How Healthy is Your Business? (Part 2)

Monday, September 30, 2013 by Rainer Stropek

In the first part of this article I covered general information and tips for KPI systems. In the second part I list examples for KPIs that are related to a project time tracking product like time cockpit. If you are a service company and you think about KPIs, I hope this list can inspire you during brainstorming about KPIs relevant for your business.

Types of KPIs

Absolute Numbers

You can express KPIs as absolute numbers. Examples:

  • Revenue
  • Number of employees in customer support
  • Number of outstanding vacation days

Note that absolute numbers are sometimes hard to understand for people who are not 100% familiar with the context. Imagine someone tells you about a revenue of 150k€ in the last quarter. Without knowing the history of the company, the branch, its plans, etc. you cannot tell whether this number is good or not. Therefore you should consider using ratios instead of absolute numbers.


A ratio expresses a relationship – typically a quotient – between two numbers. Examples:

  • Number of part-time in relation to full-time employees
  • Billable compared to overall working hours

In KPI systems you can distinguish three different types of ratios:

  1. Structural performance indicators
    How much is X compared to the whole (e.g. management working hours compared to overall working hours)
  2. Relational performance indicators
    Put two performance indicators into relation (e.g. gross margin in % of total revenue)
  3. Index figures
    Compare performance indicator over time (e.g. consumer price index, change of revenue in % of last year’s revenue)

Examples for Project Time Tracking Related KPIs

Lagging Indicators

Lagging indicators express the performance ex post. It is the market's feedback on how your company is performing.

  • Financial indicators like revenue, gross margin, profit, employee benefit or labor costs
    If your business mainly consists of consulting work, you will be able to get many financial KPIs from your time tracking system. You calculate your revenue mainly based on billable hours and/or project prices, you calculate a large fraction of your costs based on working and/or overtime hours, etc. In some cases it might make sense to express your financial indicators using structural indicators (e.g. revenue per business unit, gross profit per project, benefits in % of overall labor costs, % of profitably completed projects) or relational indicators (e.g. average revenue per FTE, average revenue per working hour, average benefit per employee). Examples for financial indicators:
    • Revenue
    • Gross margin
    • Profit
    • Employee benefits
    • Overtime payments
    • Labor costs
  • Number of employees
    When speaking about the number of employees, you should always make it clear if you speak about headcount or FTEs. 
  • KPIs related to working hours
    The absolute number of working hours is seldom used directly as a KPI. It is typically set into relation to other performance indicators. Examples:
    • Revenue / billable hours = average hourly rate
    • Overall labor costs / billable hours = average hourly cost rate
    • Billable hours / available or effective hours = billable utilization in %
    • Project management hours / overall project working hours = project management overhead in %

The average hourly rate is typically an important KPI for service companies. Many service companies try to raise profitability by being able to charge more for each billable hour or reduce the labor costs associated with each billing hour. If this topic is on the top of your head, we recommend reading David Maister's Managing the Professional Service Firm. He calls the topic the underdelegation problem. The idea is to let more "trained juniors handle that part of the project they can do with quality". Examples for related KPIs are the ratio of experienced (expensive) senior consultants to (less expensive) junior consultants or the average staff-per-partner-ratio.

Leading Indicators

  • Overtime hours
    Some companies use overtime hours (e.g. maximum overtime hours of a single employee, average overtime hours per employee, number of violations of rest hours) as an indicator for employee satisfaction. They assume that a constantly high rage of overtime hours per employee leads to lowered motivation.

This KPI could be used as an indicator for employee satisfaction. However, you should be careful when implying that many overtime hours must unconditionally lead to less satisfied employees. Studies show that a certain stress level does not always need to be negative or unhealthful. If this topic is of special interest for you, we recommend watching Kelly McGonigal’s excellent TED talk on how to make stress your friend.

  • Absenteeism
    Like overtime hours, performance indicators concerning absenteeism are sometimes used to measure motivation of employees. You could put absenteeism into relation to other performance indicators. Examples:
    • Cost by planned absenteeism
    • Cost by unplanned absenteeism
    • Short-term absent day / overall absent days = short-term absence rate

This KPI should be measured with great care. Absenteeism can have different reasons ranging from illness over lifestyle factors to motivation. Interested readers will find many studies and reports dealing with this topic (e.g. Workplace Attendance and Absenteeism). In our opinion absence rate KPIs must not be used to compare performance of individual employees. However, measured for the entire company, a noticeable raise could be an early warning sign for lowered work ethic or unsatisfied employees. See also Bradford Factor.

  • Vacation KPIs
    Healthy and fit employees are important for every company. Vacation-related KPIs like open vacation days per FTE could be a possible KPI in this area.
  • KPIs related to working hours
  • Working hours dedicated to certain tasks (e.g. training, travelling, customer support) can be used as leading indicators. If you know e.g. that the knowledge of employees is crucial for customer satisfaction and your goal is to increase it, training hours could be a possible KPI. Examples:
    • Time (absolute, percentage, or average) spent on training (e.g. preparation, participation in trainings, etc.)
    • Time spent for customer support (e.g. average support time per support case, by level (first level, second level), etc.)
    • Productive time vs. supporting activities (e.g. travel, administration, preparation, etc.)
  • Permanent employees vs. contractors
    Especially in turbulent economic times, companies have to prepare for sudden decline in the number of active projects. Putting permanent employees into relation with temporary employees or external contractors (e.g. freelancers) can be an indication about how well prepared a company is for ad-hoc or cyclical business variations. Examples:
    • Hours performed by contractors in % of total work hours
    • Contractor FTEs in relation to internal, permanent FTEs
    • Number of projects with external contractors
  • Project portfolio KPIs
    Structural KPIs can help management to keep an overview about the areas where time is spent. Examples:
    • Working hours for internal, non-billable projects in relation to working hours for external, billable projects
    • Working hours for R&D in relation to working hours in customer projects
    • Working hours for pre-sales support in relation to overall engineering hours
    • Working hours for documentation in relation to overall project hours
    • Time spent for publications, conference speeches in relation to overall project hours
  • Travel and environment-related KPIs
    KPIs about traveling are becoming more important in our experience. On the one hand, they are used to monitor and manage companies' carbon footprints. On the other hand, many companies assume that intensive traveling is disliked by employees because of e.g. higher risk of accidents, less time for family, etc. Examples:
    • Average travel time per FTE
    • Average travel distance per FTE
    • Average travel distance per means of transport (e.g. air travel)
    • Travel distance with company vehicles in % to overall travel distance (fleet utilization)
  • Project management KPIs
    Project management KPIs, especially those related to the adherence to schedules, are indicators for customer satisfaction. Examples:
    • Number (absolute, percentage, or average) of projects completed in time/budget (adherence to schedule)
    • Average overdue time of work items
    • Average length of projects
    • Ratio of project reports in need of correction because of wrong or missing time sheet entries
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