Key Performance Indicators (KPIs) are measurable values that allow you to demonstrate how effective your firm is in achieving business objectives that have been outlined by company leadership or within different business groups. They help measure the success of the company in various areas and often align with strategic objectives.
Increase Your Firm’s Profitability
The process of tracking certain metrics delivers many benefits to your architecture and engineering (A&E) business. For example, it allows firm leaders to have a shared understanding of what's happening across the company. When sharing your top KPIs across your leadership team, those leaders can start to understand how one metric impacts another and how their part of the business can directly impact another business unit’s or team’s success. Identifying key metrics and targets gives your firm a shared understanding of what your goals are for the year and beyond. In addition, by monitoring the numbers, you have a clear and consistent way to evaluate your firm’s performance. Keep in mind, there isn’t one metric that determines the health or success of the firm, but often the combination of KPIs will give you visibility into the health of the business overall.
KPIs allow you to do a check-in to see if all aspects of the business are performing as expected. When you share those numbers on a regular basis with key stakeholders across the business, the right people will have sight into trends and changes. This is especially important when unexpected changes occur, as it will give your leaders the time to course correct before it's too late.
Set Your Firm up for Success by Tracking the Right KPIs
The KPIs to track depend on the goals and objectives for your firm. Concentrate on which metrics best align to your business strategy and the top indicators that really can help make a difference in your business. To start, think about the specific goals that your company has set for this year. There are likely different goals in different areas of the business, like financial management, project management and human resources. Determine what success looks like and how you are going to measure whether your firm is reaching that goal or at least making the right progress towards the goal.
Once you have a set of goals, you need to monitor those metrics on a regular basis and use that information to have candid conversations with stakeholders that can help drive change. Many firms see and track some key standard KPIs on monthly financial reports, but it’s important not only to track the metrics, but to understand what is impacting the number. The data is only the data, but what you do with that data is where you start to learn, and that's where it really matters.
Keep in mind, there isn't a set timeline to review and monitor all of your KPIs. In fact, it's going to vary from KPI to KPI in some cases. As you determine the right metrics for your firm, you need to think about the right frequency to review the numbers. For example, if you're looking at average collection period, that's probably not something you want to monitor on a weekly basis for the entire company or for your leadership team. If you are trying to determine trends, it may be more helpful to look at that number on a monthly basis for a quick check, and then take a deeper dive on a quarterly basis. You can't find trends and potential issues if you're not looking at them on a consistent basis.
Next, you have to make sure you're balancing your KPIs. Each of your goals impact each other and there are trade-offs. For example, having a really high staff utilization target does not make it easy to encourage better work-life balance or more professional development. Conversations will need to occur, and some concessions may be necessary between firm leaders. You may also want to make sure that your goals and initiatives don't contradict each other, but support each other to reach the overarching goals of the firm.
Keep Your KPIs in Check by Leveraging Industry Benchmarks
Project profitability is a metric that firms often look at, but how does your company’s profitability compare to other similar companies in the industry? Are your goals realistic for a firm of your size in your industry? One way to find out is through an external source for benchmarking.
Benchmarking allows you to see if your targets are in line with industry targets. If you want to strive to be a high performer, for example, you can look at historical data and see are if you are setting a reasonable target or are stretching your goal too far.
The Deltek Clarity Architecture & Engineering Industry Study is one of the longest running and most in-depth studies in the industry focused on benchmarks. The study includes sections on financial management, business development, project management, human capital management and technology trends, giving insight into what's happening across the United States and Canada, while providing specific metrics in each of those different areas of the business. The Deltek Clarity report shows the industry average, the year-over-year change as well as 10-year trends. The metrics are broken down by small, medium and large firms as well as by architect vs. engineer, because we know that how you manage your business and the types of projects you deliver as an architect versus an engineer may have an impact on your metrics. We want you to find the metric that's best aligned to your business to help you set the right target to achieve your goals.
There are a lot of metrics that you can track, but if you want to be successful in your company, you need to focus on KPIs. Those metrics are the ones that are really going help drive your business forward.
