Do you use “Key Performance Indicators” in your shop to accurately gauge what’s going on in each department?
Typically, the management brain trust is so concentrated on getting shirts decorated and shipped on time that any sort of metric analysis is viewed busy work.
However, a major benefit of consistently performing metric analysis is that it allows you to keep the pulse of the everyday successes or failures in your shop.
Simply put, when you fly over at 30,000 feet you can see more of the ground.
The goal of this article is to give you a better understanding of key performance indicators, why they work, and how to use them to create SMART goals to make changes that will stick!
- What should you track?
- What do you do with the information?
- How do you know what is important?
Yeah, I know.
An article about data collection and change implementation is a Sahara desert-like dry topic.
I’ll try to not make it sound as boring as it seems. And remember, this is all about making your shop operate more effectively.
Promise. With me?
OK, What the Heck is a Key Performance Indicator Anyway?
It’s a fancy business term. Don’t let it scare you.
The phrase Key Performance Indicator is often shortened to KPI.
A lot less scary already, right?
Some brainiac coined the term to help identify details that matter for businesses. It’s naturally a measured value, which means it is usually a number of some sort.
“Key” in the term key performance indicator, designates that someone thought that the thing being measured is important enough to track.
Your KPIs are numbers that matter to your business.
- How many shirts do you embroider or print per hour?
- In terms of sales, what dollar amount did your shop bring in today?
- For any month, how much money are you spending on mistakes?
Think of a KPI as the speedometer for your car. It’s the gauge that tells you how fast you’re driving.
It’s good information, and as the driver of the car, it allows you to make necessary corrections to speed up or slow down appropriately. Simply put, it’s the tool that allows you to make quality and important decisions.
KPIs work the same way.
In your shop, building that speedometer for the core elements of your business that are meaningful to you, can provide the necessary information to make meaningful changes that can get you to the next level.
KPIs Mean You’re Measuring Something
What you want are data points.
Make a list of the top things that are important to you in your shop. These should be specific to your business, and measure not only what’s going great, but also not so great. I’ll help and give you a starter set of the most basic measurements for our industry.
Don’t worry about tracking all of these…just the ones that matter most to you:
Company Wide Totals
- The total amount of sales per week, month & year.
- Total amount of orders per week, month & year.
- The total number of labor dollars per week, month & year.
- Separate overtime dollars and measure that too.
- Salaried folks aren’t usually included in this as their labor dollars don’t fluctuate. Labor is the number one variable in business and usually, needs the most control.
- Measure your total number of impressions, with the start and finish the same days as your pay period. Divide the total amount of labor by the total amount of impressions and get your cost per impression. Remember, an impression is a decorated location, not the number of screens or stitches.
- This is one of the 5 Buckets in measuring your shop costs.
- The total dollar amount of misprints or credits issued for orders.
- You can learn a lot from your mistakes. But only if you are putting in the effort to eliminate the challenges.
Averages – Order
- Average dollar amount per sale. Under or above $600?
- The average order quantity size. Under or above 144?
- Average number of screens per location. You’ll be surprised. For most shops, it is under three. What is it in your shop?
- The average number of stitches per location. This is in the 6,000 – 8,000 range.
- Average turn time per week, month & year. This is the number of days from when an order is placed to when it ships.
- Are you averaging a 7 – 10 business day turn? 5 – 7 days? 3 – 5 days?
- This is important as the turn-time in our industry is shrinking.
Averages – Production
- The average impressions per hour for each piece of equipment. Only use the time it takes to decorate, not the set up or approval time.
- Screenprinting industry averages are 400 per hour for an auto and 60 per hour for a manual.
- Embroidery runs average about 18,000 stitches per hour, per head.
- Digital printing relies solely on equipment, as it’s based on head print speed and quality setting.
- The average amount of uptime per day for each piece of equipment.
- This can be expressed as a percentage. (Run Time / Total Time) x 100. This is the percentage of the actual amount of production time the machine is running versus the production time the machine is available.
- Only use the time the equipment is actually decorating a shirt.
- For example, Press 1 printed 3 jobs yesterday. The first took 53 minutes, the second took 183 minutes, and the third took 106 minutes. For an eight-hour workday, subtract 30 minutes for lunch and 30 minutes for breaks. This makes the work day 7 hours or 420 minutes.
- (342 / 420) x 100 = 81.42%
- Anything above 80% is decent.
Tips on Measuring
The most important tip I can give you when discussing KPIs is that obtaining quality data is crucial. Getting this info sometimes is difficult and requires your staff to measure their work somehow, but trust me, it’s worth it in the end.
Filling out forms isn’t fun for anyone. You’ll have to illustrate to your employees that this task is part of their job, and getting accurate information is critical. Hold people accountable, and if they don’t fill out the form correctly and on time then there should be consequences.
An easy to use tool is simply a log that tracks what they are doing. It doesn’t have to be elaborate, but it needs to be simple to fill out. Accuracy in the data thats collected is absolutely critical here!
No guesses allowed.
However, this means that for every minute employees are adding their information to a log or form, it’s a minute they aren’t doing their main job duty. Therefore if you aren’t using this information to make changes or decisions, don’t waste their time.
Filling out forms and just putting them in a box never to be seen again isn’t a good idea.
Lastly, if you have any sort of internal systems for your shop, many of the answers to the KPI questions above can be found by running reports. But just like logs, the reports are only as good as the quality of the information entered.
Make sure the data points you use are accurate.
Using Key Performance Indicators to Create a “SMART Goal”
One way to look at KPIs is as if you were stranded on a deserted island and somehow had the ability to keep up with what’s going on in your shop. What would you want to review?
Yes, I know that deserted island survival doesn’t depend on how many orders shipped yesterday. That’s not what Tom Hanks was worried about in the movie Castaway, but it’s a fun exercise nevertheless.
This is the data set that will matter. In business terms, this is called keeping a “balanced scorecard.”
For your shop’s scorecard, what would you measure?
You then, of course, want the numbers on your scorecard to continually improve. Sales numbers should increase, overtime labor dollars should decrease, and efficiency should improve.
Everyone in your shop should have a number that is measuring his/her performance.
What is a SMART Goal?
Remember, a SMART goal is defined as Specific, Measurable, Achievable, Realistic, and Timely.
It’s finite, with a defined beginning date and end date. It isn’t an opinion.
Using KPIs as part of writing a SMART goal helps improve the Measurement aspect of the goal.
It’s your data collection set.
Creating the SMART Goal
Let’s pretend your shop’s goal is to increase the sales revenue. It’s probably the most common idea in our industry.
Who doesn’t want more sales?
Do you just pull the goal out of thin air? How are you going to achieve it?
I guess you could just invent something, but to create a goal that could make a difference and be achievable, it must have some sort of basis.
Using KPIs that are entered into their shop scorecard can help you create a SMART goals that will work.
Goal Creation Questions
The power of a SMART goal is that it is based on realistic expectations. Use real numbers and ask questions that matter.
Shop XYZ wants to have a major bump in their sales so they can buy some new equipment without having to finance the capital expenditure. The owner has set the goal at $100,000 in sales per month.
Using historical numbers in their system, the average sales going back two years is $68,000 per month. To jump up to $100,000 in sales would be a 47% increase.
The absolute best sales the shop has ever had was $87,943, which is 29% above their average.
Pretend you work in Shop XYZ and are part of the leadership team.
Based on these numbers would a 47% increase in monthly sales be an achievable goal? Are they setting themselves up for failure?
What percent increase would make sense to you? Setting aggressive goals is sometimes a good thing, but tempering expectations with reality is another.
Inventing the Plan
Upon discussion, the team identifies that the 47% increase in sales seems too lofty. Remember, the reason for the goal is to increase sales to purchase some new equipment.
The compromised goal is restated to be a 35% increase in sales over a four month period. The new goal is to go from $68,000 to $92,000 in sales as an average per month.
To get there, the company will focus their effort on an outreach program. Traditionally, the shop just relied on walk-in traffic and basic word of mouth to generate sales. They advertised some, but with little results.
Breaking the Goal Into Chunks
The new sales program will consist of the owner and the two customer service reps calling both existing and potential customers. The effort, of course, is to increase the already established daily sales that the shop currently enjoys. The extra work is the delta above that.
The daily goal is to contact ten from each group per day.
The marketing team created a special eBook that highlighted the shop’s history, dedication to craftsmanship, creative examples and several incredible shots of their work in a mini-portfolio. A section of the eBook describes Shop XYZ’s ability to create custom online stores for company stores, schools, and fundraisers.
The team’s goal is to personally talk to a decision maker about Shop XYZ and get permission to send the eBook and a branded pricing list.
That would be a total of twenty outbound eBooks a day. The goal for that would be to convert 10% of those into sales per day with an average for $600 for the sale.
Added to the goal would be to create two new online stores per month for any customer, with a monthly average of $1,200 per store in sales.
Here’s what they would be measuring:
- Did ten current customers get contacted each day?
- For potential customers, did ten new ones get contacted each day?
- Did the shop close 10% of those, which would be two new orders per day?
- Was the average sale $600 or more?
- Did they create two online stores?
- For each store, did they have an average of $1,200 in sales?
What Could Influence Success or Failure?
During their discussion on creating the goals, the team worked to identify anything that could influence the success or failure of their newly written goals. Knowing this early on can let you then determine which variables are in or out of your control.
The team discussed some circumstances that could impact their success. One of the biggest was to have their customers start to influence other potential customers with positive testimonials.
During one great brainstorming moment, they launched the idea to market customer’s reactions to the shop’s work. They would post one photo or video a day on Facebook and Instagram showing smiling customers holding up their shirts.
Examples of production work in progress or even shop team members could be used too.
The leadership team also identified negative challenges as any problems with poor craftsmanship, missed deadlines, or lack of internal accountability for the initiative. To achieve their goals, they had to commit to doing things better and not just letting things “happen”.
Discussing these influencers early ensured that the shop’s leadership team was aware of how success or failure was dependent on their performance.
A happy customer ensures success.
The next step that the leadership team needed to handle was who owns each chunk of the plan.
Keep in mind there should only be one owner for each important task. Thus, the team assigned the ownership for each task of the goal. Daily results appeared on a white board in the meeting room. Positive numbers were written in green, negative numbers written in red, allowing everyone to know exactly where they stood.
Each week, the leadership team met to discuss what went right, and what went wrong.
Whew, That’s A Lot of Work
Change isn’t easy, especially change that can make a significant difference.
Let’s face it, major change is scary, but it’s time to roll up your sleeves and dig in!
What if you don’t succeed or make a mistake?
Sorry to bust your bubble, but that absolutely will happen eventually. You will make a mistake. You’ll fail to hit your goal.
It’s going to occur. But that’s ok too.
What do you do then?
SMART Goals Can Become SMARTER
It’s fun with acronyms time.
During the process, if you don’t feel things are working as they should, it’s time to do something about it. By adding Evaluate and Redesign to your goals, they can go from SMART to SMARTER.
Evaluate & Redesign
As your new idea is churning along it makes sense to assess your progress. Use your KPIs to track the data.
Are your goals relevant?
For example, what if you miss the mark on your goal? Evaluate the metrics and work with your team to chart a new plan of attack.
Shop XYZ’s sales goal was to hit $92,000 in average sales per month this quarter. For the first month, they hit $86,897 and in the second they sold $89,638.
What makes the SMART goal SMARTER is being open to changing something to fit reality better.
By looking at the metrics, Shop XYZ observed that they were hitting their outbound sales calls numbers, and actually closing about 14% of the calls overall. The problem is that the order totals were under the sales goals.
Previously, metrics review and discussions never happened. Everyone pointed fingers at everyone else for the problem and nobody stepped up to do anything to resolve it.
By meeting as a team, working with transparent information, and becoming more accountable, the leadership group was able to come up with a tweak to their original idea to make a SMARTER goal.
For the next two months, the sales team decided to offer a “bundle” idea where any t-shirt order over 144 pieces would also be eligible for free digitizing, and 12 free hats if the customer purchased 144 hats to go with the shirts.
Their idea worked and in the final two months of the initiative, they had $93,870 and $97,345 worth of sales respectively.
Celebrate Good Times, Come On!
To acknowledge everyone’s hard work and amazing effort the leadership team hosted a BBQ for everyone in the company after work on a Friday.
Everyone enjoyed live music as a couple of the printers were musicians. The shop never sounded so good.
The art director arranged to have a group picture taken, and enlarged it the next week. Everyone signed the photo, and they framed it and hung it in the front hallway.
Every day as they walked by that photo, each employee remembers achieving that goal and the feeling of shared victory that they enjoyed.
Key Performance Indicators and SMARTER goals work.
When is your BBQ?
“A dream becomes a goal when action is taken toward its achievement.” – Bo Bennett
“The best teamwork comes from men who are actively working independently toward one goal in unison.” – James Cash Penny
“Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” – Tom Landry