KPIs and Your Bottom Line
For Gym Operators
KPIs and Your Bottom Line
Evaluate your club’s bottom line through the lens of key performance indictors (KPIs). You’ll begin by breaking down your operations, scrutinizing every aspect department-by-department, then defining the metrics that matter most for success in your organization. You’ll learn seven characteristic of effective key performance indicators. Explore the daily huddle. Set the framework for the three most critical goals we have as operators, and the KPIs that support those goals.
The following is a summarization of an education session from the 2016 IHRSA Convention, produced with full permission from IHRSA. The full-length video is available for purchase at ihrsastore.com.
About the Speaker
Daniel M. Gonzalez, CFO, Universal Athletic Club
Why Have KPIs
A club owner, after operating for a while, quickly recognizes the large volume of details and ever-evolving pieces to the business, as well as how it can become impossible to review and track on a daily basis without experiencing some form of analysis paralysis. Data is good, until it’s the only thing you’re looking at and making decisions upon.
The idea of developing KPIs for your club is to direct the focus on what is truly reflective of your objectives, culture, and core values – the metrics that matter. If the focus is on everything, efficiency is imperfect, and all the while you’ll not get control of the chaos.
By setting KPIs, operators minimize misunderstandings or misperceptions on the part of managers, supervisors, and front-line staff. Provide employees with metrics that matter. These should foster clarity of expectations, provide support, and build confidence. KPIs help drive the direction and collectively move the team and club forward.
Six Purposes of KPIs
- Outline your operating model. Clearly define a path that all the members of the organization can visualize and follow. Frustration over lack of achievement is often attributed to managers and staff not knowing the goal or missing the objectives of the organization.
- Clarify performance expectations. All team members need to comprehend what is expected of them and, more importantly, to view themselves as a link in a strong and effective chain. They need to know they’re in the game and that they play a specific role.
- Manage objectively. When the path and expectations are set and clearly communicated, it facilitates improved employee relations. An organization’s KPIs show staff the performance bar. It helps owners and managers in best addressing producers versus non-producers.
- Focus attention on what’s important. By setting out the direction, defining expectations, and managing objectively, there is less room for distraction.
- Run more effective meetings. Staff meetings become acute and highly functioning as everyone’s roles are distinctly outlined and each staff member is aware of their key metrics. Conversations and decision-making become efficient.
- Hold people accountable. Simply put, there is no game if there is no strategy. If each player’s role is ambiguous, there is no scoreboard.
Definition of a KPI
KPIs enable owners to manage their business, control the outcomes, and achieve desired business results. An intended set of KPIs is an actionable scorecard that keeps your strategy on track.
First establish clear objectives before putting together actionable KPIs. The most effective KPIs are a result of a deep understanding of your organization’s core values, purpose, and well-defined business goals.
For example, the objective is to increase membership. Based on revenue projections, the goal is 100 new memberships per month. Historical data shows that the close ratio is 65%. The club needs to attract 153 prospects a month – an actionable KPI. To make this a manageable figure for member services, break down the 153 into a number of people per day. Small morsels make the effort more manageable and feel “doable”.
A KPI is an indicator that objectively signals to staff whether they are productive relative to a goal. Each employee should have an ongoing KPI or two that enables them to quantifiably answer the question “Did I have a productive day or week?”
Remember, the KPI or metric in and of itself will not result in an objective reached. The mindset and motivation of the staff is crucial. It’s important to communicate that each staff member has a part. Engage the team. Give them ownership.
Seven Characteristics of Effective KPIs
- Simple – A KPI needs to be both easily understood and measurable. A KPI should prompt decisions and not provoke additional questions. Has it ever happened that staff continually ask questions and you think to yourself, “I wish they could make decisions.” A KPI places the tools in employees’ hands and empowers them to make decisions. Ensure the KPI is abundantly clear and that expectations are spelled out.
- Aligned – KPIs are developed from the overall strategic goals of the organization, but instituted and distributed down to the daily operations of the staff that are affecting them.
- Relevant – Are the appropriate decision makers in control of carrying out specific KPIs? To engage staff, they need to have the power to make decisions that influence their specific metrics. Sometimes, though, a person may affect KPIs negatively. Put measures and processes into place to avoid these issues. For example, place an administrator in charge of providing the sales teams’ closing rate instead of the sales manager. An administrator, who is unbiased and objective, can provide accurate information to the management team.
- Measurable – This is necessary in order to analyze both positive and negative variations from a goal. Avoid generalized questions. KPIs are not ambiguous.
- Achievable – Design KPIs that are achievable. If KPIs are unachievable, employee morale will be directly reflected. Proper goals can motivate staff who may not have seemed motivated or enthusiastic in the past.
- Timely – Consider the sensitivity, urgency, cost, and accuracy of the proposed timeline to determine how timely the data needs to be. All managers should have the ability to view real time data via a customer relationship management (CRM) system dashboard. Share the information down line to staff.
- Visible – Growth is achieved more easily when all employees are engaged and aware of the organization’s goals and outcomes. In addition to CRM report tools, managers should send out an email to their team members to communicate on a weekly basis successes and areas for improvement.
Business Results Delivered
By implementing KPIs within the organization, owners can easily communicate the operating model to managers and are able to hold them accountable. Operators can clarify with the member services staff their performance expectations. Using KPIs within each department enables the organization to direct and guide the staff’s focus on what is important.
The Daily Huddle -- Keep Managers Accountable
A form of regular and consistent communication can improve team performance through peer reinforcement, collective intelligence, and accurate information. A daily huddle focuses on three questions: what’s up in the next 24 hours, where is the manager relative to their KPIs, and where is the manager stuck?
A daily huddle brings everyone together for a quick 15-20 minute discussion. Setting aside time daily can eliminate the unnecessary and numerous interruptions which often happen throughout the day. Through a daily huddle approach, the team listens to each other and begins to strategize collectively. It can provide access to a “tribal” knowledge among the group. Managers who may have experienced something similar can share and help other managers struggling with reaching their KPIs.
The daily huddle builds team accountability. People show up on time and are prepared. Managers have sufficient ability to brief others on their KPIs. It increases the rate of deliverables by the team.
The Three Most Important KPIs
Three main objectives of any health club operator are to attract, sign, and retain members. There are many methods to go about achieving these objectives. Let’s approach these objectives using KPIs.
Establish baseline performance numbers for the club in a particular category and in a particular market, all the while, trying to improve on them. The idea is to profile your ideal customer through measurable demographics and psychographics, which will in turn, help to discover the outlet that best targets those clients.
Determine how best to track marketing campaigns (i.e. print, billboards, television, radio, social media, website, etc.) by a defined set of aspects. Often, initial attempts at a marketing campaigns can fail. How can you increasingly succeed in successive attempts at attracting members?
In establishing a baseline rely on the following formula:
- Target: Define your ideal customer or your perfect customer, or rather, who you want to serve.
- Offer: Create an offer based upon the research of your ideal customer.
- Copy: Create the campaign and medium to use.
Target your customer repeatedly with benefits-oriented offers (what’s in it for them) and marketing efforts that support your sales message founded upon research.
Measure the Results
Marketing-originated customer rate: The % of new customers acquired over a defined period of time that originated as a lead generated through marketing channels. This is essentially the number of new members who were attracted by a campaign.
- Customer acquisition cost: The total marketing and sales expense per new customer acquired through marketing channels over a given period.
- Cost per impression: The average cost of a single impression (view) for an individual marketing or advertising campaign. How much does it cost to make the phone ring in your club or for a prospect to walk through the door? Communicate this information with staff to emphasize the importance of when the member experience begins.
- Conversion rate: The % of people exposed to an advertising campaign who are converted (sales or other defined “conversion”) into customers. The front desk staff are the critical first step in a member’s journey and in the conversion process. Make sure the staff are well-practiced at initiating an engaging dialog, knowledgeable to answer questions, and can transfer them to the appropriate manager or sales person.
- Traffic source breakdown: The detailed collection of all incoming traffic sources, to include the company website or landing pages (social media, organic search, paid search, referral, etc.) Ask how people heard of your club. Get the front desk involved when replying to phone enquiries. The information gathered is useful in developing and targeting future marketing campaigns.
- Member referrals: Track, measure, and develop referral campaigns. Consider an incentive or reward program for those members who are “brand ambassadors” – those who are willing to talk up the club to others.
Sign Up Members
The marketing department has done a great job at developing prospects. Now it’s time for the sales team to go into action. It’s important to have objectivity in evaluating and understanding all the ways people are attracted to the club or fitness center. Develop a process to intricately manage each lead. Customer relationship management (CRM) software is best at these processes and in managing the multiple data points in converting leads to sales. Here are a few points of data to track:
- Number of qualified leads
- Number of appointments/tours from qualified leads
- Sales cycle length
- Account growth
- Gross revenue pace
- Phone call tracking
- Number of accounts sold per day
- Prospect follow-up position
- Prospect correspondence over due
- Closing %
Focus on follow up and efficiency. If leads are not followed up with, they will not become members.
Depending on the organization’s historical data, define KPIs for account by type. Also provide the member services team with an invoice by percent KPI that sets out a dollar goal as well as account goal.
Create a dashboard for the member services team to track how well they’re doing in reaching goals. This can serve as a tool to communicate with the team objectively and transparently. Owners, managers and the sales staff are able to know daily in real-time how well they’re doing to meet targets and what’s happening in the business.
Once you have a member, it is your job to create loyal promoters who do your recruiting for you. Let’s assume that marketing is doing a wonderful job of driving leads into the club and the member services team is reaching out, in a timely manner, to each prospect, closing 60% of everyone who comes in or calls.
It is, however, wasted time and energy if the club is not able to grow these customers into loyal advocates who do your promoting for you.
Make it a company-wide policy to dedicate attention at putting the customer at the center of every aspect of the business. Maintain a customer-centric focus within each department, in daily operations, in hiring, online services. and even web design.
Many fitness centers and health clubs may not have had the time over the years to create a playbook. KPIs are the foundation in developing and executing a playbook for your club. Ask questions. Evaluate operations in each department, workload, and scheduling. How do expenses configure relative to percentage of gross in prior years? Develop KPIs defined by the important aspects that drive your organization’s purpose and core values.
Whether you’re looking to build capacity in revenues or membership, become more efficient, or reduce expenses, KPIs have distinct characteristics that can shape a business’ view in an acute, precise way. Remember to not become overwhelmed by huge audacious goals that are daunting to achieve. Break it down to manageable goals: critical, sensitive pieces of information.