Why I hate KPIsI hate KPIs because business owners and corporates slavishly apply them. They should be measured but hidden away from sight. Applying them to measure an individual’s performance just builds resentment.
The unfortunate thing is all business owners have legislated KPIs. Let’s just look at one; hourly cost rate. The primary legislation setting hourly cost rate KPIs is the Fair Work Act 2009.
The Fair Work Act cites 10 legislated National Employment Standards (NES). These minimum standards are mandatory for employees regardless of industry, business size or unique circumstance. They protect the minimum entitlements of employees working in Australia regardless of their award, registered agreement or employment contract.
Basically a studio owner has to pay a fair wage ($882.80 per week in 2023) for a legislated max working week of 38 hours. That’s a legislated KPI on hourly cost rates.
Divide one into the other and you get an hourly cost rate of $23.23. This is a KPI for a studio owner. No matter what work comes through the door studio owners are mandated to pay this hourly rate.
Calculate this with a 70% productivity (billed back to the client) factor, the cost to the studio owner is $33.20 per hour.
Add employee on-costs (software, computer etc) and you get to $43.20 per hour.
Remember this is for a junior employee.
A senior designer will cost $90 per hour when you account for their salary.
These are KPIs applied to a studio owner through legislation and employment market forces.
KPIs are vital to run a profitable business.
This is where it gets tricky. Designers hate being measured and studio owners hate doing the measuring.
And I think both are right. Well almost right.
You can help designers grow by adopting a different approach with KPIs.
KPIs can identify issues beyond designer productivity. Perhaps there isn’t enough work for them to meet the KPI. Perhaps you have brought in work beyond their experience or skill. Perhaps you haven’t upskilled them sufficiently. Perhaps you are not briefing them properly. Perhaps they don’t have the skills. Perhaps the access to information stalls them in producing good work. There are many more reasons.
The basic design studio hourly rate KPI is 70% billable back to clients. If you have set a good price for your services and bill 70% you will have a profitable studio. You don’t have to make this known to the designers.
Get good studio management software. For example in a program such as Streamtime designers are not aware of the KPIs you set. They are allocated blocks of time in a scheduler. As the job is completed they drag the job below the line. This automatically records the designers time and the job timing. You can use this to run weekly or monthly reports on productivity. If it’s below 70% you ask the questions above.
Use the knowledge to help the designer reach their KPI but don’t tell them it’s a KPI.
KPIs are essential to set and measure business performance. They shouldn’t be used to measure individual performance. You can increase individual performance by working with the designer to help them improve productivity.
Contact me if you would like to learn more about KPIs or join our Benchmarking Roundtables.
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Greg Branson
Greg’s passion is the research and development of methods that improve design management and the role of design in business.
Greg has developed The Design Business School to help owners manage their business better along with showing designers how to get more involved in the studio and develop their career path. Contact Greg.
