These are individuals who work temporarily or offer unique skills to help businesses grow at a faster rate. For companies seeking to optimize their return on investment (ROI) from contingent workers, it’s essential to analyze the data. This involves assessing key performance indicators (KPIs) to understand what’s working well and what needs improvement.
Keep reading to learn about eight KPIs that can help sharpen contingent workforce ROI.
1. Time to Bring a Contractor Onboard
The last thing any organization wants is for a sluggish onboarding process to delay productivity. That’s why it’s critical for leaders to track how long it takes to onboard a contractor in their new workplace. Consider the time to deploy, which looks at the span of time between the date when work begins and the date the request was approved. Ideally, you’ll want to keep the span of time from request to start at two weeks or less to maximize results.
2. Contractor Utilization
What percentage of your contractor’s available hours are billed to projects in your firm? The answer to that question will demonstrate whether your contractor is meeting capacity. When you divide the billable hours by the total available hours and multiply that result by 100, you’ll get the utilization rate.
You want to see a high utilization rate. Otherwise, you might be paying for nothing. If the rate is under 75%, you may want to reevaluate contract terms or move on from a contractor. Use cloud project management to see how rates are impacting your budget and bottom line.
3. Error-Free Timesheets
When you’re dealing with inaccurate timesheets, you could end up wading into billing disagreements that chew up valuable time. Errors can also cause delays to payments, which may leave contractors disinterested in continued work with an organization. Organizations must strive for timesheet accuracy to maintain happier contractors and more efficient billing processes. You’ll want to keep accuracy at around 95% or higher for the best ROI.
4. Budget Adjustments
Every business venture will have a planned budget. But some projects may exceed that planned spend, and by a lot. That’s why it’s important to measure budget variance for each project. To do this, subtract the planned budget from the actual spend, divide by the planned budget, and multiply that number by 100. You don’t want to see evidence of ongoing scope creep from one project to the next that results in budget issues. Remember the goals of your business plan and your quarterly budget forecast as you evaluate budget variance.
5. Average Hourly Cost
It’s wise to consider the average hourly cost for your contractors. Factor in their hourly rate, as well as any fees or overhead. Then divide that total cost by their total hours worked. You’ll be able to make comparisons among comparable vendors or projects to see which contractors provide the best ROI.
6. Profit Margins
Any business wants to see good profit margins. To find out how you’re doing, subtract the costs of your contractor from the total revenue of the project they worked on. Then divide that number by the project revenue and multiply it by 100. A solid margin of 20% or higher can show that a project investment was worthwhile. On the other hand, if you’re seeing lower margins, you may need to choose a contractor with lower costs or increase your rates to bring in more revenue.
7. Invoice Timelines
Slow invoice cycles can slow down business and impact cash flow. It’s essential to have quick timesheet approval and invoice payment to prevent unexpected dips in cash flow. That means committing to a fast invoice cycle time. By evaluating timelines, you can pinpoint the source of delays and make changes.
8. Client Feedback
Are clients pleased with the work of contingent workers? Don’t rely on financial KPIs alone to determine ROI with your workforce. Send out surveys after projects and do check-ins with managers and end clients.
Tracking Vital KPIs
Tracking these eight KPIs can give business leaders insights into their contingent workforce. Specifically, they can spot inefficiencies or client dissatisfaction that can lead to critical changes. Further, monitoring KPIs lets organizations see how costs impact their budgets through data-driven information. Organizations can’t afford to have poor profit margins. It’s never been more important to make sure every dollar invested is leading to a good business outcome.
