Service Hotel is a small family-owned hotel group that focuses on personalised service in the middle-class market.
A few years back the group created a balanced scorecard and was collecting many traditionally common performance indicators in the following four perspectives:
- Finance (e.g. net profit margin, profit per available room, turnover)
- Customer (e.g. complaints, customer loyalty, service perceptions)
- Operations (e.g. occupancy rate, energy and water usage per room, maintenance costs)
- Employees (e.g. staff turnover, employee satisfaction, staff training)
Even though the data was reported on a regular basis few decisions were ever based on the data. The management team got used to receiving the regular reports but started to ignore the data it contained. The group of directors realised that this was a big waste for resources, considering the amount of effort that goes into collecting and reporting the data.
In order to put this right, the group of directors went back to their strategy and formulated a set of high-level questions they wanted more information on. This gave them a framework for data collection, analysis and reporting and made sure these were clearly linked to true information needs and unanswered questions.
The team of directors quickly realised that the previous performance information was often just providing them with ‘confirmations’ of things they already knew, instead of giving them relevant new insights. They realised that this needed to change and they collectively identified 22 key questions, which included these two:
- To what extent are more satisfied customer more loyal customers?
- To what extent do happier employees deliver a friendlier service?
With the new set of questions the team of directors had defined the objectives and information needs, now they could start designing the key performance indicators and collecting the data.
Designing KPIs and collecting the data
The organisation worked through each of the 22 questions and checked how well existing performance metrics were helping to answer them. In many cases it meant introducing new data collection methods or supplementing existing measures with new KPIs.
For example, the organisation had a lot of measures of employee and customer satisfaction (collected through traditional annual employee and customer satisfaction surveys). However, the team realised that the KPIs could be more focused and the data collection could be simplified and collected more frequently.
The annual surveys of employees were not really giving them the level of insight they needed and only allowed them to perform the analysis once a year. So as a consequence, they introduced a shorter and more frequent online employee satisfaction survey. They reduced the number of questions from 39 to 12 and started to email the survey to a representative sample of employees once a month – making sure that over the year they collect data from everyone and that individuals only get surveyed once a year. This process meant that they can now plot trends every month and they don’t have to wait a whole year to identify any shifts in staff morale.
The same was true for customer satisfaction and loyalty, but here they introduced completely new data collection methods. Instead of the long and expensive annual customer satisfaction survey, they are now relying on just two simple indicators: the Net Promoter Score and the Trip Advisor Rating. The Net Promoter Score (NPS) is based on a single question ‘How likely are you to recommend us to a friend?’, rated on a 10-point scale. This indicator is now collected in monthly customer surveys that sample a proportion of recent guests. The benefit of using the NPS score is that the data can be benchmarked across the industry, which means the scores mean something straight away.
The second indicator is the Trip Advisor score, which is an assessment from an online forum that allows customers to rate hotels on a 1-5 point scale. The team realised that they might as well use the feedback provided by customers that is collected and published by this online forum. They felt it was not only essential to take on board feedback that everyone can read but it would be foolish not to make use of this ‘free’ performance data.
Using the KPIs to drive decision-making
The management team is now reviewing the data on a regular basis. It has introduced weekly operational performance review meetings in which short term operational performance aspects are discussed. In addition it has introduced strategic monthly performance improvement meetings in which the 22 questions are being discussed. Each meeting looks as 5 questions (and the supporting KPIs) on a rotating schedule. The management team makes sure that any data that is presented is used to make decisions, if not, then the data collection will be stopped or the indicator will be replaced with something more useful. The decisions made so far include:
- Revised staff induction and training programme based on the customer feedback provided.
- New customer segmentation and marketing strategy (including online and social media).
- New package deals for high-value customers.
- Ask questions before you identify relevant KPIs
- Use standard KPIs to generate benchmark data (e.g. NPS)
- Use data that is already out there (e.g. Trip Advisor reviews)
- Continuously challenge the usefulness of KPIs – and replace the ones that are not relevant or meaningful.
About the author
Bernard Marr is a leading performance management expert and business author.
Online articles and eBooks
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- 11 Jan 2013 (12: 00 AM GMT)
- First published
- 04 Oct 2022 (12: 00 AM BST)
- Page updated with Related resources section, adding further reading on KPIs. These new articles and eBook provide fresh insights, case studies and perspectives on this topic. Please note that the original article from 2013 has not undergone any review or updates.