Measure, Evaluate, Correct
“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”
—H. James Harrington
CEDIA’s July Survival of The Fittest Webinar, facilitated by industry expert Todd Adams (DIpartner, Vero Beach, Flor.), covered key performance indicators. The objective of this Webinar was fairly simple: provide a brief overview of measuring organizational performance while providing a core foundation of metrics to build on.
The fundamentals of any performance measurement system are based on three simple questions: Where are we? Where did we plan to be? How do we get back on track? With these questions, organization and project leaders can monitor and control performance in a relatively simple manner.
However, they need to know what to measure before they actually evaluate and correct. For the electronic systems contractor, Adams suggests four key performance indicators as the foundation for the measurement system: billable hours per month, cost per hour, team hours per month and gross profit per hour.
Billable hours are those hours that can be billed to a customer each month (as opposed to non-billable hours, such as staff meetings). Each employee represents a group of billable hours to sell each month. An ESC company must know the total amount of billable hours that are available to sell each month to customers. Start with the total clock hours in a year, deduct vacation and holiday hours, then deduct a percentage of non-billable time (varies by company, but Adams suggests starting with a benchmark of 26 percent and then monitoring each employee to determine an appropriate threshold for your organization). This calculation yields the total billable hours for the year. Divide that by 12 months and you’ll have the billable hours per month.