October 13, 2021
This post was originally published on the Sage Intacct Blog
In the many years working with service-based companies, there have been a number of common themes around an ‘us vs. them’ mentality within the office. In most cases, department goals and incentives are the root cause of these conflicts. Sales and marketing teams are pressured to drive more business, but the project managers feel like they’re under bidding a job or over promising delivery. Finance teams are focused on closing books and processing invoices and have less concern for project profit and billable employee utilization. The only common incentive-based goals are often at such a high level such as company profit, that most employees don’t feel like they can do anything in their day-to-day activities to have an impact on it.
With disconnected department goals it’s no wonder that we see challenges between teams and limited success in improving KPI performance. So how do companies break this trend? One proven tactic is to align department goals with cross functional teams and keep those goals at a level that is within the team’s ability to have an impact. Some of the indicators you can use to accomplish this are already being tracked such as: utilization, project profit, customer satisfaction, etc. The difference is incentivizing all teams on these metrics together instead of separately.
Here’s an example. By making project profit margins a goal for sales and marketing, finance, and project professional teams, you can begin to see how each team can find the motivation to work together and focus on the entire project’s lifecycle execution. Sales and marketing teams may begin to ensure that quotes are more accurate or initial project scope is more complete. Finance teams may be more likely to identify when time is entered incorrectly or ensure that vendor invoices are allocated quickly so project managers are aware of the current project status. Project teams will be more motivated to enter their timesheets daily and ensure they are billing for all of their time.
Customer satisfaction is another great example of a KPI that all your teams can have an impact on. Project team members may be more incentivized to improve the quality of their work if they felt that it would make the customer happy enough to improve their overall satisfaction. Finance teams may take more steps to ensure client invoices are accurate and timely and improve the level of service they provide to answer questions when client calls to discuss any disputes.
Even utilization can be a great KPI for all departments to strive for improvement. After all, we want to protect our billable employees time so finding efficient ways to work through administrative tasks or helping them when they need it can go a long way to improving utilization. Even small improvements here can have a big impact on your company’s overall profitability.
This is not a fool proof method. You’ll want to ensure that there are protections in place, so teams don’t start blaming each other when incentivized goals are not met. One way to do that is to keep the data aggregated when you report out progress toward the overall goals. That allows individuals to focus on their own actions and results but not spend time worrying about another team’s performance.
If you’re going to align your teams to KPI performance, then it is critical that you ensure your team can monitor those numbers in real-time. Employees should see their utilization as well as the firm wide number. Providing an aggregate number of project profitability is also a great way to gamify the whole process. Sage Intacct dashboards provide and excellent way to get just the right information to the right team members as well as accounting for any unique exceptions your company may use when calculating these KPIs.
For more information on how you can align your teams using common KPIs, check out our webinar “Cross Functional Data Driven Decision Making.” In this presentation we also discuss how to incentive your team to sell and execute on new services that may be more difficult to sell, and likely result in little to no profit.
Jim Norton, CPA
Senior Manager, Accounting Technology Services
GRF CPAs & Advisors