METRICS - IMPROVING PRODUCTIVITY

WHAT ARE METRICS:

Metrics are essential to knowing how healthy a business area is. For hospitality, metrics will empower you to measure effectiveness, with the intention of improving productivity, managing cost, and keeping quality at its best.​

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CHOOSING THE RIGHT METRICS:

Choosing the right Metrics that incentivize good habits and provide meaningful insight can be challenging.​ Over and above menu item profit margin metrics, metrics towards assessing the existing cost of supporting your current products, and metrics towards measuring the cost of your kitchen teams relative to what they accomplish are key performance indicator metrics highly worthwhile to managing your business and its menu development.

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WHAT AREAS ARE METRICS APPLIED IN SAAS:

SAAS takes into account a variety of areas in which metrics are applied to measure performance on menu items and their production for sale. The primary areas where Metrics are applied in SAAS are in the various margins and yields that menu items generate.​

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HOW ARE THE METRICS APPLIED:

The metrics in SAAS that rate the performance of your product and service items, give you an idea of how many cents you are spending to make one dollar, and for each dollar spent, what the gross amount of dollars your menu items are returning. In addition to metrics on the profit margins of menu item and add on sale products, that give the customer a better value proposition, and better yield for the business, the contribution margin is also a key metric, which tells decision makers, what needs to go towards the secondary and tertiary costs a business faces, over and above the primary costs of producing products to sell.

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EXAMPLE - A COMPLEX TASK MADE SIMPLE:

If a commercial kitchen production budget was $182,000 [minus discretionary spending] and revenues were $780,000, then production cost ratio would be 23.33%. If in the previous year it were 27%, then your productivity gain would be 13.59% compared to the previous year.

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Discretionary spending, is optional things chosen to spend money on for improvements, such as better equipment, training, or outsourcing. Why do most remove discretionary spending? This is subtracted because if it is not removed from the measurement at the start, it will most likely be eliminated by most managers responsible for costs, with the intent to give an appearance of cost being reduced, and to make the metric look better.

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For example it is easy to say: "We will eliminate all outside training". Yes this would reduce cost, but most likely it would not increase production or a teams productivity. In fact it would most likely hurt it in the long term.

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The reason we have a metric on a Contribution Margin is to allow it to be kept in mind, that the business needs to have a proportion of discretionary spending, that is essential towards the improvement of productivity gain from period to period. Therefore going on a profit margin would result in shortfalls at stages. Thus keeping Contribution Margins in budgeting, and planning how to spend money is a far more useful metric to plan by.

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