Do you want to know how to help your clients boost morale and surpass industry benchmarks? As an advisor, you can help busy business owners create great workplaces that retain talent and support long-term growth.
Gusto is helping bring you to the cutting edge of accounting and advisory. As always, we were thrilled to partner with CPA Academy to discuss the new wave of advisory services sweeping the industry. The webinar “How to Use People Data to Deliver Advisory Insights,” featured accounting expert Will Lopez, who discussed how to interpret data to help your clients create great places to work.
As Head of Gusto’s accountant community, Will Lopez is passionate about supporting accountants and small businesses. He’s a veteran in the accounting field and the founder of AdvisorFi, a modern accounting firm that uses technology to help automate business processes and provide financial coaching for small businesses. Will bridges the old with the new, helping talented accountants increase their value as they provide revenue-boosting advisory services.
What is KPI?
Since key performance indicators, or KPIs, exist in almost every industry, you likely already have a good understanding of what they are. But just in case you don’t, let’s take a look at the basics.
KPIs are metrics designed to give you actionable insights. What you measure matters. Without quantifiable indicators, you’re flying blind and have no way to track where you are versus where you want to be.
KPIs are designed to suit specific goals and outcomes such as return on investment, return on assets, or gross profit margin. They may be strategic in nature, or they may measure daily operations and deliverables. Whatever they are, KPIs are meant to be guideposts for maximizing performance and efficiency.
“KPIs provide a focus for strategic and operational improvement, create an analytical basis for decision-making and consulting, and help focus attention on what matters most for yourself [and] for your clients.”– Will Lopez
The KPIs you use will vary according to your aims. As an advisor, you’ll want to see if your client’s company is a great place to work and how employee happiness ties into profitability. To do this, you’ll need to look at the whole picture—quantifiable KPIs and anecdotal information sourced in things like employee surveys. You’ll then present your insights about your client’s workplace satisfaction and more.
“[Once] you understand how the client’s business has performed … dig deeper into the ‘people story.’ This is how [you] phrase it. The ‘people story’ [is measured] through people planning KPIs and the employee happiness survey.”– Will Lopez
Always remember to emphasize how many benefits there are to ensuring employee satisfaction. Not only does it make for a happier workplace and a better sense of community, but it can actually boost profits relatively easily. The better you understand how and why employees are performing, the more you can take actions to bolster your team and sustain their performance. According to Will, this is the equivalent of grabbing any low-hanging fruit that’s lying on the table for your clients.
Providing a new spin on KPIs
As an advisor, you can take advantage of Gusto’s platform and its integrations to give you the KPIs you need.
“The people planning reports can be generated using the integration that we have with Jirav, which pulls data from popular apps like Gusto, Xero, [and] QuickBooks to give you that rich insight on people.”– Will Lopez
It’s important to note that using KPIs to track employee impacts is nothing new. Some KPIs you’ll use as an advisor may be classics that business owners have been using for decades. However, you’ll be approaching them and interpreting them differently. Since you’re helping clients make their business a great place to work, you’ll need to ask questions you may not have thought of before.
“[KPIs] are tools to help advisors better understand [and communicate to clients] the impact of traditionally hard to measure things such as team morale, values alignment, and belief in management.”– Will Lopez
People planning KPIs can give you the language and insight you need to present data in the context of having a great place to work. For example, the way that resources are allocated can indicate whether employees are spending inordinate amounts of time on routine administrative tasks rather than higher-level ones.
“Percentage spent by department … gives you a figure to compare with industry benchmarks to get an idea if your client is spending the right amount on certain functions, especially administrative ones. This can really provide insight into team morale on a more granular level.”– Will Lopez
Let’s explore some of the key people planning KPIs, and get some ideas about how we might use them to analyze a client’s people story.
Examples of people planning KPIs
- Average revenue per employee
- Gross margin per employee (also known as contribution margin per operations employee)
- Operating profit per employee
- Percentage spent per department
It’s important to keep an open mind about the KPIs you’re measuring, as some conclusions may feel unexpected.
“Take average revenue per employee, for example. Great metric. [It’s] been around [for] as long as accounting [has been around.] … If this is rising quickly for one of your clients, it could mean that people are working more efficiently, or it could be a sign that they’re being worked too hard.”– Will Lopez
To get to the bottom of this metric, you’ll want to compare multiple KPIs, make use of employee surveys, and ask your clients the right questions. How is your client’s team doing? Are they feeling burnt out? How many hours per week do they work? You won’t know the answers unless you ask, and doing so is a crucial part of the picture.
When it comes to your clients, demonstrate to them that value doesn’t always lie only in immediate profits. To survive in the long run, businesses need to understand the high costs of churn and the weight that an unwell or unhappy employee can have on a business.
“[We generally see a higher average revenue per employee] as a positive, but actually it could potentially be a negative. … It could just be that the client’s teams are being worked too hard. … [What does that do] to churn? It increases churn drastically. And in the long run, it impacts margins and profitability negatively.”– Will Lopez
When you approach average employee revenue with churn in mind, you may have very different advice for your client than you would have previously. Take hiring, for example. If you find that employees are being overworked—and fully understand the value of having a great place to work—you’ll likely factor that into the equation. This may contrast greatly with how you’d approach this goal.
“I know all of your clients come to you and ask, ‘Hey, when’s the next time to hire?’ And what do you all do? Cash flow forecast. Dropping the comp rate. Salary run rate.”– Will Lopez
While you’ll still factor things like cash flow and salary into your hiring advice, you’ll also be taking the current team’s satisfaction into account. If a team is being overworked, it’s not sustainable no matter how motivated or talented they are.
Another metric that you’ll want to look at differently is the gross margin per employee. Like average employee revenue, it can be misleading at first glance.
“Gross margin per employee is also known as contribution margin per operations employee. It’s a critical number for professional services firms. … It tells you gross profit that each operational employee generates for the business. In other words, if another professional is hired or an employee is hired, this is on average what the business can expect them to generate in revenue minus their own cost and salary and benefits and overhead.”– Will Lopez
Much like average employee revenue, a higher margin isn’t always positive. Just because someone generates much more profit than they cost to keep on board doesn’t mean they’re going to sustain that. If they work hard, but don’t have adequate salary and benefits, they’ll likely burn out and move on.
Throughout the process of running and relaying reports to clients, you’ll want to consistently discuss the value of having a happy team. Most businesses already know the challenges of being understaffed or having unfilled roles for months on end. But in case they need a reminder, emphasize how competitive the hiring landscape is.
Learn more about people planning KPIs
KPIs are metrics that help guide businesses toward increasing their bottom line. They are designed to measure things according to specific outcomes and objectives, such as higher profits or lower spending. As an advisor, you’ll want to look at how the data demonstrates the quality of your client’s workplace. This means going beyond how profitable a team member is to look at whether they are overworked and burnt out. In the long run, team members who perform well but are unhappy can cost the company. You’ll need to help clients balance short-term survival with long-term success by looking at their overall financial picture and work culture.
Gusto’s mission is to create a world that empowers a better life. We’re here to help you thrive now and in the future. Don’t forget to check out our other articles based on the same webinar: How People Advisory Is Revolutionizing Payroll, A 4-Step Framework to Develop People Advisory Insights, Exploring Gusto People Advisory Reports & Integrations, and Gusto’s Employee Happiness Survey and Why It Matters.
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