To improve it, start by measuring it.

As the first part in this series - The 17 Actionable Service Management Strategies to Grow Your Service Company - this article outlines ten of the most important Key Performance Indicators you can track in your service and maintenance company. They allow you to understand exactly how your business is performing.

Businesses learn that until you consistently measure something, it's almost impossible to improve upon it, or get better at it.

If you've come across this piece of advice - or one like it - you'll find this article very valuable.

Here's why...

Mechanical, HVAC, Plumbing, and Electrical contractors that maintain high profit margins do two things very well:

First, they identify the industry best practices and strategies that will work at their organization.

Second, they put 100% of their resources into executing and scaling those best practices while measuring and improving their key performance indicators (KPI's).

But you're probably wondering: what the hell's a KPI?

A KPI or Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives.

For example - If our company has dispatched a technician to a specific equipment breakdown, and we've done this 4 times in the past 12 months, how many times has the technician made a complete repair the first time? In other words, what is our technician's first time fix rate or FTF?

Now, in the past these ideas around measuring could only be implemented at large organizations. That's because only they had the resources to manually create reports and dig into the data.

But there was still a problem. Once you took a few weeks to compile the data, it was already outdated. This made it a time consuming process and very few companies would actually take the time to understand and optimize their business metrics.

Now we live in a much different world. With the availability of field service management software, contractors can easily understand and work to improve the KPI's that drive their business.

More importantly, instead of basing performance standards off of company averages, we now have the ability to focus on real-time technician level performance metrics. Each technician can be given constructive feedback to improve their output, which translates into continuous optimization, growth and higher profits for your company. And administrators have the information, resources and guidance to make better day to day decisions. These are very exciting times.

Actionable Metrics:

These strategies are centered around actionable metrics.

Actionable metrics are defined as key performance indicators (KPI's) that connect specific and repeatable actions to results. They are business actions that you can directly improve and they answer the question why.

  • Why were we more profitable this quarter?
  • Why have customer satisfaction levels gone up?
  • Why are we getting more referrals?
  • Why is top level metric "xyz" performing in that way?

Optimizing actionable metrics should be explored across your entire organization; sales, customer success, marketing etc. but for the purpose of keeping this article focused, we will just go over actionable metrics as they relate to service and maintenance work that happens in the field.

The Important KPI's

It's important to note though that when you're choosing which KPI's to monitor, it's best to choose 3 to 5 at a time to keep things manageable and prevent interference. The 3-5 you choose to focus on really comes down to what your organizational focus is at the present time.

Throughout this series, we'll cover the actionable, technician level metrics that drive these top level KPI's. As you'll see, none of these operate on their own; they are all connected and have an effect on each other in some way.

Let's begin.

KPI # 1 - First time fix rate (FTF)

Every time you correctly diagnose and repair your customer's problem on the initial visit it is a "first time fix". So your first time fix rate is the percentage of all service calls that were resolved on the initial visit to site.

As you're well aware, return visits to site are costly, unprofitable and dissatisfying to customers. This is why first time fix rate is a great indicator of overall company health and is a good starting point for any organization to begin optimizing their operation around.

KPI # 2 - Mean time to Repair (MTTR)

Mean time to repair is the average length of time your organization takes to fix your customers problems. For example, a residential complex calls in to say they have no hot water. How long will it be before the tenants of this property can expect to have their hot water back on? The MTTR can tell your customer service representative pricisely how long the breakdown should last.

Industry leading organizations with a low mean time to repair are organized, efficient and manage their resources well. This KPI is affected by a number of factors, which when optimized, will lead to higher customer satisfaction, SLA complacency levels and profits.

KPI # 3 - Repair Time Variability

Repair time variability is a son to MTTR. It encompasses the entire range of time it takes to complete similar jobs. Most organizations who focus on mean time to repair will get the greatest benefit from reducing the long tail (the jobs that take much longer than the average) of their repair times, since these are typically the jobs that cause lower satisfaction levels and pose a risk of not meeting a service level agreement (SLA).

Sometimes we've seen this actually raise the MTTR because new process have been put in place, for example, to get everyone troubleshooting problems in the same way. Even though this may at first look like negative outcome (your MTTR increased), since you're reducing the likelihood of jobs taking much longer than expected, you'll see higher customer satisfaction levels and less instances of not meeting SLA's.

KPI # 4 - Technician Utilization %

A well utilized technician workforce is one who spends the majority of their time solving customer problems and having that time billed to a customer. Technician utilization is commonly calculated by taking the actual time a technician works and dividing it by the time that was billed to customers. For example, Ryan works a 40 hour work week and 34 of those hours were billed to a customer, take 34/40=0.85, so Ryan has a 85% utilization rate.

Some organizations calculate their utilization rates by taking a more in-depth approach through looking at billable time spent on actual maintenance work and contrasting it with all other activities that technicians engage in. These could be travel time, idle time, job documentation, visits to suppliers etc. Looking at it this way will provide greater insight into actual company performance and is a good indicator of how efficiently you are operating.

In the end, looking at technician utilization both ways are great ways to monitor and ensure top performance.

KPI # 5 - Administrator Productivity Rate (APR)

The productivity of your office administrators is calculated by taking the total overhead cost of your administrators and comparing it with the profits of the work they are able to process for a defined period.

For example, let's say your profits for last quarter were $1,000,000 and the total burdened cost of your administrators was $600,000.

Take 600,000/1,000,000= .60, so for every 60 cents of administrative input you're getting $1 of profitable output. Or to put it another way, it's costing you 60 cents in administration to make a dollar of profit.

Optimizing administrative productivity has a direct effect on your profits. Simply put, when it costs you less to process the same amount of work, your profits will increase.

KPI # 6 - Average onsite response time

Responding to your clients work requests in a timely manner is an important factor of maintaining high customer satisfaction levels. Average on-site response time is measured by looking at the average time across your organization that it takes from your customer placing a work request to your technician arriving onsite.

As seen here from Aberdeen's 2012 field service research study, poor onsite response times are two of the most common causes of customer dissatisfaction.

KPI # 7 - Percentage of Missed Opportunities

Since customers place so much value on you arriving to site on schedule and keeping arranged appointments, it's important to never miss these opportunities. We classify missed opportunities as the combination of late arrivals and appointments that were missed.

The % of missed opportunities is calculated by taking all of the late arrivals and missed appointments and dividing it by the total number of jobs for a given period. Looking at company-wide missed opportunities is a good indicator of how well your company is meeting customer expectations. Since missed opportunities are closely tied to satisfaction levels, working to reduce the number of missed opportunities is a great way to increase customer satisfaction.

KPI #8 - Customer Satisfaction (Rating or %)

Quickly collecting customer feedback after your technicians visit by requesting that they or their onsite contact provide a rating out of five and a brief description of why they provided that is a great way to understand what you're doing well and to address issues before they become larger problems.

Calculating companywide customer satisfaction % is done by adding up all of the customer feedback scores from each job. Although this is valuable to understand company wide, these scores are most valuable on a job by job basis to uncover how each job was perceived in your customer's eyes. It will also reveal how your technicians performed and how effectively your organization delivered its value.

KPI # 9 - Customer Retention Rate

If you want your business to be growing the only way to successfully do that is to have your current customer base renew their contracts. When your customers renew their contracts you retain them as a customer.

Customer retention rate is calculated by taking the customers who have renewed their contracts in a given period of time and dividing those by the total number of customers acquired in that same period. This will show you what percentages of your customers are continuing to work with you.

Monitoring retention rate is a good way to understand how satisfied your customers are with your services. Unfortunately when customers fail to renew their contract due to a specific service issue, it's usually already too late. Think of it more like a wake up call. If a customer doesn't renew you should take time to understand why they failed to renew so you can prevent it from happening with other customers in the future.

KPI # 10 - Service Profit Margin

Unless you're operating a service and maintenance charity, running a profitable business is what allows you to keep operating and growing. Most service organizations are aware of their profit margin since it ultimately determines how much money they'll make, but many have trouble accurately calculating it until the year end. It's dangerous to operate like this because monitoring your profit margin is the only way to ensure you aren't losing money performing work for certain customers.

As the various costs associated with operating your business change, you need to be aware of how they are affecting your profitability or else there's a good chance you'll end up losing money. Knowing your profit margin at any time allows you understand the top level health of your organization.

Proper's latest cloud maintenance software ensures tracking these KPI's is easy and intuitive, with capabilities to understand exactly who is underperforming and why. Proper allows managers to easily digest these values through smart reporting and live dashboards, so you can start maximizing the effectiveness and profitability of your service company.

For more information on achieving these performance measurements or to learn more about articles in this series, please get in touch.

Jordon Klarenbach is the co-founder and managing director of Proper. He works and lives in Toronto, Canada.