In a previous blog post, we discussed how to turn your translation (project) data into business analytics (BA). This time we want to provide suggestions for developing your own key performance indicators (KPIs).
KPIs are essential to tracking your business performance and monitoring progress toward your goals. But choosing the right KPIs is not always easy. So, let’s see what KPIs are, why they’re so important, and how to choose them.
A Few Things to Know About KPIs
KPIs are measures of the performance of a company, its activities, its processes, and the progress of its projects. In order to be significant, KPIs must be correlated to quantifiable business goals.
It’s also important not to confuse KPIs with metrics. KPIs are indeed metrics, but not all metrics are KPIs. A metric is anything that can be measured, but although many things are measurable, they aren’t automatically relevant to your business. A metric makes for a good KPI when it measures a performance that is considered crucial to a business.
As a general example, let’s take a company’s website. You can set up KPIs to measure the access to the website (direct links, search engines, external links from other sites, banner campaigns, SEM activities, etc.) or the type of visitors, their age, or their location. You can also analyze conversions based on certain goals, like the number of downloads, the number of newsletter subscriptions, or the number of video views.
It’s important to set deadlines and measure KPIs at fixed intervals in order to make effective comparisons. KPIs must help you to predict something of the future: Using them over a sufficiently long period of time, you will be able to spot trends and make projections on your company’s performance.
How to Choose Your KPIs Wisely
Different companies will have different KPIs based on their individual goals.
Generally speaking, translation volume, revenue growth, or reputation are valid goals for a translation business.
If you want to measure and grow your translation volume, you’ll need KPIs related to sales and/or client acquisition. For example:
- Monthly sales/new customers
- Monthly new leads/prospects
- Customer retention rate
If revenue growth is your goal, you’ll need to find out which language pairs, services, and/or domains are more profitable. You will also have to establish which clients are willing to pay more: You might have a prestigious client that sends you high volumes, but pays little and always late, while other less prestigious clients could send you lower — but more regular — translation volumes and are willing to pay more and on time.
We suggest you start taking into account the following metrics:
- Sales growth (monthly, quarterly etc.)
- Customer profitability
- Potential new clients contacted
- Customer acquisition cost
What about reputation growth? Start by considering these four KPIs:
- Employee satisfaction: Happy employees work better and make a better working environment (virtuous circle).
- Customer turnover rate: How fast are your clients leaving you?
- Best and worst services: It’s useful to revise your marketing strategy.
- Net Promoter Score: Find out who your best customers are, as well as the clients that are at risk and the ones that could damage your reputation.
And what about the employee turnover rate? As most LSPs and translation departments make use of freelancers, how many freelancers stop working with your company? Is it a good thing to always use the same linguistic resources? How efficient are your vendor managers at finding the right resource for each project (process KPI)? Which resources give the best results (performance KPI)? For more details on this, please refer to ”A data-driven approach to translation vendor management.”
Another interesting index is the efficient use of technology. How do you use the technology at your disposal? Especially when your company invests in rather expensive technology (like a translation management system or a custom machine translation system), you’ll want to make sure that you are indeed receiving all the expected benefits. In this instance interesting KPIs could be:
- Capacity Utilization Rate
- Latency time
- Uptime rate
For a detailed description of the most used KPIs, we’d like to refer to Bernard Parr’s amazing KPI library. You can of course develop your own KPIs based on your processes and business goals. If you’re ready to take this step, check out David Parmenter’s website, where you will find everything you need.
Keep an Eye on Your TMS Dashboard
To compute the KPIs you need for your business, your TMS dashboard and your project metadata are your best friends. The better you are at defining this metadata, the more information you’ll be able to collect and the more you’ll be able to analyze the structure of your company: Who answers a client’s request, the project manager or the account manager? Who sends out a project estimate, and based on what data? The ability of your staff to interact with clients and prospects in a systemic and synergic way is essential to this end.
Useful project metadata are:
- the start date and the end date of a project
- the early start/late start and early finish/late finish dates
- project milestones (the batch completion date, the batch delivery date, etc.)
- the number of words
- the number of linguistic resources working on a translation project
In this last instance, if 10 people work on a project lasting 5 days, there’s definitely room for improvement in terms of efficiency within your processes. When you have a 50,000-word project to complete in 5 days and you split it among 10 freelancers, your efficiency is taking a blow. And if all your projects are like this one, you might want to consider using fewer freelancers and planning longer delivery times or investing in machine translation.
The above mentioned project metadata will be useful for setting up the following KPIs:
Finally, show off your KPIs. Once you’ve done all your measurements and recorded your numbers, consider writing down your KPIs in a leaflet (to be regularly updated) and/or a web page for your prospects as a snapshot of your company, together with a brief description of your services and other useful information.
Learn how to measure localization metrics and KPIs within Wordbee Translator with your 15 day free trial or talk to one of our localization consultants.