Translation management KPIs: The ultimate tracking guide for LSPs

How do you measure the success of your business? Or make key business decisions around hiring and spending? There are systematic ways to track progress in all areas of business, KPIs. Key performance indicators (KPIs) are metrics tied to specific objectives within an organization. They can be applied to the organization itself, to departments, or to individual employees.

For example, if one of your company’s goals is to handle more business, you might track the volume of sales managed each month and set an annual goal. Statistics are pulled from various systems — such as your accounting software, website, or CRM. They are then integrated into business reports that give you a broader picture of whether you are meeting your company’s goals.

They help spot company weaknesses. KPIs become the foundation of your company’s growth plan. Spot and fix weaknesses in your company before they impact your customers.

They uncover areas of potential growth. For example, if you see that a certain language pair is constantly generating higher margins and customer satisfaction, you can focus your sales effort there.

They keep your company competitive. The translation industry is growing. As attracting and retaining customers becomes more competitive, LSPs need to provide better services with smarter business practices.

For instance, by tracking both your margins for individual language pairs, as well as translation quality, you can see where you need to improve your vendor selection or pricing to remain competitive.

Note: Check out our marketplace to find experienced translators looking for work.

Well-defined KPIs at every level of an organization can provide a window into its overall health. They can serve as motivators for individuals and teams to meet goals. Poorly defined KPIs, on the other hand, can have detrimental effects on morale and the well-being of the organization.

Let’s see when KPIs may not work best:

When they aren’t paired with strategic action. When goals or standards based on KPIs are placed on teams without good communication and strategy, they can act as demotivators.

If you want to improve the customer satisfaction scores of your customers, create a plan to meet that goal including rewards for improved quality and performance, as well as training opportunities, and clearly set expectations for each team member.

When KPIs do not align with a company’s objective. For instance, if quality is one of the top goals of the organization, but the KPIs are solely based on profitability, this mismatch can cause problems. At the project management level, there can be a temptation to cut corners on quality by hiring cheaper vendors to meet profitability goals. This can have adverse effects on overall sales in the long-term.

Note: To make your project management more efficient, use a client portal or a translation management system.

Set KPIs according to the stage of your company. Specific KPIs matter at different stages of growth. For instance, younger companies need to focus on monitoring the quality of translations rather than expanding their margins.

Prioritize KPIs that most directly impact your customers. The most important KPI is customer satisfaction for one simple reason: It’s difficult and expensive to acquire new customers. Customer retention should be the primary goal of all LSPs.

KPIs need to be SMART. SMART is an acronym developed by Dr. George T. Doran, a consultant and corporate planner, to evaluate the effectiveness of a set objective. SMART objectives are Specific, Measurable, Attainable, Realistic/Relevant, and Time-related.

Is your objective specific? We are growing rapidly, but want to improve our gross margin this year.

How can you measure progress towards your goal? To figure out our gross margin, we can track the costs for each project and subtract the total costs from overall revenue. In Smartcat, we can easily track these costs in real time and take the necessary action to impact that KPI.

Make sure the goal is attainable and relevant to the organization. In our competitive environment, growth goals, such as increasing margins, are always relevant to the health of the organization.

What is the time-frame for achieving this goal? Goal should be met in six to twelve months, but we can track our progress regularly.

There is information that can help you assess and calculate specific KPIs.

• Quality Assurance reports can help you assess and calculate the quality of your translations.

• Project cost statistics can help you figure out your gross margin and cost per word.

Standard KPIs such as profit, sales growth, and employee productivity can be applied to any company, including LSPs. Other metrics are industry-specific, like translation quality and translator productivity. In a competitive market like translation, KPIs based around customer satisfaction and retention are crucial.

Here are some examples of KPIs that may be useful to language service providers. Note that all of these metrics can be tracked over a month, quarter, year or, in many cases, by project.

Growth and retention

Net New Customers: The number of new customers the company signed in the last tracked period.
Net New Revenue: The amount of revenue brought in by new customers during that period.
Active Monthly Customer: The percentage of customers with at least one project in the last tracked period.
Average Selling Price is often tracked per project or per word for each language you offer.
Average Cost: The internal costs of completing a project, once again figured out for each language.
Customer Retention Rate: The number of customers you still have at the end of the year that you started the year with.

Operational metrics

On-time Delivery: Track what percentage of projects were delivered on time.
Average Project Duration: Calculate the average time it took to complete each project.
Quality Rating: Agencies that have Quality Assurance departments can randomly sample translations and grade them, determining the quality of a translator’s work.
Gross Margin: The difference between the sale price of words or pages sold to the client and the cost from translators and localization engineers.
Volume of Sales per Project Manager: Tracking the amount of sales managed per team will show you the productivity of that team and the project manager.

Customer experience

Net Promoter Score (NPS): A scale from 0 to 10 that denotes how likely a customer would be to recommend the product or service to someone else.
Customer Satisfaction: This can be obtained through surveys provided after major projects or semi-annually.

1. Choose 10 KPIs to start tracking on each level. Start with your company’s primary objectives, then determine the metrics you’ll need to track to meet those objectives. Make sure the KPIs you choose are SMART, contextually tied to your company’s primary values, and prioritize your existing customers.

2. Assign a person responsible for tracking and reporting on KPIs at each level. For company-level KPIs, this is often the business owner or CEO. Project managers tend to track KPIs related to each project and their teams.

3. Review KPIs regularly. If you typically work with large projects, we recommend that you review KPIs at the end of each project. If you work with a consistent number of smaller projects, track your KPIs monthly. Note that some KPIs, such as customer satisfaction, need to only be gauged every quarter.

4. Develop reports for customers and stakeholders. Tracking and reporting on your KPIs shows invested parties the progress you’re making and can help build trust. Develop specific reports for customers and stakeholders around the objectives that will impact them the most.

5. Re-evaluate which KPIs you’re tracking. As your company matures, so should your objectives. Younger companies will need to re-evaluate their KPIs on a more regular basis — potentially, every year. More established companies can re-evaluate their objectives less frequently, setting five-to-ten-year plans.