In our eBook, The CEOs Guide to Keeping Score, we address five sections of a CEOs brain to help visualize where, as a strategic CEO, you need to spend your time. Then, we discuss the five related scorecards and KPIs we designed to help CEOs get the information they need to make data-driven decisions.
In this blog, we focus on clients and services and the Services Scorecard.
The back of the CEO brain focuses on the clients and services that drive profitability. Keep in mind profitability by client or job is the most important metric to monitor in Clients & Services. Why?
Because if you make money on other people’s time, chances are, that usually means you’re working on clients or jobs. If you don’t work on clients or jobs, then use "per hour paid" as your unit for unit economics.
Once you’re able to see profit or loss by client or job, then you can tag each job – this allows you to see profitability any way you need to make decisions to improve profits. Tip: You can tag each job with codes that will show your profitability by team, industry, product sales rep or even marketing campaign, and can track where your profits come from.
Tactical and strategic CEOs approach clients and services differently. A strategic CEO focuses on client and employee retention issues and deals with day-to-day service problems. Rather, they think ahead to answer the following questions:
The Services Scorecard allows you to analyze how well you manage the effectiveness of your staff.
A best practice is to look at gross profit and utilization percentages together. Let’s say a job shows a healthy 70% profit margin this month, but the employee utilization rate is just 50%.
That tells us employees are not charging all their time to the job. When the CEO checks the reason for the discrepancy, it may be because employees have been charging time to non-billable activities that nobody is monitoring and the gross margin is artificially inflated.
Or a low utilization rate might also mean that new employees have been hired but the new hires are not yet reaching their full productivity. The results may also indicate that employees are initially spending time in training and not yet serving clients.
Utilization rate helps the CEO know how their people spend their time.
No matter how you measure it, Clients & Services is a key area for a Strategic CEO to be focusing on; it’s the way you’ll be able to increase utilization rates while keeping your employees working at a reasonable pace.
If you want to learn about the other building blocks for a strategic CEO brain, check out our newest eBook, “Keeping Score” below: