Better decisions, better business

Your biggest expense is your payroll. And your most unforgiving payees are your employees. If you miss  payroll or make partial payment to staff, there is panic, fear and major distrust. You are messing with their livelihood and that is not acceptable. But if your employees contribute what is less than needed to run the business… well, ooops… that’s just business.

As the owner or senior manager in an IT service company (VAR, MSP, etc.) you are responsible for the livelihood of the company. Anything that messes with that should be declared unacceptable. So where do you draw the line? And how do you communicate performance expectations with your team?

One way to look at the contribution of your staffing investment is with overall ratios. Before you single any one individual out, you need to know if your overall staff contribution is working out for the company. In other words, is the contribution of the whole team getting you to the right results or not. There are always players on a team that contribute in different ways and at different levels. If you can see that the whole team is hitting the overall performance goals, your conversation with the team is very different than if not. If you are hitting the goal, then the conversation goes to tuning individual performance as the way to build a top performing team. If you are not hitting the goal, you get the best results by getting the whole team to recognize that they are falling short and you need a full team effort to change that. If you let some team members off the hook because their performance is okay, you will fracture the team and your best performers will just blame the underperformers. If you hold them all accountable as a team, they will all work together to find a solution.

With that said, it is important to show the team what the overall revenue, expense and profits are per team member per month. This is not about looking at the billable hours per person; this is about taking total revenue and dividing it by the number of employees in order to see revenue by head count. This is a number that you can compare to a benchmark and to your internal goal and know if your business is underperforming or running ahead of plan. This will tell you what kind of conversation you need to have with your team.

The Corelytics Financial Dashboard lets you look at this question from multiple angles. You can look at revenue, expense, gross margin and profit per full time equivalent employee and by billable full time equivalent (FTE). You can also include contractors into your headcount so that you can really see what the whole team, including your pinch-hitters, is delivering.

Corelytics is just now beginning to get enough data to generate employee contribution benchmarks for each of the Predominant Business Models^©. This is starting to tell a very important story and is helping business owners and managers play a much tighter game. This is only going to get better in the months ahead. We would love your feedback on how you make this work for your company.

Stay tuned for more insight on this topic in the months ahead.