Key performance measures (KPIs) are vital in measuring an electrical contractor’s present and future success and go beyond just looking at how much money the company is making. On the second day of NECA 2021, Dan Doyan, director at Maxim Consulting Group, and Greg Padalecki, master electrician and president of Alterman, Inc., lead a presentation called “Key Performance Measures – Increasing Margin and Reducing Risk” on how KPI measurements can be improved upon or implemented for electrical contractors and why.
First, Doyan defines a KPI as a metric that can be used to define and measure success or failure. “It’s information that you probably already have and just may not have correlated it together to find trends or compared yourself to peers in the industry,” he says. Additionally, there are both leading indicators that allow an organization to forecast its success or failure, while lagging indicators reveal history and can lead to better projections.
Next, Doyan explains that KPIs can be measured across all the sectors of an organization including business development, estimating, prefabrication, purchasing, operations, equipment, and job cost and financial controls. In fact, he says there are over 80 kinds of KPIs ranging in complexity from low, medium, to high.
While it’s impossible to incorporate each one of these metrics into a company, Doyan and Padalecki share examples of mostly low-complexity KPIs within the various departments of an electrical contracting company that can be easily implemented and help ECs gain a better understand of what is working and what is not. Some of the examples they provide are:
- Total sales: A low-complexity business development KPI that can be measured and defined as the total dollar amount of sales over a period.
- Cost-per-estimate: A low-complexity estimating KPI that is calculated by the sum of all costs divided by the number of estimates.
- Throughput time by assembly unit: A medium-complexity prefabrication KPI that measures the sum of a company’s processing time, QA inspection time, move time, and queue time).
- Office-to-field ratio: A low-complexity operations KPI that measures the number of office employees to field employees.
- Utilization percentage: A medium-complexity equipment KPI that calculates the percentage of workdays that equipment is used out of total workdays.
Utilizing these KPIs and others can allow ECs to better predict or show their success compared to a set of objectives and enables companies to see trends over time and measure performance. “KPIs define things so we can consistently talk about them,” Padalecki concludes.
