CivicActions tracks and presents company-wide Key Performance Indicators (KPIs) at each monthly All Humans Call (AHC).
Definition of terms
- Key Performance Indicator (KPI): A numerical and measurable signal that demonstrates the health of the organization. It indicates how effective we are at achieving key business objectives.
- Current Ratio: A comparison of total liabilities (e.g. short-term expenses and vendor payments) with cash on hand and short term money (e.g. accounts receivables). This data is converted into the ratio with a target number (for example, 1.5 or higher). A higher current ratio value is safer, but it could also mean there are missed opportunities in using the assets. Quickbooks provides this data. Current ratio = Total liabilities / (Cash on hand + Short term money)
- Debt-to-Equity Ratio: A comparison of the total of assets and debt. The debt-to-equity ratio is similar to the current ratio, but it factors in a long term money ratio instead. Quickbooks also provides this data. Debt to equity ratio = Total assets / Total debt
- Profitability Percent: A percentage that takes all expenses into account, where the expenses are subtracted from all revenues earned during a period. This number is calculated on an accrual basis. The money calculated is based only on the money earned and expensed each month — it does not factor in previous or future revenue or expenses. The healthy profitability target for professional services industries is typically 20%, but it can be adjusted lower if there is a decision to increase investment elsewhere in the company. An example of an investment is the decision to hire before landing new work. Profitability percent = (Revenue - Expenses) / Total expenses
- Net Labor Multiplier (NLM): A comparison of the base salaries of our delivery team members and how much revenue their work is generating for the company. The total company NLM is calculated by dividing the monthly payroll base (US, Canada, Contractors) by the monthly revenue for those team members' work. Insurance, benefits, taxes, etc. are not factored into the payroll base. The industry standard NLM is 3.0. It is affected by utilization percent and base salaries for delivery team and billing rates. Net labor multiplier = Total revenue / Total base salaries
- Utilization Percent (Delivery): The percentage of a delivery team's average time that is billable. A typical industry standard target is 80% utilization. This data is pulled from Unanet and filtered by the "delivery" team members into a report. The delivery team members' utilization is averaged to compare to the target percentage. It is expected that some delivery team groups' utilization will be higher and some will be lower, with the anticipated goal that it evens out to the target. Also, certain individuals in the delivery team may have higher and lower targets due to other objectives they may have, or other roles they play in the company. Utilization percent = Billable time / Total time
- Utilization Percent (Company-wide): The percentage of the whole company's time that should be billable. The industry standard target is 60% utilization. Unanet provides this data and includes all team members (billable and non-billable). The delivery team and non-billable team members utilization is averaged to compare to the target percentage. Utilization percent = Billable time / Total time
- Overall Health Score: A score of red, yellow, or green indicated by the CEO each month after the six KPIs are calculated.
- Profit and Loss (P&L): A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period.
How the KPI data may be used
The monthly KPIs provide high level health indicators. They could raise a red flag or show that things are stable. These temperature checks with the data may trigger conversations to help determine what might need to be shifted. These KPIs are also used in conversations throughout company service areas as a basis for business plans (to know if a part of the business is doing well).
How to read the data
- All KPIs have a target value. This value can change from month-to-month, but typically stays consistent throughout the year.
- A data point above the target line indicates that the KPI is aligned with or above the target. This is the highest level of KPI health.
- A data point below the target indicates that the KPI is trending towards or away from the healthiest level.
- The charts also often display the previous year's data as a comparison for historical reference.