For many, success in business can be defined as ever-increasing revenues and profits. Yet such a rudimentary definition comes with a catch: revenue and profits are lagging indicators, meaning that by the time you notice something is awry, you’re already feeling the heat.
Enter the concept of key performance indicators. Key performance indicators, or KPIs, help you measure how successful various aspects of your business or operation are performing in real-time, allowing you to get ahead of problems before they show up in your company’s bottom line. When it comes to assessing the health of a property management maintenance operation, KPIs are especially useful.
Leading vs. Lagging Indicators
First, let’s try out an example. Say you’re cruising along the highway. Suddenly, red-and-blue flashing lights pop up in your rearview mirror. Twenty minutes later, you’re holding a speeding ticket. That ticket is a KPI of your driving. But, it’s a lagging indicator, meaning it measures your poor driving performance after it has already occurred and the problem has already presented itself.
In business, using profits and revenue as KPIs is like using a speeding ticket as a measurement of your driving. While profits and revenue are definitely a key measurement of the performance of your business, they serve more as a broad signal that something else in your operation is awry. They also do little to truly identify what is amiss.
Now, consider the alternative. You’re driving along a winding country road when you glance down at your speedometer and notice you’re speeding 10 miles per hour over the speed limit. Naturally, you slow down. The speedometer just served as a KPI, but in this case, it’s a leading indicator. In other words, it measures your driving performance as it occurs, identifies the problem — you’re speed — and gets ahead of the issue before you’re stuck with a speeding ticket, or in business, lagging revenues and profits.
As you can probably deduce, when you’re trying to decide what types of KPIs you should measure in your property management maintenance operation, it is better to measure for leading indicators than lagging indicators. But where do you start? We’ve got some ideas.
Tenant retention (leading)
Happy tenants are less likely to move, leading to reductions in tenant turnover, vacancy rates, and staff work spent trying to fill empty units. In other words, the happier your tenants are, the more money and less work your company has to do. As a result, tenant turnover rate is a good example of a KPI leading indicator in the property management business. It’s logical to assume that if your tenant turnover rate is high, your profits and revenue will also suffer. But, with the insight that your company has an abnormally high tenant turnover rate, you can address the issue immediately and at the source without needing to wait for the gut shot to your wallet to recognize the problem.
Measuring your tenant turnover rate is a great leading KPI measurement to track. But how do you get ahead of even this leading indicator?
Time of Repair (leading)
One of the best ways to create happy tenants is to fix maintenance issues quickly and effectively. According to our data, 46% of residents said that maintenance issues factored in their decision to resign a lease or move elsewhere. Even more striking, 31% of residents reported that maintenance issues were the primary reason they left a property, with rent price the only larger determinant. Given the correlation between the time it takes to fix a maintenance issue, and the satisfaction of tenants, we constructed a data-based guideline for how long your company has to repair each type of maintenance issue before your chances of a happy tenant drop off considerably.
HVAC repairs: 3.5 days or less
Plumbing repairs: 4.5 days or less
Electrical: 5 days or less
According to our analysis, if a maintenance issue takes longer than seven days to fix, you have close to a zero chance of receiving a positive review. In the end, measuring the speed of a repair job is important insomuch as it’s directly related to resident satisfaction, the ultimate measure of how your maintenance process is working. By tracking how long each repair takes and the resultant satisfaction level of the affected tenant, you can then begin to understand how long you have for each type of job before the tenant experience turns sour.
One caveat: you should never use the day you receive an invoice for a completed repair job as the date of the job’s completion. Rather, your maintenance process should have built-in checkpoints and your technicians should understand that when a job is complete, they should notify a designated person in your company, or record its completion using, say, Property Meld software. If this isn’t a part of your process, you’re setting yourself up for failure, negative reviews, headaches and lost revenue.
Online reviews/resident experience program (lagging)
We’ve said it before but it’s worth repeating: in today’s digital world, online reviews are currency. In one study, 78% of prospective residents said a property management company’s online reviews were the biggest factor in choosing where to live, with that figure rising to 86% for millennials.
In the property management industry, the primary reason for negative reviews is maintenance issues. So, if you want to preserve your company’s online reputation, you’d be smart to start with building a consistent, checkpoint-oriented maintenance process. Though it’s ultimately a lagging indicator, the satisfaction level of your residents is so intricately connected to other KPIs that it’s worth keeping an eye on.
Of course, you can also craft your own system outside of online reviews to track resident satisfaction. If you choose this route, our advice is to avoid the pitfall of selective surveying. The goal is to accurately understand how your maintenance program is operating and where the issues may lie. Selective surveying may help you intercept some issues but will taint your data and ultimately make the collection and analysis of it quite pointless. To sidestep selective surveying, you should attempt to survey every resident who has had an interaction with your maintenance crew/operation and ensure there are no barriers to entry for the reporting of their experience.
When companies report their quarterly and annual performance, revenue and profits typically attract the most attention. But those figures only tell one part of the story: the end. By using KPIs, you can gain deeper insight into the inner workings of your business, identify and get ahead of problem areas, and ensure the story’s ending is a happy one.