In previous columns, I shared some of how John Gagliano used key performance indicators (KPIs) to build a business that included more than a dozen Collex Collision Experts shops that he was able to sell in 2014 for about $45 million. Here are a final few key takeaways from what John told me about using KPIs to build and manage his business.
Use KPIs to monitor receivables. John said one of the powerful things about KPIs is they help you pinpoint where in the business there’s a problem that needs to be addressed immediately.
“We tracked our receivables at each location, and if we had a shop where the receivables exceeded 45 or 60 days, we knew there was something going on,” John cited as one example. “It generally meant there was a problem with the way those guys were closing the repair orders, such as closing jobs without authorization from an insurance company.”
Without tracking and monitoring KPIs, he said, you might know at month-end there was a problem with profitability or cash flow at that location. But it might take you time to determine it was a receivables issue – rather than some other cause – that you needed to address.
Use KPIs to give real-time feedback. John said KPIs are ideal for managing millenials and other workers who thrive on regular feedback. He cited his own recent experience at a gym as an example of how younger generations are more attuned to real-time data. A guy on the next machine over at the gym asked John what his heartbeat was, and John was initially baffled.
“For my generation, how we are doing at the gym is based on sweat,” John said, laughing. “Now there are monitors tracking distance, time, calories burned and heart rate. All I really had to do was look down to see all that on the machine.”
KPIs give those feedback-hungry workers the real-time inputs they crave, just as a Fitbit gives a runner data on how they are doing.
“If you’re not measuring and reporting anything until the end of the month, there’s no way you can give correct feedback,” John said. “You may tell somebody they’re doing a good job when, if you looked at the real-time numbers, they’re really not. They could be your lowest producer or your biggest customer complaint generator.”
KPIs give employees ongoing feedback even when you’re not there to do it, John said, and help you point to what they’re doing well and in what areas they can improve.
Use KPIs to manage your time leading the business. Whether you have one shop or a dozen, one thing doesn’t change: The number of hours you have in the day.
“Your time is limited, so KPIs help you answer the question: Where should I put my time today,” John said. “They helped me know: I need to work with this particular location on its cycle time, or accounts receivable, or whatever the numbers show needs work.”
That is where the sophisticated electronic KPI dashboard John built for his business proved invaluable. He could see, for example, that one of his shops wasn’t hitting its production numbers. But before jumping to address that, he could use that dashboard to quickly dig into the numbers in order to see, for example, that perhaps that particular location was down because a technician was on vacation. Knowing that, he could spend his time on more pressing or “unexplained” numbers within the KPIs.
Use KPIs rather than looking for a silver bullet. John said he built Collex Collision primarily by buying existing shops, not building new ones. Seeing the lack of skilled use of KPIs in many of the businesses he bought reinforced his understanding of their power.
“Almost every single one of the owners whose shops we bought had just kept looking for that silver bullet to fix his business,” John said. “Really, the solution is usually a bunch of little things – not one big thing – done right. That’s what gives you the right results. We didn’t come in with a silver bullet. We used KPIs to locate the little things that needed to be addressed.”
