KPI decryption. What is KPI (KiPiAi, KPI)? Payroll based on KPI
The main responsibility of the top management of the company is to create a strategy, determine the goals and objectives of the enterprise. The implementation of these goals rests on the shoulders of employees from structural divisions. The development of a company can be jeopardized if communication between employees and management is poor. This is mainly due to the information overload of the leadership and the inability to rationally assess the situation in the working positions. This, in turn, affects the quality of control over the actions of staff and the implementation of the strategy.
The impact of KPIs on the company
If there are no specific strategic goals for the staff, and there is not enough motivation, this leads to the fact that employees are not able to determine the right course and are not able to act for the benefit of the company's development. This inconsistency often leads to a waste of company resources on tasks that are secondary. Such problems occur quite often, and many enterprises around the world suffer from them.
It is difficult to call a self-sufficient strategy of the enterprise. The aspirations of management are to achieve goals by setting goals for the staff, as well as quality control over the quality of work performed. In the chain of elements that are necessary to realize these goals, which is the control cycle, there are two elements:
That is why many modern entrepreneurs are interested in KPI (Key Performance Indicators), what it is and how it can help in management. After all, the weak link in the chain shown above is, in fact, the connection between management and staff. If failures occur in its work, then decisions will be made taking into account information that is incomplete. According to some managers, the guarantee of the correctness of their decisions depends on the amount of information collected. But in this case, this is a wrong opinion, since the time for evaluating information increases, and its quantity is not at all responsible for its quality.
Management Tools
Any management needs a tool that allows them to receive high-quality and adequate information for decision-making. Western companies have long been using key performance indicators of the company and the balanced scorecard for this.
Under the KPI, a system of indicators (financial and non-financial) is considered that have an impact on the qualitative and quantitative change in the result of the work of the staff or the result that is expected. It includes the coefficients of each controlled object, as well as the methodology for their assessment. This allows you to focus on achieving strategic goals, based on an assessment of the organization's performance. 
The assessment of key performance indicators is precisely the tool that can show how well management is carried out in relation to the results in relation to the goals set, taking into account the value and position of the company in the market. It should be borne in mind that this tool can facilitate the decision-making process of management through complete and high-quality information, but it cannot solve serious systemic problems of the organization. This technique does not provide ready-made solutions, it only reveals the area in which the problem arises.
The transition to new methods of progressive company management is justified by the fact that the old methods, which include increasing the scale and pace of production, as well as improving product quality, do not create the necessary competitiveness. Thanks to modern management tools, the organization can quickly respond to any change that occurs in the market. 
The main task pursued by the system of key performance indicators, together with balanced scorecards, is to translate the company into a comprehensive set of necessary indicators that can highlight the main elements of management and measurement. Thanks to this set, an organization strategy is formed that is able to include all the necessary qualitative and quantitative characteristics in order to inform workers in a timely manner about the factors that affect present and future success. Having formulated the results to be achieved, the organization not only defines the goal, but also works on the conditions that allow better and faster to come to its implementation. 
It is not the amount of information that is important, but its objectivity, accuracy and relevance in order to correctly carry out all the necessary calculations. The concept of balanced scorecards is that traditional financial and economic indicators are not enough for the success of the strategy. To solve problems, it is necessary to better balance key performance indicators, taking into account various planes, in order to control the factors that have an impact on these indicators. You should not pay much attention to past achievements, it is worth evaluating future results. If you focus the indicators on only one area of activity, but this, of course, will have a bad effect on the final result.
System implementation
To implement the system in an enterprise, there are certain steps that should be performed sequentially. Violation of this sequence can adversely affect the final result.
The first stage is the formation of a strategy
A clearly formulated strategy should describe the main steps to achieve the desired results and goals. It needs to be broken down into specific initiatives, where tasks for individual departments of employees will be allocated. This results in significant savings not only in money but also in time.
The second stage is the identification of key factors
Here it is necessary to determine the most important factors, or rather, the parameters of aspects of economic and economic activity having an impact on the implementation of the tasks set and the implementation of the strategy. These factors have a significant impact on success.
The third stage - key performance indicators
It defines the activities necessary for the strategy to be successfully implemented. KPI is used as a tool for their determination. It is worth highlighting only the most sensitive of them, while not using secondary indicators. They should be stimulating for the staff. Among the main requirements for the system of key performance indicators, the following should be highlighted:
- Clear limits on the number of indicators.
- They should be the same for the entire company.
- The possibility of obtaining a digital format of the indicator.
- It should be directly related to the factors influencing success.
- Metrics should motivate employees to meet the goals required by the organization.
Key Performance Indicators: Examples
Take, as an example, a well workover shop (WOC). The strategic task for this organization will be to increase the level of production of the product, which will be expressed in the debit of wells and reduce the factors that provoke the loss of the product and reduce its cost. In this regard, the KPI should be set in such a way that it reflects not only the goals of the company itself, but also raises questions regarding a specific unit. If repairs are carried out, then the operation of the well is stopped, therefore, it is worth considering the costs caused by the shutdown. 
The structure that key performance indicators for this unit have can have the following structure:
Thus, using KPIs (key performance indicators), examples of which are discussed above, employees are encouraged to reduce costs and increase oil production. This not only corresponds to the overall goals of the company, but also affects the quality of work of a particular unit.
The fourth stage - work with a balanced scorecard
This stage involves the development of a generalized system that includes financial and non-financial indicators. This takes into account both the object of control and the assessment of factors affecting the overall picture of the efficiency of the enterprise.
The fifth stage is the selection of a technical solution for the implementation of the tool
At this stage, the data source is determined, through which the indicators will be filled, it must satisfy all the conditions for the reliability of the information received. You must first create a strategy that allows you to implement a new management tool. Determine the goals, considering how positively they will affect the state of the company. It is also necessary to set up the information flow in order to correctly calculate all indicators. There are many more points needed to achieve the main goals and objectives of the organization, which will help to cope with key performance indicators.
Introductory. general description typical processes in companies
Any company consists of many business processes: from strategic and financial management to detailed planning of production processes and quality management of goods/services produced.
Each company has its own degree of formalization of processes.
In some companies, the processes are not formalized and work “on a whim”, and in some companies, strict regulations are formalized and developed, highlighting the stages of work, official duties and areas of responsibility.
It all depends on the size of the company, the amount of work and the degree of control required.
To achieve the success of the company, quickly adapt to a changing market, ensure the quality of work and the speed of service delivery, it is necessary to control the company's activities, both in the operational and in the long term.
Any head of the company and even more so the owner of the business needs to understand the performance of the company and its employees. At the same time, we must not forget that in addition to everyday "current" tasks, it is also necessary to perform tasks aimed at achieving the company's strategic goals.
The strategic goals of the company can be described both in an enlarged form and worked out in detail. In any case, any goals must be measurable and achievable.
To implement and track financial and non-financial indicators of achievement of strategic goals, a balanced scorecard (Balanced ScoreCard, BSC) is usually used, which in turn uses a set of KPI indicators to measure performance and the degree to which goals are achieved.
KPIs. general description
According to the quality management system standard (ISO 9000:2008. Quality management systems. Fundamentals and vocabulary) :
KPIs (Key performance indicators) – these are key indicators of efficiency and effectiveness, while efficiency is defined as the ratio of resources spent and results achieved, and effectiveness as the degree to which planned results are achieved.
The KPI system is applicable in any field of activity and is focused on the company's management to monitor the effectiveness and efficiency of activities.
The implementation of the KPI system in the company will allow:
Manage the performance of the company as a whole and monitor the achievement of the strategic goals of the company
Evaluate the work of the company, departments, specific employees in the operational and long term
Identify the patterns of development of both the business as a whole and individual business processes
Ensure employees are motivated to achieve the company's strategic goals
Increase employee loyalty and ensure an effective remuneration system
Increase customer loyalty and satisfaction with the quality of goods / services provided
Reduce the cost of business processes and the cost of products
Lagging indicators = resulting. Used to monitor performance and achieve goals at the end of the reporting period. It is they who set the strategic direction of activity, what the company wants to achieve at the end of the reporting period.
Leading indicators = operational. Leading indicators are used to monitor the operational activities of employees in order to further achieve Lagging indicators, i.e. indicators to achieve the set goals at the end of the reporting period.
Indicators can be developed in relation to the goals of the organization, to the goals of departments, to business processes, to the functions and areas of responsibility of employees in accordance with their job descriptions.
For companies operating in various business areas, for each business direction developed its own group of KPI indicators. For example, in this way you can track the activities of branches and their compliance with the goals of the company as a whole.
When developing any indicator, it is necessary to fix the responsible person responsible for the implementation this indicator. If the indicator is for the company as a whole, the general director can be appointed as the responsible person, who, in turn, will write out more detailed goals and objectives for his subordinate employees. Similarly for the purposes of units.
Basic requirements for indicators:
The indicators should stimulate the work of the employee
Indicators should be clearly defined and measurable
Metrics must be realistic and achievable
Indicators should be distributed in accordance with the areas of responsibility of employees
When developing KPIs, it is recommended to use no more than 10 key indicators, which will avoid overloading the guide for planning and tracking indicators. To motivate employees, it is customary to use 3-5 KPI indicators.
The development of a KPI indicator system is carried out comprehensively for the entire company as a whole and consists of the following stages:
Project initiation
Methodology development
KPI system development
Project initiation
Any project begins with the initiation: preliminary survey, feasibility assessment, project approval and approval, formation of responsible persons and project team acquisition.
Methodology Development
To develop KPIs, it is necessary to develop a methodology that ensures that KPIs are aligned with the company's goals and organizational structure.
When developing a methodology, the following is carried out:
Formalization and optimization of the organizational structure
Determination of the list of positions for which the KPI system will be used
Determination of key KPI indicators, the order of their calculation and weights, taking into account the strategic goals of the company and the approved motivational model
Definition of reporting forms
Formation of regulations for planning, execution and control of KPI
Development, coordination and approval of a motivational model for selected positions, taking into account KPI
The result of this stage will be a developed methodology with developed KPI indicators and regulatory documents.
KPI system development
To monitor and control the activities of the company, it is necessary to create a unified information system.
The main stages of development, configuration and implementation of the KPI system:
Writing a technical task
System development and configuration
System testing
User training
Putting the KPI system into operation
The result of the stage will be the formation of a unified KPI system that provides a single repository of management indicators, collection and analysis of KPI for the company.
Examples of performance measuresDepending on the goals of the company, when developing KPI indicators, different approaches are used, but a general principle for developing indicators can be distinguished: first, we define the business goal, and then we form the indicators.
As an example, consider the company's goal: From 01/01/2014 to 12/31/2014, monthly increase sales by 10%. Thus, indicators for the Sales Department Employee are immediately formed:
|
Index |
Calculation |
Comment |
|
Planned sales volume for the current month |
Last month's actual sales + 0.1 (10%) * Last month's actual sales |
It is also used to ensure that the employee sees the actual target value for the implementation of the sales plan for the period |
|
Actual sales volume based on the results of the reporting month |
Calculated either manually or automatically |
|
|
Ratio % increase in sales volume (monthly) |
(Actual sales volume based on the results of the reporting month * 100% / Planned sales volume for the current month) - 100% |
We get the actual ratio of % increase / decrease in sales volume |
|
Monthly assessment of sales plan fulfillment |
If > or = 10% |
The goal is fulfilled in accordance with the standard, the employee is awarded a bonus |
|
If a Coefficient % increase in sales volume < 10% |
The goal is not met. It is necessary to find out and eliminate the reasons for not fulfilling the plan. |
Examples of possible indicators:
| Responsible person | Index | Target |
| Top managers, leaders | EBIT (earnings before interest and tax), Earnings before taxes and interest | Increasing the company's profit, business profitability assessment, management motivation system |
| Gross profit, profitability level, the ratio of gross profit to total sales | ||
| Managers | Number of new clients for the period | Implementation of the sales plan, motivation, calculation of bonuses |
| Average sales | ||
| Average amount of checks | ||
| No order rejections | Increasing customer loyalty, improving the quality of service, increasing sales, motivation, calculation of bonuses | |
| Human Resources Officer (HR department) | Staff churn rate, the ratio of the number of dismissed employees to the total average number of employees for the period | Reducing the outflow of personnel, motivation, calculation of bonuses |
| Company employees | Employee efficiency according to the list of operational and long-term tasks | Improving the efficiency of each employee of the company |
For further evaluation of indicators, the plan/actual ratio is used.
To manage efficiency, companies optimize and automate business processes, implement CRM, SCM, EAM, PLM and ERP solutions, which also allow you to calculate business KPI indicators.
To build a unified KPI system, they organize a common integration interaction between all information systems of the company, or implement specialized software.
At the same time, it should be noted that information systems there are usually many in a company, and the implementation and configuration of end-to-end integration information flows between them is one of the most important, but also the most expensive tasks.
The most economical option is to implement additional specialized software with minimal setup of the required integration interaction.
As an example, consider the specialized software "ELMA KPI", what gives and why you need it.
The system is designed to improve the efficiency of the company through the implementation and monitoring of the implementation of goals and objectives.
The system supports the classic approach to developing a KPI system according to Norton and Kaplan:
For each indicator, the responsible person, scale, default value, methods for collecting and analyzing values, the need for coordination, approval and control of work results, accounting for labor costs are determined.
Use of a unified management system
Comprehensive formation of goals and objectives for the entire company with reference to performance indicators for their implementation
Organization of feedback for each task and each indicator
Visual representation of the status of the implementation of strategic goals and objectives with the possibility of detailing to the level of a particular employee
Use of ready-made management indicators, reports and charts
The general concept of working in the ELMA KPI system is as follows:
Consider the possibilities of the system:
Management of the company's strategic goals
Event Management
Formation of SMART tasks
KPI management
Performance matrix management
Operational task management
Management of communications between employees - Communicator
Client management
calendar of events
Grade
Monitoring and reporting
Potential data sources for calculating KPIs: databases, OLAP, CRM and BPM systems, various 1C configurations: Enterprises, specialized queries with additional business logic, email, results of launched and running tasks, manual entry.
Management of the company's strategic goals
The system allows you to manage strategic goals in various views: tabular and graphical, which is convenient for use in various management reports.
The system allows you to build and monitor strategic maps for achieving goals. Color indication displays the status of the goal:
Event Management
The system allows you to track the timing, cost and status of planned activities to achieve your goals. For each event, you can assign a SMART task.
Formation of SMART tasks
The system allows you to create SMART tasks linked to strategic goals and activities. The system supports the Work Flow for working with tasks; for each task, you can assign an Executor, a Coordinator and a Supervisor.
KPI management
Contains a number of built-in KPI indicators:
The System also allows you to generate indicators in the context of the organizational structure (taking into account replacements and absence of an employee), set up the logic for generating indicators, taking into account the strategic goals and objectives of the company, track the dynamics of changes and dependence on other indicators.
For each indicator, it is possible to add comments and clarifications on the indicator.
It is possible to comprehensively view the effectiveness of employees:
Performance matrix management
The system allows you to create and use performance matrix templates with the ability to assign a set of indicators and SMART tasks to a group of employees.
Operational task management
The system allows you to assign tasks both for business processes and for specific documents, both for a specific performer and for a group of performers.
WorkFlow is supported for working with tasks (the ability to agree / approve, assign, execute and control the execution of tasks).
The system automatically counts completed and overdue tasks.
Management of communications between employees
The system uses the Message Feed as a Communicator between employees.
Client management
The system supports part of the CRM functions. Allows you to plan communications with Clients, keep track of potential contacts and Clients.
Grade
The system supports the ability to evaluate the performance of employees by KPI indicators.
Monitoring and reporting
The system supports various built-in monitoring, control and reporting tools.
In terms of functionality, control panels are a bit like OLAP systems with their ability to view summary reports and further detail when navigating to specific chart elements. based on 5 ratings
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 employees of the organization, personnel, conduct trainings, and effectively interact with company departments;
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 balanced system indicators, and be in line 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:
-
revenue from sales;
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KPIs are key performance indicators with which you can evaluate the results of the work of employees of various departments of the company. Based on them, employees are promoted up the career ladder or they are paid bonuses.
Relatively recently, company leaders began to actively introduce such a concept as KPI into their work. Now the most valuable thing for which employees work is tied to it - wages. Moreover, the KPI indicator becomes important not only for administration, managers or office employees - line managers, but also for representatives of working specialties.
The main idea of KPI (Key Performance Indicator - usually translated as "key performance indicator") is that it can be used to unambiguously and objectively evaluate the work and performance of any employee, group of people, department, project and company as a whole. The indicator will reflect the whole picture of the processes taking place in the company, using numbers.
The most important thing is to develop the right KPI for each position and enter real indicators. It is very important for an employee who encounters this concept, having received a job in a company, to immediately understand and understand what exactly is included in his personal set of KPIs (criteria for evaluating his work). The list of indicators will allow the beginner to quickly understand what exactly the employer wants to receive, what results he expects from the employee. The KPI range will immediately show how much effort you need to put in to achieve the desired level wages whether this work will be within the capacity of the applicant, or, conversely, his abilities will significantly increase the requirements and, accordingly, wages.
Scorecard
The KPI system gives specialists clear work goals and transparent bonuses. But the indicators may turn out to be unattainable, and the transition to such a system can be painful.
In large foreign companies, where everything is spelled out and detailed to the maximum, work on the KPI system is a great option for an employee. He understands how much, for what and when he will receive in excess of the salary. He has personal tasks and deadlines for their implementation, and the company can regularly monitor his work with the help of evaluation.
In many organizations, in addition to the monthly report, it is the KPI results of all employees that serve as the basis for the annual assessment of the performance of the company's personnel. 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 in foreign companies the head office helps in developing goals and indicators, then Russian employers act in a slightly different way. Some invite consultants, others do it on their own: KPI is prescribed by the HR Directorate. Since neither one nor the other thoroughly knows the specifics of the work of each particular specialist, it happens that the indicators are formulated inaccurately. It even happens with us that the most advanced, in quotation marks, organizations for the development of KPI involve managers and employees of the units being evaluated.
Types of indicators
There are some key performance indicators in the KPI assessment system: financial, client, process and development criteria.
Financial indicators include, for example, market value, return on investment - ROI, turnover, cash flow, internal rate of return - IRR, share price, total assets and many others. These indicators reflect the external economic condition of the company as a whole.
Customer indicators characterize individual employees who deal with customers and create the external image of the company in the market. These criteria include market share, number of new markets, customer satisfaction, quality, image indicators, and more.
Process indicators include indicators that grow along with the speed of various processes in the company: time to develop and launch new products on the market, processing a client's request; time spent on logistics and delivery of goods, etc.
Development criteria - KPI indicators that characterize the degree and level of development of the company itself (external processes of the company's development in the market and internal processes for the development of human resources): staff productivity, profit or administrative costs per employee, staff satisfaction level and its "fluidity".
The employee works as a consultant in the sales department, answering questions from potential buyers by phone. For him, the following key performance indicators (KPIs) are defined: customer satisfaction and the number of purchases that people made after consulting an employee over the phone.
Pros and cons
The KPI system is good for employees whose work results affect the financial and economic performance of the enterprise. AT trading firms these are, first of all, top managers and sales managers, in recruiting companies - recruitment consultants.
In some companies, the performance of an employee's KPI also affects the individual size of the annual salary review: the higher the score, the higher the percentage of salary growth. For example, the annual bonus for managers may consist of two variables that depend on the results of meeting individual goals and on the performance of the company. 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 percent 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”, called the coefficient of influence.
If the KPI scale is compiled incorrectly, there will be little benefit from it. If there are too many KPIs, the impact of each on the amount of the total bonus will be small. For example, initially there were about 20 percent of KPIs, but a year later they were reduced to five. Most of the indicators accounted for a small share of the bonus, and the loss of 5 percent in it is not particularly significant. A 20% KPI weight motivates much more effectively.
One of the main disadvantages of the KPI system is the dependence of the quality of work of an individual employee and the performance of the entire department. If the unit did the work poorly or not quite qualitatively, without fulfilling the general plan, then all employees of the department can lose their salary at once. After all, personal KPIs are associated with key indicators of the entire department. In case of systematic non-fulfillment of planned indicators, an employee may be demoted or dismissed. Therefore, KPI forces you to always "be in shape and tone." Who can not stand this rhythm, leaves himself.
Another disadvantage is that not all employees can directly influence the company's strategic KPIs. When the bonus depends on net income and sales, the secretary or economist will not be able to influence it.
From experience, we can say that very often in Russian companies the KPI motivation system is one-sided: everything that an employee over-fulfills is just a job well done, for which he receives a salary, and for under-fulfillment he is deprived of some part of the salary.
Many managers of international companies believe that the work of technical specialists (accountants, engineers, programmers) is easier to describe job description than prescribing KPIs for them. We must not forget that the planning and calculations of this system take time. Heads of areas or departments at the end of each month spend time setting and calculating KPIs for all their subordinates. The indicators have to be coordinated with the HR department, and the main work of managers goes by the wayside, and after all, bosses have their own KPI.
As a rule, the transition to a KPI system is usually accompanied by unrest in the team: some quietly sabotage it, others completely do not 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. It is easier for new employees if the HR manager explains to them in an accessible way what the company pays bonuses for, and newcomers, most likely, will normally perceive work according to such rules.
Opinion 1:
Ludmila Shusterova, Deputy General Director of the outsourcing division of BDO
Original KPIs
KPIs are usually associated with either an increase in the profitability of the company and its turnover, or with an increase in productivity and efficiency in the use of capital assets. Based on these conditions, it is unlikely that it will be possible to draw up some fundamentally new and original KPIs. Unless, of course, the work is connected with something very non-standard. For example, you can put an increase in the number of koalas by n percent in the KPI for the head of a biological station. But for a typical manager, it is unlikely that it will be possible to invent something better than increasing revenue, margins, increasing customer satisfaction, or reducing staff turnover. It is desirable that there are several KPIs, but not too many. Indeed, in the pursuit of business and profit growth, it is important that both customers and staff do not suffer - and this is not a trivial task at all.
But the main task of indicators is not to be original, but effective.
Opinion 2:
Dmitry Pelah, Director of the Financial Consulting Agency
Regulation on KPI
In order to start applying the KPI system in your company, you need to fix it in internal documents. A regulation on KPI should be developed, which will be approved by the head of the company. In this position, it is desirable to provide formulas and calculations on the basis of which the system of indicators is built. It is also important to link indicators to data. accounting or with IFRS if the company uses international standards.
The regulation on the KPI system should establish a causal relationship of indicators with the main goals of the company and determine the level of responsibility for the values of the indicators of employees to whom this system will be applied.
There is no standard form for a KPI statement, so a company can develop it on its own or seek help from specialized consulting firms.
Opinion 3:
Ivan Shklovets, Deputy Head of the Federal Service for Labor and Employment
Dismissal for low performance
The labor legislation does not contain such grounds for dismissal as a low indicator of efficiency. Therefore, the employer has no right to dismiss an employee with such a wording.
It is possible to dismiss an employee due to inconsistency with the position held only on the basis of the results of the employee's attestation, which must be carried out in the manner established by the employer himself in the form of a local regulatory act. In this case, there must be a protocol of the attestation commission. However, even in this case, before dismissal, the employer will be obliged to offer the employee other available vacancies or work that he can perform taking into account his state of health.
Non-compliance by an employee with established labor standards or quantitative (qualitative) indicators may affect the amount of remuneration. For example, incentive payments may be reduced or canceled. However, when working out the established norm of working hours, the employee in any case will have a guaranteed right to receive the salary (tariff rate) established for him. If the employer nevertheless dismissed the employee on the above grounds, he has the right to appeal such dismissal in court.
Pros and cons of using KPI to evaluate employee performance
|
pros |
Minuses |
|
The amount of an employee's bonus directly depends on the fulfillment of his personal KPI |
Due to too many KPIs in the total bonus, the share of each of them is small |
|
Each employee is assigned responsibility for a specific area of work. |
Too much weight of one of the indicators leads to distortions in work (the employee does not pay enough attention to the functionality that has the least weight in the KPI system) |
|
The employee sees his contribution to the achievement of the overall goal of the company |
Really unattainable KPIs demotivate employees |
Articles in this section
- Proper incentives for employees
The topic of motivating and stimulating the work of employees is one of the key issues of personnel management in any organization. When establishing a system for stimulating the work of employees, it is important to prescribe all the necessary provisions in local acts. Otherwise, the claims of the inspectors are possible.
- Motivations
What are the practices for rewarding and recognizing employees in your company? Is there a unified approach/general culture of gratitude and support for the initiative of employees, or does it all depend on the individual style of managers?
- Staff motivation. Fight for efficiency. It's time to act!
A crisis, whether internal or external, forces people to learn and companies to change. As long as the company is profitable, and there is no hint of problems, the owner and director are unlikely to be ready for major changes. Poor performance in business (like…
- Individual promotion of employees. How?
An individual employee incentive system is an integral part of the work of an HR manager. After all, a productive employee is, first of all, a satisfied employee!
- We motivate accountants
Not all key performance indicator systems are capable of making accountants perform their duties more efficiently and efficiently. However, everything can change if you connect the gameplay to the motivation.
- Formation of a system of non-material incentives
At present, all possible systems of material incentives are developing quite well at enterprises. This is due to the fact that employers seek to clearly define and subsequently know for what, for what specific work he pays the employee ...
- Employee Motivation: The Equity Model
If employees perceive remuneration as fair, their labor contribution remains approximately at the same level. The biased attitude of management initiates the emergence of tension and motivation aimed at reducing the degree of injustice. If employees perceive remuneration as too high, equity theory states that they will feel an imbalance in their relationship with the employer and seek to restore balance.
- How Motivational Factors Work
How to build the practice of personnel management in your company based on the theory of motivation, read the article.
- Is a counteroffer in the labor market a way to keep a specialist in a company?
Recruiters at recruiters say that employers are increasingly resorting to counter-offering (i.e., offering better terms than a new employer) in an attempt to retain a good employee who has already decided on a new job and is leaving. How relevant is the counterproposal today? Many companies are not only not retaining employees, but on the contrary, they are reducing staff. Nevertheless, the topic of the counterproposal remains relevant to this day, because good specialists or leaders are needed always and everywhere. Accordingly, accepting or not accepting a counteroffer is one of the defining choices in a person's career. After all, your future fate as a specialist or as a leader will depend on which offer you choose. You will learn about what is happening in the labor market now from the article
- Motivational profile of the candidate
- What do TOPs who already have everything want?
The question "How to motivate someone who already has everything?", from my point of view, is an epic. What is the difference between a true story and an epic? A true story is a story that happened once, and an epic is a repetition of this story many times with distortions in legends and myths. That top manager who already has everything has never met in my life, this is an epic.
- The most effective methods of staff motivation
Employees should be stimulated on intermediate achievements, without waiting for the completion of all work, since great successes are difficult to achieve and relatively rare. Therefore, it is desirable to reinforce positive motivation through not too large intervals of time. It is important to make employees feel confident, because this is required by the internal need for self-assertion. Success brings success. In general, it is possible to formulate a number of rules for the effective motivation of employees.
- Diagnostics of motivation
The article is devoted to the study and evaluation of the strategic development of the system for managing the motivation of the labor activity of managers and specialists, as well as their remuneration at the enterprises of the construction complex of the Penza region. The possibility of the existence of unused managerial reserves in the strategic system of labor motivation is substantiated.
- satiety threshold.
Managers are characterized by territorial mobility, high sensitivity to changes in the labor market and are not limited to a specific geographical area. They live and work throughout the Russian Federation. At the same time, there are pronounced local features that significantly distinguish, for example, an information technology manager from the city of Voronezh from the same specialist from the city of Yekaterinburg. The differences come down to three main parameters: the size of the "satiation threshold", the format of leisure activities and self-esteem.
- Job Satisfaction as a Component of Effective Organizational Behavior
The most important task facing the modern Russian business community is the development of mechanisms for managing the organizational behavior of an employee. Organizational behavior will be effective if it contributes to the achievement of the strategic goals of the organization, i.e. the main vector of behavior of all employees coincides with the movement of the organization to achieve its strategic goals. However, the achievement of these goals will be possible only if this movement is sustainable. Job satisfaction (job satisfaction) can give such stability to the behavior of employees.
- Motivational mechanism of corporate culture
Perhaps the key condition for increasing the efficiency of the internal segment of corporate management remains the choice of adequate methods for activating personnel at all levels of the hierarchy: from an ordinary performer to a top manager.
Why, in an atmosphere of budget cuts and staff cuts, some employees are loudly indignant, while others are quiet? Does this mean that the former began to work worse? How demotivated are the “quiet ones” who are completely withdrawn into themselves? This article briefly describes W. Marston's DISC, a little-known but very effective for business model of personality differences, explains why different people react and behave differently in a crisis, and gives recommendations on individual motivation for representatives of different personality types.
- Don't you have exactly the same, only without wings?
In job advertisements, one can often read the following: "Sociability, initiative, discipline and creative thinking are necessary conditions." Of course, we all want "everything and a lot", not assuming that some requirements may be incompatible.
Why is it necessary to focus on the strategic goals of the company when developing employee incentive programs?
How to make the motivation system as transparent as possible? - How to motivate staff in a crisis
The crisis situation threatens the company not only with financial problems and the loss of its positions in the market, but also with the loss of qualified personnel, without which it is impossible to overcome the crisis. Retention of key employees is one of the main tasks of management at the crisis stage, and this goal can be achieved if the staff is informed in a timely manner and an adequate motivation system is implemented. Let's talk about this in more detail.
The article discusses the motivation factors that most often cause employees to change jobs. Practical recommendations and advice are given on how to eliminate and / or reduce the negative impact of these factors or reduce the risk of their occurrence.
KPI-based personnel are gaining more and more popularity in Russia. The main advantages of such mechanisms are in the rational reflection of the activities of companies.
KPI: what is it
KPI (KPIs) is the English abbreviation for “key performance indicators”, in Russian it is referred to as KPIs - key performance indicators (sometimes parameters). But in the original foreign sounding it is used as a norm. KPI is a system that allows you to evaluate the performance of the company's employees in order to achieve goals (strategic and tactical).
"Key indicators" allow the company to analyze the quality of its structure, the potential in solving problems. On the basis of KPI, a system of the most important factor is also formed: if there are no signs of targeting, then there is nothing to apply to “key indicators”. and KPI, thus, are two interrelated phenomena. The first involves, first of all, forecasting the results of work, as well as planning how these results will be achieved.
Who came up with KPI?
History does not give an unequivocal answer to this question, however, one can trace how the world management went to understand KPIs, what it is and why it is useful. In the late 19th and early 20th century, the sociologist Max Weber determined that there were two ways to evaluate the work of employees: the so-called "sultanic" and meritocratic. According to the first, the boss (“sultan”) at his own discretion assessed how well a person copes with his duties. The rational principle here plays a secondary role, the main thing is a purely emotional perception of the work of a subordinate.
The meritocratic method is when the results of labor are evaluated according to real achievements, with the involvement of objective measurement mechanisms. This approach was adapted by management theorists in Western countries and gradually crystallized into what we know as the KPI system. An important role in systematizing the rational evaluation of personnel performance was played by the works of Peter Drucker, who is considered to have turned management into a scientific discipline. The concepts of the scientist directly state that there are goals, but there is an assessment of the degree of their achievement through key performance indicators.
Benefits of KPIs
The main positive side of the KPI system is the presence of a mechanism for evaluating labor and the work of the enterprise as a whole that is transparent to all employees of the company. This allows the authorities to evaluate the performance of all subordinate structures in real time, predict how tasks will be solved and goals achieved. The next plus of KPI is that the management has a tool for adjusting the work of subordinates if the current results lag behind the planned ones.
If, for example, performance measurement in the first half of the year reveals that performance is not high enough, then workshops are held to identify the reasons and encourage employees to perform better after the next six months. Another positive side of KPI is the feedback between the specialist and the manager. The first will receive not just instructions and sometimes seemingly biased nit-picking, but well-founded comments, the second will improve performance by specifying errors and shortcomings in the work performed by the subordinate.
Cons of KPIs
The results of assessments within the framework of KPIs (performance indicators as such) can be interpreted not quite correctly, and this is the main drawback of this system. As a rule, the probability of occurrence of such a problem is the lower, the more attention is paid at the stage of formation of criteria for how to evaluate performance parameters. Another disadvantage of KPI is that companies will have to spend a lot of resources (usually calculated in time, labor and finance) to implement this system. We are talking, of course, about working on the key parameters of the effectiveness of the proper level of elaboration. There is a possibility that it will be necessary to carry out large-scale retraining of employees: specialists - with a view to changing tasks, and hence working conditions, while management will have to master new methods for assessing the work of subordinates. The firm may not be ready to give the team extra time to learn new things.
Subtleties of KPI implementation
The main task when implementing a KPI system (“from scratch”) is to prevent a negative attitude towards it from employees. Therefore, the management of the company needs to clearly convey the meaning and practical benefits of innovations to each of the subordinates, whose work is subject to subsequent evaluation for effectiveness. The best method here, according to some experts from the field of HR, is an individual presentation, an explanation to specialists in specific positions: KPIs - what are they and why implement this system in a company.
It will be a mistake to unconditionally impose efficiency parameters by order, but the necessary step is an appeal from the top officials of the company. If, for example, a line manager informs subordinates in his department about the imminent implementation of KPI, then this information should also be confirmed and CEO. The specialist must understand that the system of key performance parameters is not an invention of the boss, but an element of the strategic policy of the entire company.
Optimal timing of KPI implementation
There is an opinion among experts that KPI indicators, if we are talking about a system, should be implemented simultaneously at all levels of company management - from ordinary specialists to top managers. According to this point of view, the timing of the implementation of key performance indicators cannot be extended in time: the system starts working immediately. The only question is how to optimally choose the moment of its launch. There is a point of view that it is enough to notify employees about the start of KPI about three months in advance. This is enough for the company's staff to study the specifics of the future assessment of the effectiveness of their work.
There is also the thesis that for some time KPI can work in parallel with the previous payment system. Depending on the degree of liberalism of the authorities, the employee will be able to choose according to which scheme he will be paid. It is possible to fully motivate a person to work according to the new KPI through bonuses and bonuses, the conditions for obtaining which will be clearly spelled out in the key parameters.
Stages of creating a KPI system
Actually, as such, the introduction of KPI mechanisms is preceded by several stages of preparatory work. Firstly, this is the period associated with the formulation of strategic goals that are set for the company. As part of the same stage of work, the general concept is divided into tactical areas, the effectiveness of which is to be measured. Secondly, it is the development of key performance indicators, the definition of their essence. Thirdly, this is work on the distribution of official powers related to the implementation of the system, so that each person in charge asks a question like “KPIs - what are they?”
Thus, all indicators will be assigned to specific individuals (divisions) in the company. Fourth, current business processes may need to be adjusted (if the updated strategy requires it). Fifthly, it is the development of a new system, the creation of payroll formulas according to fresh criteria. After completing all of the above procedures, you can start the KPI system.
KPI Requirements
As mentioned above, KPIs are key performance indicators that are inextricably linked to the company's goals. The quality of targeting development is the main requirement for the KPI system. Goals can be formed according to different principles, but one of the most popular in the HR environment is the SMART concept. Means "specific" (specific), "measurable" (measurable), "achievable" (achievable), "related to the result" (relevant), "time-bound" (time-bound), and, as a result, giving worked out and quality KPIs.
Examples of goals that meet these criteria: "open so much (measurable) outlets(specific) in a city (relevant) in the first quarter (time-bound)”, or “sell so many air tickets to such and such a country in three weeks”. Each goal should be divided into tasks, which, in turn, are reduced to the level of personal KPIs (for employees or departments). The optimal number, according to some experts, is 6-8.
KPI automation
One of the factors for the successful implementation of KPIs is the technological infrastructure. Since key performance indicators are a set of rational indicators, a computer will do a very good job with them. There are many software solutions for managing KPIs. The possibilities available in such distributions are quite extensive. Firstly, it is a convenient presentation of information (in the form of graphs, analytics, documentation) about the processes associated with KPIs. What does it give? Mainly, the unity of data perception, reducing the likelihood of misinterpretation of numbers. Second, the collection and calculation of performance indicators. Thirdly, this is a multidimensional (with very large volumes of numbers) analysis, which will be difficult for a person without a program to perform. Fourth (in the presence of a network infrastructure), this is the exchange of information between individual employees and the establishment of feedback channels "boss-subordinate".
