Difference Between KPIs, OKRs and KRAs
Key Performance Indicators (KPI) are measurable guidelines that are used to gauge your performance in existing functional areas such as operations, human resource and finance within the property management scene. Property management KPIs are usually established from industry standards that every firm in real estate will aim to achieve. For example: –
Performance Indicator: Maintaining an acceptable occupancy rate at 95%, the recommended metric for urban property development areas.
OKR refers to Objectives and Key Results which aims to clearly define a goal and attach it to a measurable success indicator. Unlike KPIs, where current performance is measured, OKR is used to quantify ambitious business goals and reach them realistically through agile means. OKRs are reviewed constantly rather than annually.
Objective: Increase the number of properties managed through marketing
Key Results: Improve engagement and build a community through an online presence by 30%
KRAs, on the other hand, refer to Key Result Areas that is primarily used to align employees with business goals and ensure that all employees are aware of their roles. While KPIs are used to measure performance, KRAs are seen as critical success factors breaking down your organisation goals into focus areas such that it is easy to define and integrate employees’ workflow into your company’s objectives. A property manager’s KRA includes maintenance compliance and ensuring tenant satisfaction.
Why should KPIs matter to facility and property managers?
Property management KPIs help facility and property managers keep their business objectives at the centre of their daily activities as well as provide knowledge into the performances within each role and function. They not only help your property management agency stay competitive and at the top of their game, but they also help:-
- Monitor your company’s health
- Measure progress
- Solve problems with insights to progress
- Stay on track with objectives
- With the planning of strategies and processes
A systematic measure of your company’s capabilities can also be used to gauge your standing amongst the increasing number of competitors within the property management scene.
Quoting the Singapore Institute of Surveyors and Valuers (SISV): “..there are many real estate agency companies, valuation companies and property management companies for a population of three million people (to date)“, which is why facility and property managers should adopt the use of key metrics to define, track and improve not only on the competency of property management’s methodology but also on the quality of services rendered to stay ahead of the game within the highly-competitive and constantly advancing real estate sector.
Most Commonly Used KPIs within the property management scene
Most commonly-used KPIs by existing property Management Agencies.
As a property management company or managing agent, you are often in charge of a diverse mix of responsibilities. From supervising contractors, properties and staffing, to compliance of property management regulations, thus it is important to recognise key property management KPIs across the various functions within the property management process. Here are some of the common determining success metrics:
- Number of properties and units per property they manage
- Average market rent of rental units
- Weighted Average Lease Term
- Properties won and lost annually
- Revenue growth
- Employee satisfaction
Most commonly-used KPIs by existing on-ground facility and property managers.
On-ground facilities and property managers are responsible for the day-to-day operations concerning the managing of properties in their care. Their property management KPIs would include:
- Speed of repair and maintenance
- Arrears and cash flow
- Management fees
- Vacancy levels
- Tenant Turnover
How To Formulate KPIs For Property Management
How to choose KPIs
While it is common for facility and property managers to consider metrics such as revenue growth, maintenance and tenant conversion rates as generally efficient key performance indicators, it is important to note that no two property management organisations operate the same. Hence, the choice of KPIs will also differ. The most effective property management KPIs are refined and depicted to meet an entities’ specific organisational goals. Here are some suggestions of how you can create a suitable KPI list for your facility and property management firm…
Step 1: Identify business goals.
As a property manager, you should first, decide your scope of service to landlords, building owners, MCSTs and tenants, and quantify your desired income range.
Step 2: Learn about your clients' and their expectations.
Communication between property managers and tenants or building owners are key to deeply understand implicit and explicit expectations from your clients such that you can formulate your property management KPIs to meet their needs appropriately.
Step 3: Formulate KPIs.
After identifying your goals and your client’s needs, you can generate useful performance indicators that will satisfy your property management objectives. Using the SMART technique to construct your KPIs will help you achieve them better. KPIs must be Specific, Measurable, Attainable, Relevant and Time-bound.
Step 4: Categorise KPIs into different business functions.
If your performance indicators seem exhaustive, split them into your business functional areas. For example, cash flow and net operating income will fall under finance. Adam Hooley, Business Consultant at leading property managers Association (LPMA) tells us that in doing so, it will help you reduce complications (from 50 property management KPIs to only 7 business areas) and enable you to focus on critical areas that demand more attention.
Below is a list of top KPI’s that we have listed that has been categorised for the various areas within property management.
Top KPIs suggested for Facility and Property Management businesses.
1. Financial KPIs
Net Operating Income (NOI)
NOI is used by real estate professionals to measure the profitability of properties that are owned or managed. Property managers use this KPI to track and showcase how much their managed properties have grown in terms of value. Comparing your NOI annually will help you identify whether your company is aligned with your profitability goals for each property. If you fail to add value to a managed property, this property management KPI can help identify which property is pulling your revenue. Given this information, you can drill down on the reasons for the decline in NOI that come from either a loss of income or increase in property management expenses and subsequently adjust them. For property managers, operating at an income margin of 15% or higher is advised. NOI measures the efficacy of your property management services by subtracting operating expenses or running costs from your property’s revenue.
Arrears and Cash Flow
Arrears refer to overdue payments owed to you that can affect your cash balances. Sufficient cash flow is necessary to ensure that your company can pay for taxes, bank loans and purchase new assets. To improve this property management KPI and reduce arrears, property managers can perform proper screening on tenants’ employment claims and credit balances to determine their ability to pay rent when it is due. You should look into tenants who consistently owe you rent for more than 7 days. To measure arrears, multiply the amount of money owed by the number of months unpaid.
According to Jo Anne Oliveri, Founder and Managing Director of property management business solutions company, Ireviloution Intelligence, your average management fee determines your monthly income and thus will influence your asset value as a property management company. Analysing your monthly property management fees can help prevent your employees or individual property managers from discounting percentage fees unnecessarily, which may affect your brand and its reputation. Property management fees usually account to 8-12% of monthly revenue depending on your service levels to MCSTs and building owners. Based on this amount, calculate the property management fee over 12 months to get the average for the year.
Maintenance cost refers to the cost of labour, replacement or repairing of appliances, and materials used to maintain properties. Including maintenance cost as your key property management KPI is essential as it will provide insights on the trend of maintenance expenditure per month, allowing you to decide on either scheduling more routine maintenance inspections or employing minor repair works wherever possible to cut down on maintenance costs. Generally, maintenance cost KPI should be 1-4% of the annual property value. To calculate maintenance cost per property, you can take the total maintenance cost divided by the total number of properties managed.
Response to Maintenance requests
This property management KPI measures how long you take to reply and act on clients’ requests. Keeping a good track record of response time will show that you are a responsible property manager, positively influence your property management branding. This is possible with a handful of property management software that can notify you of any damages or requests communicated by tenants. Such approaches contribute to an overall positive net promoter score as overall response time improves. The industry standard for this property management KPI is to take 24 hours to respond to requests. Monitoring response time can be done by recording the interval between a request and the provision of service.
Schedule compliance is a measure of adherence to weekly maintenance work. Scheduling maintenance will ensure that assets are maintained in the right timing. Property managers may overlook maintenance dates and have them in a backlog, especially when overwhelmed with other tasks. Lack of priority given to schedule compliance can lead to safety risks of tenants. To honour maintenance scheduling better, property managers can assign employees to handle them and record updates in an asset management software. However, with the help of smarter technologies these days, solutions with preventative maintenance-like features are emerging in the market as it serves to forecast proactively and alert property managers about necessary upcoming maintenance ahead of time, reducing reactive approaches as assets are well maintained with the help of data and intuitive workflows. Your property can run smoothly with a minimum of 40% schedule compliance rate. However, it is advised to aim for a KPI of 90% in schedule compliance. To calculate this property management KPI, find the percentage of the number of work orders completed on time over the total scheduled number of tasks.
Certificate of Insurance compliance
Ensuring that your property management services are as per Singapore’s legislative requirements is crucial. Property management companies need to ensure that their tenants and vendors are covered by managing their insurance policies. Examples of such insurances include workers liability, pollution liability and workers compensation. It is important to verify the Certificate of Insurance (COI) from every partner in your facility or property management business to mitigate risks and avoid expensive lawsuits and claims in the long run. According to property risk managers, insurance coverage for your tenants and vendors should average above 90%.
Net Promoter Score (NPS)
NPS is a KPI used by property managers to verify if landlords, building owners and tenants are satisfied with your property management services. A short feedback survey is crafted to check out the overall satisfaction rate among tenants and residents. Apart from asking if they will recommend your services to their friends and acquaintances, you might also want to ask them to suggest one key improvement for your reference. This allows for relevant stakeholders to feel heard and to open up a healthy conversation, not to mention it provides facility and property managers with the understanding of key needs or unhappiness of residents, tenants, landlords and building owners. It can only improve your overall NPS.
An NPS score of 0-6 means that they are unhappy and will avoid sharing about your service. A score of 9-10 indicates their willingness to go out of their way to promote your company. To find out more on how to craft and collate your Net promoter Survey results, click here.
Tenant Turnover Rate
Tenant turnover rate refers to the number of times a tenant moves out, and the property is prepared for a new tenant. It is necessary to keep this property management KPI in check as finding new tenants will cost you time and money. It is more expensive to search for more tenants than to retain your tenants as you have to invest in renewal works and to market your apartments for a new tenant, adds to property manager’s maintenance costs. The goal is to decrease your tenant turnover rate and increase tenant retention. If 50% of your tenants are not renewing, you have a tenant turnover problem. It is normal for a tenant to move out every 12 – 24 months for rental properties. Tenant turnover is calculated by finding the percentage of the number of tenants that moving out over the total number of tenants within 12 months.
Lead generation KPIs keep track of the number of clients found and converted. Property management firms should have a lead generation strategy to meet this property management KPI as it will increase your revenue, such as increasing the number of properties managed, overall tenant occupancy or other revenue-generating streams in your company. To identify your performance in lead generation, you can calculate the number of leads generated with how many converted to clients. In real estate, conversion rates average about 2-3% convert them into clients. To calculate lead conversion, you can take the number of leads generated divided by the number of clients gained that month.
We hope these categorised KPIs will help you better quantify, achieve and optimise on your facility and property management goals. But before you begin implementing your KPIs, let’s take a quick look at some of the possible challenges you may encounter before you set up realistic goals to work towards.
Possible Challenges faced by Property Management Agencies
Identifying and setting up KPIs are only in-part beneficial; the execution of it is reliant on ground-level executives and partners, which is why it is imperative to communicate objectives and KPIs to on-ground staff as clearly and transparently to avoid misalignment. While property management KPIs can set high-performance standards, attaining those KPIs are almost impossible without the help of your employees as they are the ones carrying out on-site management operations. Poor communication of goals will lead to a lack of understanding of task objectives which reduces the morale of your ground-level executives. Unmotivated employees will avoid going the extra mile to help you achieve your property management KPIs. Incongruencies between KPIs and execution of tasks by employees is caused by the inconvenience of facilitating information across property management divisions. Not having a unified platform to communicate your goals will hinder your performance. Acquiring property management software that can display useful information on KPIs to the organisation will ensure that employees can follow and tailor their tasks in accordance with the set property management KPIs. They can also receive advise and help easily from upper management with an effective communication tool.
Lack of transparency
Transparency within a property management firm refers to easy accessibility of information on workflows, records, tenant information as well as performance data. Lacking transparency will limit your firm in achieving targeted property management KPIs. Categorised KPIs are usually divisionally managed. For example, the net promoter score to determine client satisfaction will be tracked by the customer service or marketing team. However, the ability to reach one KPI in a given sector can be improved with the involvement of another sector within the firm. Take NPS, for instance, to improve net promoter score, information from the maintenance division on how quickly maintenance responses are provided will be helpful. Understanding how fast or slow servicing is actioned upon will expand your insight on the reasons behind a poor net promoter score. Matching property management KPIs in this manner will foster more accurate decision making and enable you to provide quality property management. Hence, transparency within an organisation facilitates the much-needed integration of information across all functional areas of the firm.
Did you know that there are property management software that will not only provide you with data and information but also promote collaboration among property managers and stakeholders, right down to the employees? Educating employees on property management goals not only align them but also helps them understand the bigger picture behind their daily tasks. Solutions out there that provide transparency and communication does that efficiently as data is instantly accessible to everyone.
Facility and property managers today need a robust and intuitive property management platform that not only provides data and information but also enables intuitive workflows and transparent communication that is compliance-ready.