In our eBook, The CEO’s Guide to Keeping Score, we address 5 sections of a CEO’s brain to help visualize where, as a strategic CEO, you need to spend your time. Then, we discuss the 5 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 People and Operations and the People Scorecard.
The largest part of a CEO’s brain should be focused on their people.
With service businesses, your business’s ability to make money is directly a function of how well you attract and retain people who your clients will love.
In companies that profit from their workers’ services, gross profit is directly related to people performance. Strategic CEOs consider employees an asset to the business. Thus, the lower employee turnover rate will help them achieve their targeted profit margins.
→ 80% of turnover comes from bad hires. You'll be able to hire "A" players if you don't have to rush into hiring employees.
This KPI scorecard shows the profit on the investment you made in your people. When analyzing the People Scorecard, CEOs should make sure that the income per hour paid trend line is increasing at an equal or greater rate than the labor cost per hour paid.
That's the secret in a service business - driving productivity, lowering your turnover, and reducing the amount of time it takes for a new hire to be a fully productive employee.
Charts in the People Scorecard
Income Per Hour Paid - It shows the total amount of revenue generated from your people and shows the impact of turnover on your company and the company’s efficiency in onboarding new staff.
Labor Cost Per Hour Paid - Total labor cost should include the hidden costs of your people, including overtime, recruiting, training as well as the fringe benefit costs of health insurance and paid time off. The rule of thumb is full-time, salaried employees with 40 hours of work per week are considered one FTE.
ROI on Total Labor Cost - the percentage of net income divided by the total labor cost.
There’s a lot to be said about keeping score relating to what’s important and assessing your KPIs in conjunction with your people. Clearly, there are a multitude of questions you should be asking as a CEO. The real difficulty, however, comes to implementing the right strategy based on the determined KPIs.
Our Keeping Score eBook describes a framework that helps CEOs make data-driven decisions especially for service businesses. No matter what size your business is, you can take actionable steps to help lower employee turnover and drive profitability in your organization.