff this year. If they sold 10% more than that, they would get basically a 10% bonus on commission.
"I would give them weekly updates on their sales. As we got towards the end of the month, people would inquire daily where they were, and they would hustle and bring up our programs with customers more, even with the customers that already told them no, and they'd be closing more sales. It was big for the store.
"In the end, they were just having way more conversations about programs with customers, and it became more of a habit. I'm sure a lot of it was about the money, but it wasn't always because there were some months where it was maybe October or something and their bonus would've been about 50 bucks, but it was hitting that goal and being more involved that motivated them. Having access to those numbers and being able to watch progress was new and exciting for them."
IT'S FAIRLY SIMPLE, BUT NOT EASY
KPIs make a big difference in a manager's decision-making confidence and ability to communicate to employees. It's the difference between hard data in hand and a feeling or impression. Both may be correct, but numbers make the point in a powerful way.
At the same time, the mere act of target setting and performance tracking changes the managerial mindset, and literally opens new vistas on one's business from a vantage point that is simply inaccessible by any other means.
If you're new to this approach, start by figuring out what's important and using that to choose your KPIs, because there are different categories of KPIs with completely different goals. For instance you can have operational KPIs or incentive-based KPIs or KPIs that help with managing employees.
In our industry, there are plenty of small pool and spa company managers who measure nothing but the level of cash in the company bank account. And there's a reason for that. It's so much easier.
"Measuring and tracking all that data. It's totally worth it, but it's not easy," Dennis says.
Renee laughed at that. "When I look at our KPIs, sometimes I get kickback from my team. They're like, 'This is a full-time job, just cracking all this data!' It can feel that way sometimes, but it's important, so we do it."
This article first appeared in the October 2024 issue of AQUA Magazine — the top resource for retailers, builders and service pros in the pool and spa industry. Subscriptions to the print magazine are free to all industry professionals. Click here to subscribe.
