Never before have commercial integrators had access to so much information.
Most leaders can pull up dashboards tracking sales opportunities, project performance, labor utilization, backlog, gross margins, cash flow, and customer satisfaction within seconds. Technology has given us incredible visibility into our businesses. Yet despite having more information than ever, many leadership teams still struggle to answer a simple question:
What’s having the most influence on our results?
I was recently working with Rick, the owner of a successful integration firm, when this exact challenge surfaced. Like many NSCA members, his company had invested heavily in systems designed to improve visibility and performance. The data was everywhere. Every department had reports. Every manager had metrics. Every meeting included another dashboard. But something was missing.
Different departments were focused on different numbers:
- Project managers tracked labor performance
- Sales teams focused on bookings
- Service leaders monitored response times and ticket volumes
- Finance reviewed profitability and cash flow
Individually, these metrics are useful. Collectively, they create noise.
As our conversation continued, Rick made an observation I hear frequently from growing businesses. “We’ve gotten really good at measuring the business. Now, we’re trying to get better at managing it.”
That statement captures one of the biggest challenges facing integration firms today.
When More Data Creates More Complexity
As organizations grow, complexity follows. More customers, more employees, more projects, and more service offerings inevitably lead to more systems and more reports. Over time, leadership teams find themselves reviewing dozens of metrics without clearly understanding which drive results.
- A metric is a measure of a business process’s status. Metrics provide data that may or may not measure or predict a strategic objective outcome.
- A KPI, or key performance indicator, is an important metric that measures the progress of a strategic objective. Indicators may measure results (lagging measures) or data that may lead to a result (leading indicators).
More metrics don’t always produce better decisions. Organizations scale by identifying the few KPIs that matter most and creating accountability around them.
Finding Your Critical Number
One of the most powerful ways to create focus is by identifying your organization’s “critical number.”
A critical number is your most important KPI based on the state of your business and the current environment. It acts as the ultimate definition of winning, helping align teams and prioritize decisions.
For many organizations, the default critical number is revenue because it’s easy to understand and easy to celebrate. But, as Rick’s team discovered, revenue doesn’t tell the whole story.
Integration firms often aggressively pursue more sales while struggling with labor shortages, project overruns, margin compression, and cash-flow challenges. More work doesn’t automatically make a business stronger.
After evaluating what was most important, Rick and his leadership team chose “gross profit dollars” as their critical number. That decision changed the nature of their conversations.
Instead of asking, “How much work can we sell?” they now ask, “What’s the right work to pursue?” The result was greater alignment throughout the organization.
Looking through the Windshield Instead of the Rearview Mirror
Once a critical number is established, the next step is identifying what drives it. This is where understanding leading-indicator KPIs and lagging-measure KPIs is essential.
Lagging-measure KPIs assess outcomes that have already occurred: revenue, gross profit, EBITDA, and cash flow. These KPIs are important, but results have already occurred by the time they appear in a report. Think of them as your rearview mirror.
Leading-indicator KPIs provide a view through the windshield. They help leaders predict outcomes, address issues earlier, and drive the business. The best-run integration firms spend less time reacting to historical results and more time managing the activities that create those results.
The Numbers that Predict Profitability
For integrators, some of the most valuable leading-indicator KPIs are found in daily operations.
Project labor efficiency is one example. When actual labor hours consistently exceed estimates, profitability suffers. Monitoring labor performance allows project managers to identify issues before they become major financial problems.
Backlog quality is another popular leading-indicator KPI. A healthy backlog creates confidence in future revenue, but only when projects are properly managed. Looking beyond backlog volume to backlog quality often reveals opportunities and risks that financial reports haven’t yet captured.
Recurring service revenue also has the attention of many firms. Service agreements create predictable income and strengthen customer relationships. Renewal rates and service contract growth can provide valuable insight into future performance.
Specific KPIs will vary by company, but the principle remains the same: identify the activities that have the greatest influence on your critical number, assign an accountable owner, and review them consistently.
Turning Information into Insight
The purpose of KPIs is decision-making.
To learn and foster accountability, the best leaders ask a simple question in their weekly huddle meetings: “If a leading-indicator KPI is positive, what do we need to keep doing? If a leading-indicator KPI is negative, what do we need to start doing?”
If the answer isn’t immediately clear, the metric or the accountable owner may not be helping the business move forward.
When Rick’s team narrowed their focus to a handful of meaningful indicators, meetings became more productive. Problems were uncovered more quickly, and managers became more proactive by identifying issues while there was still time to influence outcomes.
More Visibility, More Freedom, More Fun
One of the unexpected benefits of creating clarity around critical numbers and leading-indicator KPIs is confidence:
- Forecasts become more reliable
- Teams become more aligned
- Problems surface earlier
- Opportunities become easier to identify
- Leaders spend less time reacting and more time leading
That’s exactly what happened for Rick and his team. They were able to focus on what mattered most.
In a world overflowing with dashboards, reports, and data points, the companies that thrive will be the ones that transform information into insight, insight into action, and action into results.
If your leadership team had to identify one critical number and six to eight leading-indicator KPIs that predict future success, what would they be?
The answer may reveal more about your company’s next stage of growth than your current dashboards ever could.
Mark Fenner is president at RISE Performance Group, an NSCA Member Advisory Councilmember.
