How is kpe deciphered. KPI - key performance indicators - what is it in simple words. Optimal timing of KPI implementation

Key performance indicator (KPI) is an indicator of the organization's performance that helps the company achieve strategic and tactical goals.

KPI is one of the tools with which you can analyze how effectively the staff works to achieve the company's goals.

Using key performance indicators, the organization gets the opportunity to manage the process and make changes to it, as well as set goals for the staff and motivate the employees of the company to achieve the goals.

What is KPI for?

The tasks of KPI include stimulating employees and motivating them to achieve planned results.

Types of KPIs

There are several types of KPIs in connection with the following performance results:

cost item - the amount of resources spent in value terms;

performance item - the percentage of utilization of the capacities involved;

efficiency article - indicators characterizing the ratio of one indicator to another (for example, the ratio of revenue to costs);

article of results - a quantitative expression of the result of the company's activities.

Also, key performance indicators can be divided into two types - operational and strategic.

Operational indicators are used in the current activities of the enterprise and its divisions. Operational indicators allow the company to set goals and objectives depending on changing conditions.

Operational indicators include indicators that characterize the efficiency of the organization of production, the volume of supply of raw materials, the quality of manufactured products.

Strategic indicators reflect the result of the enterprise's activities for the current period. Strategic indicators enable the company to adjust plans for the next period. Strategic indicators are used, for example, in the analysis of cash flows, on the basis of which the main strategic indicators of the company are calculated.

Strategic indicators include performance indicators of the enterprise (for example, profitability).

Rules and principles of KPI implementation

The rules and principles of KPI implementation are as follows:

The 10/80/10 rule. This means that a company should have around 10 KPIs, up to 80 production metrics and 10 KPIs;

The principle of control and control. The unit responsible for a certain indicator should be allocated the necessary resources to manage it, and the result can be controlled;

The principle of partnership. To successfully meet the challenge of increasing productivity requires the establishment of an effective partnership between all stakeholders;

The principle of transferring efforts to the main directions. To increase labor productivity, it is necessary to expand the powers of the employees of the organization, personnel, conduct trainings, and effectively interact with the company's divisions;

The principle of integrating performance measurement, reporting and performance improvement processes. An integrated performance evaluation and reporting scheme should be created that stimulates specific actions of company employees. To do this, meetings should be held regularly, which in terms of timing depend on the complexity of the issues being addressed;

The principle of coordinating production indicators with the strategy. Performance indicators should be linked to the current success factors that make up the balanced scorecard and consistent with the strategic goals of the organization.

Benefits of KPIs

The main advantages of using KPIs include:

employee motivation;

fairness, transparency and comparability of results (it becomes clear to management and staff which employees of the enterprise work how much and how much they earn);

adjusting the work of the employee according to the received low indicators;

participation of personnel in achieving the goals of the organization;

quality control of the performance of duties.

Thus, the advantage of the KPI system is active based on calculated comparable indicators.

Key performance indicators in sales

Key performance indicators in sales are calculated based on the following indicators:

sales profit;

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How, after all, to develop a really working KPI system in a company? There are many methods, there are separate examples, but it is practically impossible to find an algorithm for developing a real KPI system. I hope the reader will be interested in the proposed algorithm for developing a KPI system from scratch (when there is nothing yet), ending with the final result - a working system. About this in this article.

"God is not on the side of the big battalions, but on the side of the best shooters."

Voltaire

In the article “How to develop a motivation sheet for a salesperson? Strategy and Tactics ”, which was published on December 27, 2016, showed specific KPIs for sellers taken from the author’s real practice.

In this article I will try to give an algorithm for creating a KPI system in the company as a whole. On the example of a design company (IT company) implementing large and technically complex projects.

KPIs - Key Performance Indicators- key performance indicators of the unit, company or enterprise. The Russian abbreviation uses the abbreviation "KPI".

I'll start with the main one. The questions that usually come up are:

Where can I get these same KPIs, and what should they be? Will these KPIs be achievable, and how to determine this?
Which KPIs are important and which are not?
How to use KPIs to link the key areas of the company's activities, so that KPIs for marketing do not contradict KPIs for sales?
What project implementation methodology should be used? Let's say we chose the Balanced Scorecard (BSC) methodology - Balanced Scorecard. What should be done next?
How to start such a project, and how should it end? Etc.

Lots of questions. Answers, as usual, many times less.

In the article “How to develop a “Headwheel” for managing a large company”, which was published on January 10, 2017, there is some material on this topic, since the basis of the “Headwheel” is the KPI system.

If the company has a business development strategy, strategic goals are the basis for strategic KPIs, which are easy to decompose into separate divisions of the company. In this article, we will not consider this case.

Consider the algorithm for creating a KPI system when there is no business development strategy in the company. Step by step.

Step 1. We choose the methodology for implementing the project to create a KPI system. For example, the Balanced Scorecard (BSC) methodology. I wrote about this in the article "How to develop a" Manager's Wheel "", but I repeat. These are the classic 4 "walls". See Fig.1. The gist in short:

A. Finance. Finance in the company is provided, after all, by sales of goods and services.
b. Sales. In order for everything to be normal with sales, technologies / products are needed - those that are in demand by the market and those that can be offered (sold) to the market.
C. Technologies/Products. In order for everything to be normal with technologies / products, specialists are needed - people who create them.
D. People. In order for people (able to do this) to create competitive products, they need to be paid, they need to be trained and developed, and so on. Then they will create products, products will be sold, and the company will have everything in order with finances. Then the company will be able to invest in people again and again to create new technologies / products. Technical specialists (production personnel) implement projects for which customers, in fact, pay money.

Rice. 1. Very simplified the essence of the Balanced Scorecard (BSC) methodology - Balanced Scorecard.

Step 2. We form the structure of the main areas of the company's activities. For example, for a project company, this is:

"Wall" A

A set of more complex macro parameters. Somehow: liquidity indicators, capital structure, business profitability, business activity and others will not be considered in this article.

"Wall" B

2. Sales.

3. Marketing.

"Wall" C

4. Key areas of development(their condition). Let's say this is the modernization and expansion of the product line.

5. Presale.

"Wall" D

6. Production(implementation of projects).

7. HR(personnel Management).

Comment: it is worth noting that many companies add their own “walls” (5th, 6th) to the classic 4th “walls”, which are the most important in the company's activities. For example, the logistics block.

Step 3. Determine the areas that we want to strengthen. Or areas in which we have clear “points of failure”. "Points of failure" are not complete failures in business. This is something that doesn't work, or doesn't work very well. The task is clear - to eliminate the "points of failure". There are such “points of failure” in every company.

Task example. Suppose, in general, everything is more or less normal with us, except for the fact that Industry Segment 1 ceased to be profitable, but we see that it is promising Industry segment 2(or a new promising niche) with which you urgently need to start working.

An example of an action plan.

1. Prepare/adjust the product line for the new Industry Segment 2 (new industry for short - “NO”). This is the "wall"
2. Find a professional sales director for "BUT". This is the "wall" of B and D, since it is a task for the company's sales director and for HR.

a. Develop a customer profile "NO". This is the "wall" B.

b. Develop a profile for the NO director. This is the "wall" B.

c. To develop the main parameters of the motivation of the director of "NO". This is the "wall" B.

d. Develop a motivation sheet for the director of "NO" and agree on it. This is the “wall” D.

e. Carry out a search/hunting for the director of "NO". This is the “wall” D.

3. Form a new sectoral department - for short - "GCD" - (budget, responsibility centers, staffing, etc.). This is the "wall" B.

a. Assign tasks to the director of "NOD". This is wall "B".

b. Develop the main parameters of the motivation of sellers of "NOD". This is the "wall" B.

c. Develop motivational lists for NOD sellers and coordinate them. This is wall "D".

d. Search/hunt sellers in "NOD".

e. Transfer part of the sellers, hire part of the "NOD", part, perhaps, dismiss. This is the "wall" of B and D.

4. Set presale tasks to promote the company's solutions in "NO". This is the “wall” D.

5. Set tasks for marketing to promote the company's solutions in the "BUT". This is the "wall" B.

An example of a goal tree and KPIs.

"Wall" C

KPI (Technical Director):

Prepare/correct product line for NO.
Set presale tasks to promote the company's solutions in NO.

"Wall" B

KPI (Company Sales Director):

Develop a customer profile "NO".
Develop a profile for the NO director.
To develop the main parameters of the motivation of the director of "NO".
Form a "GCD" (budget, responsibility centers, staffing, etc.).
Assign tasks to the director of the "NOD" (after HR finds the director).
Set tasks for marketing to promote the company's solutions in BUT.

KPI (Director of "NOD"):

Develop the main parameters of the motivation of sellers of "NOD". Coordinate them with the company's sales director and transfer them to HR.
Look at sellers (existing and new), make decisions.

"Wall" D

KPI (HR directors):

Develop a motivation sheet for the director of "NO" and agree it with the Sales Director of the company.
Search/hunt director "NO" (find a professional sales director).
Develop motivational lists for NOD sellers and coordinate them with the director of NOD.
Search/hunt sellers in "NOD".
Transfer part of the sellers, hire part of the "NOD", part, perhaps, dismiss.

Comment: it is clear that there are tasks for "wall" A - to plan new expenses in the company's budget, etc.

So, we have formed a tree of goals and set goals and objectives that will ensure the creation of a new branch department (SOD).

1. The department will have to be headed by a professional sales director in this industry.
2. We have planned all the necessary actions related to closing or downsizing Industry direction 1 if it can't be closed yet.
3. The technical department, marketing, HR and pre-sales have been assigned the appropriate tasks, which must do their part of the work, according to their profile, and support the new direction “on all fronts”.

Dear reader, for sure, will think: “Easy to say: to hire a professional sales director for a new industry segment!”. Complicated! How did the author do? I formed several lists for HR.

1. List number 1. Large and medium-sized companies where it makes sense to look for a director or deputy director of a similar direction. It doesn't work, then:
2. List number 2. Smaller companies where it makes sense to look for a director. A person will be a little out of step, but he will be inside a more rebuilt company. And for him it will be career growth. It doesn't work, then:
3. List number 1. Look for a strong seller in large and medium-sized companies, not a manager. Also for growth. It doesn't work, then:
4. List number 1. Look for a director who is close in terms of industry, taking into account his ability to master a new industry.
5. Etc. There were other options as well.

By the way, the HR service, having received such lists, could quickly figure out where and whom to look for. As a result, candidates usually found.

"For a man who does not know which harbor he is heading for, no wind will be favorable."

Lucius Annaeus Seneca the Younger

KPI details can be generated using, for example, the well-known S.M.A.R.T. goal setting methodology. So,

Step 4. Study the goal setting methodology to be used in goal setting.

For example, the goal setting methodology S.M.A.R.T.

Move on. We have identified areas that we want to strengthen. Or areas in which we definitely have “failure points”. What's next? Next, we develop an action plan (see example above) that will allow us to strengthen these areas and/or eliminate “points of failure”. Without a holistic action plan, it is not realistic to build a KPI system that will unite the work of various company services. Anyway, it's pretty difficult.

Step 5. Develop an action plan.

In Step 3, I showed an example of an action plan, not the most trivial, but which is quite possible to implement, and such action plans are quite often implemented by companies. What's important? - a meaningful approach to problem solving!

Step 6. Check the action plan for feasibility.

Experience shows that most often, it is immediately clear which points of the plan are precisely feasible. The main thing - you need to carefully look at those points that are clearly in doubt. And either, think a little (for example, arrange a “brainstorming”), or involve experts, or, perhaps, go another, simpler, way. But, one should not set clearly impracticable (unattainable) goals and objectives!

Step 7. Building a tree of goals (and tasks).

So, there is a plan of action. There are goals and objectives. It remains to build a tree of goals (and tasks) and appoint those responsible. If new Responsibility Centers have appeared - well, these functions did not exist before - then it is necessary to modify the organizational structure of the company in accordance with the new Responsibility Centers. So, in general, companies grow.

Step 8. Formation of a list of KPIs with the appointment of responsible employees for specific KPIs.

An example of a tree of goals and the formation of a list of KPIs based on an action plan is shown in the example above.

Step 9. Formation of motivational sheets.

Until similar (given above) qualitative goals appear in the motivation lists (and in the example above there is not a single financial goal!), the KPI system will not work! It will remain on paper. What is shown in the example above is what needs to be done urgently! Exactly in order not to "accumulate" a bunch of extra costs, and even worse - losses, and exactly in order to ensure the further growth of the company as quickly as possible. Of course, financial!

“It is impossible to solve the problem at the same level at which it arose.

You need to rise above this problem by rising to the next level.”

Albert Einstein

How to implement such a project?

I often hear "tried - it doesn't work!". There are quite a few reasons why such projects do not reach the stage of operation and the final result.

We often forget that man is not a machine. Therefore, based on my own experience, I would recommend the following:

1. Start with small pilot projects, limited by the scope of the company and the range of tasks. The goal is simple - to quickly develop a skill. It is not necessary to put developments into action immediately. You can simulate the situation (see item 3).

It is far from always effective to launch a large and complex project.

Example. Motivation systems in large companies, as a rule, are perfected for 2-3 years. In one of the companies in which I worked, we came to a balanced new motivation system only after 3 years. At the same time, a fairly good and correct system of motivation was developed already in the first year. In the second year we had to make it more aggressive. In the third year, the motivation system was already balanced, including by the market, and tested in practice for 2 years. Of course, subsequently the motivation system was adjusted every year.

2. Small pilot projects are best done in the simplest and most understandable means (for example, in Word or Excel). To start. The main thing is that this is the substantive part of such projects, “put on paper”. When implementing a very small task, the mistakes made (and they will be!) Can be quickly corrected.

3. Carry out a full cycle of modeling - from solving some small problem to the formation of KPI with the conditional "appointment" of responsible persons and the formation of conditional motivational sheets.

Example. Suppose the company does not have motivational sheets (yet), there is no KPI system (yet), and the company has not implemented this project before. How to simulate a situation? Run steps 1-3. Do not assign KPIs (!), and “do not hand over” motivational sheets (!). Just entrust the responsible manager with what is written for him. And then compare what was planned and what really happened.

It is extremely important to try to avoid "classic" mistakes. To do this, do the following:

1. Be sure to form the final goals of the project to create a KPI system. The goal - "to set KPI" - is "understandable". But this is the same as “increasing the efficiency of the business”, “ensuring the further growth of the company”, etc.

I will give an example of a range of practical goals for creating a KPI system:

a. Goal 1.1: Competency testing of managers and key employees in order to identify “points of failure” (incompetent employees) and promising employees (able to grow). Still, key performance indicators should show (and show!) Efficiency and inefficiency.

b. Goal 1.2: checking the effectiveness of the company's business areas (sales, production, presale, marketing, etc.) with the same goal.

c. Goal 1.3: Checking the effectiveness of business processes and communications in the company. Most of the major goals and objectives are implemented by various departments. The growth of the company depends on the coherence of their work. No more and no less! This is the very efficiency that we often talk about.
2. The action plan must be checked for feasibility. So that it does not have unattainable goals (and tasks).
3. Be sure to appoint responsible for specific KPIs. At least simulate it (for starters). So that it does not turn out that no one is really responsible for specific KPIs.

"What is everyone's business is nobody's business» .
Isaac Walton
4. The project to create a KPI system must be completed with motivational sheets. So that the formed KPIs do not turn out to be “outlaws”. If this is a pilot project, let it be several KPIs for a period of 2-3-4 months. This is also correct.

A practical example based on the Balanced Scorecard (BSC) methodology.
I will give an example based on the above, taking into account the mentioned methodology and in the form of a sequence of practical actions. Let's say you start at the top "Finance" and you are concerned about the "marginality" indicator. It is clear that there are a lot of ways to increase the marginality of projects, so it makes no sense to list all these methods. You need to choose the methods inherent in your company, as well as identify the reasons for insufficient margins.
So, a very conditional plan - just for example.
1.KPI-1. Increase the marginality of projects by at least 7% over a period of time not exceeding 6 months.
Suppose the key reasons for insufficient marginality of projects are the following (conditionally):

High project costs due to failure to complete projects on time.
Most projects by themselves do not have sufficient marginality. Further - we often “fly out” of the deadlines and budget, and the marginality becomes even less.
There is no possibility to choose more profitable projects from the existing portfolio of projects. There are so few projects, and there is almost no portfolio of potential projects.
The high cost of purchasing equipment for projects, which does not add marginality.
There are no unique (almost unique or high-quality) services due to which the company can "charge" extra money for projects.
Etc.

From here, KPIs of the next level “grow” for a number of company services. Namely (again - conditionally):

2. KPI-1-1(for the Technical Directorate and Project Managers (RP)): the implementation of projects on time and within the budget of the project. The KPI for the project was fulfilled - the RP received a bonus. No - you need to figure out why, and, possibly, change the RP.

3. KPI-1-2(for the Marketing Block): identify industries, segments, and niches that are more solvent than those that the company currently operates in. Prepare a presentation and justify your proposals. During<такого-то срока>.
4. KPI-1-3(for the Sales Block): to form a portfolio of projects with a volume of at least<такого-то>, for at least<такого-то срока>(in close interaction with marketing, so as not to waste time). To be able to select projects for implementation.
5. KPI-1-4(for the Procurement Block) not yet. Initially, you can set the task - to work out and give suggestions on how to reduce the cost of purchased equipment for projects.

Today, many companies are trying to get their employees to work according to the KPI system ( Key Performance Indicators- key performance indicators). What are the monetary pros and cons of KPIs?

The goal is one, the tasks are different

KPI is a scorecard by which employers evaluate their employees. It has much in common with the usual planned approach. With one major difference: the performance of each individual employee is tied to the overall KPI of the entire company (such as profit, profitability or capitalization). The purpose of the system is to make sure that the actions of employees from different departments are not contradictory and do not slow down the work of specialists from other departments. Everyone contributes to the common cause, works to achieve their goals and as a result receives bonuses for their implementation.

KPI work allows specialists to better understand what they need to do in order to be effective. By "efficiency" is meant not only the amount of work done per unit of time, but also the benefits received by the company from the activities of the employee.

In each department, the company's general KPIs are "split" into smaller ones - personal ones. There should not be many key indicators for each. Three to five well-defined KPIs are enough. The main thing is that each of them can be easily measured. An example of the indicators of one of the sales managers: “sales volume is not less than...”, “the number of new customers is not less than...”, “the size of the average contract for a client is within...”, “the level of English knowledge is not lower than .. .".

Measure of result

In large Western companies, where everything is spelled out and detailed to the maximum, work on the KPI system is a good option for employees. The specialist understands how much, for what and when he will receive in excess of the salary. And what is included in his salary. Clear, documented information about what the employer expects from you makes the job very easy. Each employee has personal tasks and deadlines for their implementation, and the company regularly monitors his work with the help of evaluation.

In many companies, in addition to monthly monitoring, the results of all KPIs are taken as the basis for an annual assessment of staff performance. After the annual assessment, the HR Directorate draws up lists of the most promising specialists for enrollment in the company's personnel reserve and promotion.

But if the “head office” helps foreigners in developing goals, then domestic employers, in order to determine the goals and objectives of their specialists, act in different ways. Some invite consultants, others manage on their own: the goals are prescribed by the personnel directorate. Since neither the first nor the second features of the work of each particular specialist are known, it happens that the indicators are formulated inaccurately.

“At the exit”, the employee is faced with the fact that his KPIs turn out to be impossible. Or, on the contrary, such a system allows the specialist to find legitimate “loopholes” so as not to strain especially. The IT director of an industrial holding, Alexander, recalls that before the introduction of KPI, his subordinate "system administrators" solved user problems "on the first call." Now, when calls like “Help! Computer froze!" they react "bourgeois". They demand that they write a request with the essence of the problem and pass it on to the senior “sysadmin”. Then it is queued for execution. “Yes, I could do it in three minutes, but it will not be recorded anywhere. What do I care about the difficulties of other employees and departments? I will be evaluated according to KPI, the achievement of which I am motivated.”

Plus bonus

The described system is good for employees whose work results most affect the financial and economic performance of the enterprise. In trading companies, these are, first of all, top managers and sales managers, in recruiting offices - recruitment consultants.

Communications manager Elena says that in her company, the achievement of goals by an employee also affects the individual size of the annual salary review: the higher the score, the higher the percentage of salary growth. “The annual bonus for managers consists of two variables, which depend on the results of meeting individual goals and on the achievement of company performance indicators. This approach encourages better performance of functional duties.

For employees from different departments, the size of the bonus, which is affected by KPI, can range from 20% to 100% of salary.

At the same time, the formula for accruing the bonus itself is quite complicated: it takes into account the number of KPIs, the coefficient of completion of each of them, as well as its “weight”, that is, the coefficient of influence (the more important the indicator for the company, the higher the “weight”).

If the KPI scale is compiled incorrectly, there will be little result from it. For example, if there are too many KPIs, the impact of each on the amount of the total bonus will be small. Economist Lyudmila says that at first she had about 20 KPIs, but a year later they were reduced to five. “Most of the indicators accounted for a small share of the bonus, and for me the loss of 5% in the bonus was not of particular importance. A 20% KPI weight motivates much more effectively,” she admits.

System Disadvantages

One of the main disadvantages of KPI is that if a department performs poorly, all its employees can lose salaries at once. After all, personal KPIs are associated with key indicators of the entire department. If the planned indicators are systematically not achieved, the employee may be demoted. Therefore, KPI forces you to always be in shape. Who does not withstand this rhythm, he leaves himself.

The disadvantages of working in the system of key indicators include the fact that not all employees can directly influence the company's strategic KPIs. If the bonus depends on net profit and sales, it is unlikely that sitting in the office, a secretary or an economist will be able to influence it.

Very often, in Ukrainian companies, the KPI motivation system is “one-sided”: everything that an employee overfulfills is just a job well done, for which he receives a salary, and for underfulfillment he is deprived of some part of his salary. Or another option: a system of key indicators is being introduced, but there is no link to the employee motivation program.

The work of technical specialists (accountants, engineers, programmers) is easier to describe with a job description. And it is very difficult to find a fair “line” for them.

And further. Keep in mind that planning and KPI calculations take time. The head of the logistics department of a transport company, Roman, is dissatisfied with the fact that the introduction of this system turned out to be additional hours of work for him. “Now, at the end of each month, I have to spend time setting and calculating KPIs for all my subordinates. All indicators have to be coordinated with the HR Directorate. At the same time, they don’t pay me extra for calculating the size of bonuses,” he complains.

The transition to a KPI system is usually accompanied by unrest among employees: some innovations are “quietly sabotaged”, others do not completely accept it and leave the company. It is difficult to immediately change your habits, the order in which functions are performed, and get used to the new conditions of remuneration.

Andrey, a former regional manager of a confectionery company, recalls that when he was given the goal of “selling not a lot of cheap sweets, but a lot of expensive ones,” he had to change a lot in his work. Misunderstanding of innovation by the team and partners interfered. While he was retraining his subordinates, some of the people left. And when he negotiated with retail chains, based on the new goals of the company, he was forced to agree to more stringent conditions.

Now we list a number of rules that must be taken into account when creating your system for evaluating the performance of KPI work.

Firstly, it is worth noting that the calculation of KPI indicators cannot be overly complex and lengthy, so that any manager is not distracted from his direct duties and is not forced to devote all his working time to this matter.
Secondly, the indicators should be transparent and as measurable as possible so that all employees in the enterprise can understand them in the same way.
Thirdly, and most importantly, these indicators should not just be received and ignored, but on their basis a picture of the work of each employee was drawn up. On the implementation of the plan - a bonus or encouragement is paid, if the plan is not fulfilled, on the contrary, a fine is imposed.

Positive and negative sides of KPI

The positives include:

Motivation for employees to implement the plan.
Honesty, transparency and adequacy in wages. You can see which of the employees works best and how much he receives.
Making adjustments to the work of a lagging employee.
The staff is involved in achieving the goals of the company.
Monitoring the quality of work and the fulfillment of their duties.

The disadvantages of the indicator include the fact that it is not ideal. Not in all areas KPI can be effectively and rationally applied, since it is not always possible to quantify this or that work. This means that in order to find it or bring the system to the desired indicators, the manager will have to spend a significant amount of time, nerves and budget.

Motivation by KPI

It sounds ominous, but it's actually very simple. There are 3 main levels in the system: minimum (at which the employee is not fired), normal (when the employee shows a satisfactory result) and maximum (where the staff should strive). If each employee of the enterprise clearly assesses what indicators he has and where he needs to grow in order to receive an increase in salary, a bonus or a new position, he begins to work with redoubled energy.

Example of KPI calculation

There is no formula for calculating this indicator, because each enterprise is unique and has its own specifications, but we will take a fictitious company, let it be the “Your Milkman” store and our employee-manager:

The rate is 10 thousand rubles.
He receives 5% from each of his sales (the turnover is 500 thousand rubles).
He receives a bonus of 2 thousand rubles if he finds the right number of new customers.
It is not difficult to calculate that he will earn 37 thousand rubles.

As you can see, the calculation is transparent and understandable for any employee, which means that this increases the motivation of company managers to sell and attract new customers.

How to implement KPIs

To implement the system in an enterprise where none of the employees have ever encountered such a system can become a real problem, it can even go as far as refusing to enter the workplace.

That is why, first of all, you need to carefully analyze all the points, find key indicators and submit them for temporary testing. This moment will help to identify all the weaknesses of your system and improve it, bringing it to a good result.

The most important factor in a successfully implemented KPI system, is its automaticity of all processes.

Summarizing

From the article, we learned that KPI is a key performance indicator, analyzed its positive and negative sides, learned how to calculate this indicator, analyzed how it can affect employees and how to properly implement the system in production.

KPI key performance indicators: what is it, examples of such systems, as one of the tools to increase business profitability, are becoming more and more in demand in the information field dedicated to entrepreneurship.

KPI solves the problem of transferring the evaluation of the company's performance from the sphere of subjective assessments to the world of reality and objectivity, allows you to identify weaknesses and bottlenecks in the business, optimize activities aimed at obtaining the highest possible profitability.

KPI is used as part of a strategic balanced scorecard, which performs the task of establishing cause-and-effect relationships between indicators and goals, identifies factors of mutual influence and business patterns through the dependence of some performance results on others (BSC system)

What does KPI mean?

This abbreviation came into Russian from English (Key Performance Indicators), most often translated as “key performance indicators”. “Efficiency” in the definition does not correspond to the full meaning of the word “Performance” in English management science, where this concept came from. The full meaning is described in the ISO 9000:2008 standard. 2 values are accepted:

performance, according to the standard, this corresponds to the degree of achievement of planned results;
efficiency, this concept determines the correlation of the resources expended and the results that have been achieved through their use.

Thus, the term KPI is better understood more broadly - as "a key (main) indicator of performance."

Understanding the term KPI in this interpretation makes it clear that it can be used to evaluate the company's activities only in conjunction with the content of the goal, its content. Therefore, it was KPI that formed the basis of the modern concept of management "Management by Objectives". And the KPI itself is used to control the business activity of employees, departments of the company, the success of its activities as a whole.

Benefits of a KPI system

The KPI system has undergone many changes since the time of Peter Drucker and, in an effort to meet the ever-changing realities of the business world, has absorbed many management concepts that creatively develop the main one - “Management by Objectives”.

The advantage of the KPI system in comparison with others aimed at solving the same problems, first of all, is that KPI provides an inextricable link between such business components as plan, execution, result, motivation. Today, KPI allows, using the data it generates, not only to evaluate the effectiveness of employees, departments and the company as a whole, but also to build a perfect motivational mechanism for stimulating employees.

Not every indicator can be considered key. This includes only those indicators that are related to the purpose of the business and for which planned indicators and norms for employees are set. For example, it is illiterate to attribute timely accounting reports to KPI indicators, since it is not directly related to the specifics of the unit's activities.

Types of KPIs

KPIs are divided into several types:

KPI of the result - what results have been achieved and their quantitative expression;
Cost KPI - how many necessary resources were used;
KPI of functioning - determines the execution of current business processes, evaluates their compliance with the desired execution algorithm;
Performance KPIs are derived indicators that characterize the ratio of time spent on achieving the planned result in the value of the result itself;
Efficiency KPIs are derived indicators that serve to assess the ratio of resource costs to the results achieved with their help.

In turn, efficiency KPIs are divided into:

lagging, that is, those that will reflect the results of the work after the passage of some time;
Leading(another name - operational) - these are those that allow management to manage the work during the selected reporting period, allotted to obtain the specified results after its completion.

lagging These are primarily financial indicators. They are aimed at demonstrating the connection between the desire of management and the ability of the firm to generate cash flows. Their disadvantage is that due to the delay in the manifestation of efficiency, it is not possible to describe the effectiveness of the company as a whole and its divisions at the current time.

Leading indicators if necessary, they are involved in analyzing the work of the enterprise at the current time, to give an objective assessment of the quality of current activities, the degree of satisfaction of customers' needs, how satisfied they are with cooperation, to identify the possibility of increasing cash flows for the future, to evaluate the quality of products.

What to keep in mind when developing KPIs

When developing indicators, the following rules should be observed:

strive to minimize the set of indicators that are needed to manage the process of doing business;
each indicator must be such that it can be expressed in a measurable numerical indicator;
the cost of funds that need to be spent in order to measure the indicator should not exceed the monetary value of the profit as a result of its use.

KPI development algorithm

This work is carried out in several stages.

Pre-project work. This stage consists of:

obtaining the approval of a higher manager and finding out ways to interact with him;
project initiation and planning;
creation of a project team;
work on conducting a pre-project study.

Development of KPI methodology. At this stage, perform:

optimization of the organizational structure;
develop a methodological model;
develop a company management process using KPI;
develop regulations (a system of normative and methodological documents).

The stage of development of the KPI information system. It includes:

development of technical specifications for setting up an information system and its setting;
user training;
performing trial operation.

When developing a KPI methodology, attention should be focused on:

development of KPI as a holistic development strategy;
the availability of an explanation of the benefits of KPI for staff;
identification and clear recording of corporate key success factors;
creating understandable reporting for all levels;
ways to refine KPIs to keep them relevant when existing business conditions change;
development of coordination and application of decisive KPIs.

Project completion stage. Putting into practice the methodology of the KPI system.

Characteristics of effective KPIs

Key performance indicators will be effective if they meet the following characteristics:

Address affiliation. This means that each KPI must be associated with the direct executor (it can be either an individual employee or a structural unit), who are responsible for the results of activities that are in their area of responsibility;
Correct Orientation- KPIs must meet key development projects, strategic goals of the company, key business processes;
Reachability- the implementation of KPIs must maintain a balance between the necessary efforts to achieve them and the probability of their implementation, it should be in the range from 70% to 80%;
Openness to action- KPIs should be set in such a way that there is an opportunity to intervene in processes to improve them;
Ensuring forecasting- it should be possible to assess the factors that directly determine the planned results and have a direct impact on the value of the business itself;
Limitation- KPI should be oriented in such a way that the performers focus on the implementation of priority tasks and do not scatter their efforts on the implementation of minor ones;
Ease of perception- KPIs should be accessible to their understanding by performers;
Balance and interconnectedness- key performance indicators should not be included in the zone of mutual conflict, they should complement each other;
Initiating change- KPI measurements should cause positive changes in the company like a chain reaction, that is, the implementation of some causes a natural process of improving others;
Ease of measurement- KPIs should be left in such a way that users can independently quantify progress;
reinforcement- KPIs should motivate employees, that is, be supported by individual material stimulation;
Relevance- since after a while the influence and effectiveness of even professionally created KPIs can significantly weaken, they need to be updated periodically;
Comparability- KPIs should provide the possibility of comparison in such situations, for example, it would be wrong to use the ratio of average revenue per day for single-format outlets, but having such a different location as a regional center and a small district town;
reasonableness- each indicator should provide an opportunity to conduct an analysis based on it and carry a semantic load. As a negative example of the lack of meaning, one can cite such a key performance indicator, which is calculated as all expenses for the maintenance of the administrative apparatus to the mass of profit (total). Such an indicator will meet the above characteristics, but in reality it will be meaningless.

General principles and rules for implementing KPI

To successfully complete the tasks that the system is aimed at, certain rules must be followed.

The 10/80/10 Rule this rule sets the number of key indicators in the system. It states that a company must have ten key performance indicators, no more than eighty production key indicators, ten key performance indicators. This ratio avoids overburdening managers, as well as significantly reducing the time that management spends discussing the implementation of the program.
The rule of observance of the principle of controllability and manageability. It says that each unit that is responsible for a certain indicator must be provided with the necessary resources for implementation and management, and the result must be monitored.
Rule of the principle of partnership. When developing, and even implementing, the moment of mandatory application of establishing an effective partnership between all elements of the system, employees, a clear understanding of the need for change should be taken into account.
The principle of focusing efforts on the main direction. This principle establishes the need to analyze the activities of employees in order to identify the possibility of expanding their powers, identifying those who require advanced training, determining what training employees need, making them responsible for developing their own KPIs, establishing effective communication links (both vertically and horizontally).
The principle of integrating the processes of improving productivity, evaluating reporting and evaluating indicators. It is important to think over and implement such systems of reporting and evaluation of indicators, which would be aimed at stimulating concrete actions and understanding one's responsibility. A strict schedule for reporting meetings should also be established.
The principle of coherence between the overall strategy and performance indicators. This principle requires linking key performance indicators to the current critical success factors and inclusion in the overall balanced scorecard and company strategy.

Variability in KPI selection options

KPI- these are indicators that shape the direction of employees' actions, are the main indicators on the basis of which it is possible to evaluate the effectiveness of their work

For example, you want the sales manager to bring some profit to the company. How can he do it?

Make a very big deal with one very wealthy client. But there are few such clients, and there is an active struggle for them.
Therefore, he must work through a large array of smaller clients. To get this pool of potential clients, the manager will have to make a large number of phone calls, send commercial offers to do a lot of work to create communication links with potential clients.

For a manager, when building a system of indicators, KPI is the right choice of indicators that will most effectively influence the achievement of the goal, for example, the company's profit.

How the KPI system is built

We write out those indicators that, in your opinion, will lead to the required results. For example:

volume of sales;
percentage of customer service;
quantity of goods sold x and y;
markup.

Mistakes when creating KPIs

As an example, we can analyze the creation of a KPI system for a company that itself manufactures and sells products.

Structurally, such a company can be represented as consisting of:

department that purchases the necessary materials;
production department;
sales department;
financial division.

The purchasing department is focused on reducing costs when purchasing materials. Naturally, in order to fulfill your planned KPI, you need to create a system for obtaining sustainable discounts, bonuses, and so on.

For the production unit, the main KPI is the equipment load (it should be above 80%). For example, if two types of products are produced, you need to have an effective scheme for redirecting the work of equipment so that it does not stand idle.

Now let's analyze the mistakes that will inevitably occur if KPI is introduced mechanically, without taking into account the strategic activities of the company.

Meeting the goal for the purchasing department of reducing the cost of purchased materials includes opportunities to reduce their cost by:

purchases in large quantities, and this, in case of excess materials for the production unit, will entail additional costs for storing and freezing money in stocks;
purchases of lower quality materials - this can cause equipment breakdown;
prepaid purchases - this entails a freezing of funds.

The second mistake is the implementation of KPI without taking into account the motivation of employees. For effective work, it is necessary to ensure the connection of KPI with the system of bonuses and fines, that is, with the system of material motivation.

The third mistake is the substitution of KPI indicators for result indicators, for example, revenue, profit, marginal profit. KPI indicators are correlated with the activity of the employee in order to achieve such a result that you need to specifically perform today, tomorrow, the day after tomorrow, that is, the leading indicators described above. If we consider the sales manager, this will be:

number of clients to meet;
how many contracts to conclude;
how many calls to make;
how many potential customers to find.

The fourth mistake is the lack of a planning and KPI accounting system. These indicators can be taken from the operational accounting system, the management personnel control system. Planning means setting targets for a certain period.

Using the KPI system for motivational purposes as an indicator that affects the increase in base wages should be done very carefully and legally correctly. If this variable part is introduced into the employment contract, then the court will consider those payments that were made before the case was considered in court as wages. In the event of a labor dispute, an employee, even if he did his job poorly, will be able to receive additional money from the company. Therefore, it is better to draw up an additional production contract or efficiency contract to the main employment contract. which displays the variable part of the salary.

In order for KPI to become not just a fashionable innovation, a kind of marker for the company's management as trying to keep up with the times, but really effective tools for increasing the company's profitability, three points must be observed:

introduction of a norm- this is the KPI that is achievable by an employee during normal work, this is not a dynamically changing indicator, but a static one, for example, in order to receive a regular salary, a manager must conclude a minimum of 10 and a maximum of fifteen contracts. The norm excludes the factor of chance, as well as the factor of luck;
introduction of the concept of purpose- this is the money that an employee can receive if he achieves outstanding results, for example, based on the above, an employee will conclude from 15 to twenty contracts;
introduction of the concept of "Challenge"- this is the money that can be received when achieving results that are significantly higher than the average for the company, for example, not thirteen contracts concluded per month, but forty.

How to evaluate the performance of an employee

The first indicator is the result, that is, something measurable (square meters of tiles laid, the number of contracts concluded, and so on).

The second factor by which it is possible to evaluate the activities of employees is the time factor, that is, how quickly the business process is performed. For example, the time of fixing an error in a call center by IT services. This time, regardless of the type of business, can be normalized and entered into KPI.

The third factor is the quality factor, that is, the absence of returns, complaints, complaints, and so on. Also, when introducing such a performance indicator, it is required to take into account that if an employee has achieved a satisfactory planned result for a period of planned time, the quality can be considered satisfactory.

You can also measure efficiency by estimating the amount of resources that should be spent on the execution of a business process.

How to develop KPI for a specific department, examples

Although the competent development of efficiency ratios is an individual process, taking into account all the specific features of a company or production, examples of typical developments can still be given. This is especially applicable for services with typical functionality, such as accounting. Below are some examples. At the same time, it should be noted that correctly created KPI systems also take into account the workload, if it is more than 100% - an employee and bonuses, if it falls below 70% - the manager is fined because he could not provide employees with work.