Most shop owners are familiar with key performance indicators (KPIs) because of those that have been handed to them by other organizations. Insurance companies, for example, have long told shops things like, “We’re measuring your performance based on cycle time, severity and on-time repairs.” Many automakers are adding KPIs to their shop certification programs, perhaps telling shops, “We’re going to be watching your level of OEM parts use, and customer satisfaction.”
If the organizations you have aligned your business with have KPIs they measure, those clearly are numbers you will want to track. But I would argue it’s every bit as important for shop owners and managers to establish their own KPIs, the measurements that are most important to their specific business.
No insurer or automaker, for example, likely cares which of your company’s marketing efforts are paying off in increased business. But knowing that could be very important to you. Insurers and automakers aren’t tracking what your profit is on paint and materials, but that’s likely a critical KPI for your business. An overall CSI number might be sufficient measurement for the insurers or automakers you’re aligned with, but perhaps it would be more helpful to you to also know specifically what percentage of jobs result in a come-back.
In short, you need KPIs that enable you to measure your ability to set and achieve business goals, KPIs that help you measure the real results of your business activity.
But too often I see small businesses making decisions based more on assumptions rather than valid numbers. You need real data to know exactly how you are doing and to understand the impact of your decisions.
KPI management is the process of establishing, monitoring and analyzing specific business performance numbers to understand the level of success you are achieving to reach your objectives.
Over the course of several upcoming columns, I’m going to share how I’ve seen collision repair businesses – large and small – fix and enhance their business performance by the numbers. This won’t just be “theory.” The collision business owners themselves will explain how they used KPIs to ferret out business problems, improve performance and build the value of their business.
By way of introduction, however, I want to first outline three best practices that I suggest you follow when using KPIs to fix your business’ performance “by the numbers.”
First, make sure the KPIs you use are aligned with your current business goals. Why actively monitor the make and models of vehicles you repair if that’s not directly tied to your primary goal of, say, improving profits or productivity? Figure out which KPIs are likely to have the most impact on the goals you want to achieve, and make those the numbers you track and work to improve.
Second, use your specific business goals to narrow the list of KPIs you track to avoid data overload. Some people track way too much information, and they can’t decipher what’s really important and what it really means. Vehicle dashboards have become increasingly complex, but think about how they still generally highlight the information drivers most regularly need to know, such as vehicle speed and fuel levels. Similarly, you should have a KPI “dashboard” you can look at regularly to help you focus on the areas where you are under-performing.
Third, ensure the goals you set for your KPIs are achievable. Be realistic. Make it a stretch, but still doable. Maybe your longer-term goal is a fairly large change in a number, but set smaller, shorter-term milestones that can add up over time. This is especially important if you are sharing KPI goals with your management team or the entire organization. You don’t want them to think, “That’s not achievable. We’ll never get there.” Establishing unrealistic KPI goals can be as detrimental to your business as not establishing any at all.