EPM

KPI’s: More Than Just A Number

KPIS MAY BE ESSENTIAL for productivity and growth, but Cathie Crampton highlights how setting targets can actually help to infuse your team culture with energy and passion.

ANY SEASONED operator knows KPIs and the role they play in supporting and engendering a successful business. I would suggest that KPIs create more than that; they are also the fundamental platform upon which we can all rest, relax and put up our feet. Setting KPIs can not only boost productivity; they can create a culture of energy and enthusiasm among the staff.

Property management is no different to any other business. It’s very hard to create the ideal future state unless you have a handle on the current state.

WHAT KPIS SHOULD BE MEASURED?
To a landlord, the critical elements remain rent being paid on time and the property being maintained by the tenant. Thus arrears management and routine inspections are the first two KPIs that need to be measured.

From this, you could then move to repairs which would considerably reduce your complaints – for example, no work orders outstanding over 14 days, and rent reviews, which will improve client yield and your management revenue.

Finally, tackle expired leases. This gives you and your client the maximum control over the tenancy.

A HEALTH CHECK REPORT FOR YOUR AGENCY
When it comes to crunching the numbers, you need to compare what you are currently achieving against your new KPIs and what it is you aim to achieve in each area. This health check report will highlight the condition of your business; depending on how your numbers look against your KPIs, you may either be at a health spa or in intensive care!

Your KPIs should be set internally; perhaps something you agree on as a team, framed against your budget and of course against industry averages. The latter may be published sources or something you glean from informed discussions with credible sources. Essentially what you have then is a platform indicating details such as number of managements, commercial arrears (dollar value and percentage), residential arrears (same), vacancy rate, overdue tenant invoices, overdue inspections, work orders exceeding 14 days, expired leases (percentage) and overdue rent reviews. Break each one down by location or pod and provide the information as a chart.

It is important that not only do you reference everyone’s results, but that they are transparent. Post them up on your whiteboard, publish on email and reference them in team communications. Get some fun stickers and really work it into your team environment. For example, in our Lane Cove office we have a ‘super-pod’. They have a Superman insignia on all their communications, wear Superman T-shirts (presented to them at a team event of their making) and take enormous pride in all their results.

From the PMs’ perspective, having KPIs helps them break down their role, have clarity and feel as if they are more in control in what sometimes seems like an uncontrollable job. It also helps pods work as a team and engages all members to function together to reach the targets.

CREATING PASSION AND ENTHUSIASM
So now you’ve set your KPIs and got your stats, how can you use them to create a culture of passion and enthusiasm?

Remember, the key to creating culture is buy-in. KPIs are merely a window; they are not the answer or the result. How you use the information is the culture key.

Create energy around it; talk about it at one-to-ones, weekly team meetings and group meetings. Publish it to the team in an energetic format.

Believe it and deliver with authenticity. We believe that transparency is normal; there is no judgment. Above all, don’t hide it.

Set up interoffice or inter-team competitions. Reward the achievers with lunch out or perhaps a jet boat ride; remember to post those to your team Facebook page or in your office for momentum. Post on a whiteboard, make it a focus of the day and wrap your interactions around it with equal degrees of empathy and expectation. Perhaps make it a competition for PM of the Year, with a prize like a weekend away. We publish ours each month and then at our EOFY we present a trophy for the winner with their prize – it is hotly contested!

BUT WHAT ABOUT REAL DELIVERABLES?
Creating culture will get you those real deliverables! You cannot be everywhere and nor can your team, so focusing on the culture will minimise the requirement for reactive management. When your team is engaged, they will take pride in their results and genuinely see them as a reflection of their identity. They will challenge you, and this is great because it means they are treating their role and your business with pride.

LINKING PRODUCTIVITY TO EARNINGS
You may wonder about real-time activity and real-time earnings for a team member or yourself. A key way to engage the team is to link productivity to their earnings. Providing incentives means they share in the reward and are further connected to the success of the outcome. For example, a team member could earn a bonus by running excellent portfolio statistics, such as in the example below (percentage can be varied depending on your budget) and could further increase their earnings by creating solutions beyond day-to-day excellence, such as the identification of new leads.

EXAMPLE KPI STRUCTURE
Available incentive pool

  1. 1 % of management fees for the quarter
  2. Identification of a new business lead that becomes a new management: $300/management.

All the following key performance indicators must be met to qualify for the above incentive:

  • Overdue rent reviews less than 2%
  • Arrears at less than 1% (of total monthly rent due)
  • No preventable lost managements per quarter
  • No outstanding routine inspections
  • No work orders over 14 days

Some caveats

  • KPIs must be met on a monthly basis to qualify for the bonus
  • Bonus is calculated and paid quarterly
  • Each preventable lost management in excess of the above number will reduce the bonus by 25% (and future bonus amounts if current bonus is reduced to nil)
  • Any contingency/compensation payments that are made to a landlord or tenant will be deducted from current and future incentive payments.

Example calculation assuming all KPIs are met on a monthly basis
Non-pod structure with management fees of circa $22, 000 per month (135 managements at $615 per week average rent with average management fee of 6%). Property manager identified three leads from their portfolio that became new managements during the quarter. Thus 1% x $22,000 x 3 months = $990 plus 3 x $300. Total quarterly incentive $1, 890.

BENEFITS ALL ROUND
The benefit of this to you as an principal or leader is that you are maximising your revenue and creating a culture that is about excellence on all levels. You will also find that your complaints level will decrease, leaving your team members with more capacity to focus on what it is all about: building healthier relationships and sustaining themselves in property management.

As buy-in increases, your team members will also challenge their results (a very healthy measure again of their engagement), address every one of these with positivity and reference their results against the KPIs you have agreed are your Team KPIs. You can also extend this by applauding this excellence – which is just excellent KPI deliverables that all have a points system – with something like a ‘PM of the Year’ award, as I mentioned earlier.

On top of that, the commission outlay is outweighed by increased referrals from both your sales team and your client base: retention and revenue. When the average management is worth $7,000 to $8,000 on your balance sheet in metro Sydney, this is substantial.

KPIs implemented only for the sake of visibility will not engage; they will undermine your team and affect quality tenure. But KPIs that are executed with true vigour and as the pathway to a fun, calm PM space will be the absolute pillar for your business success.

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Cathie Crampton

Cathie Crampton is the GM of Property Management (Smollen Group) McGrath Estate Agents. Cathie will be speaking at ARPM 2015; for more information and to book tickets visit arpm2015.com.au.