KPI (Key Performance Indicators). How to implement a KPI system in a company

Hello! In this article, we will talk about the KPI system.

Today you will learn:

1. What is KPI.
2. How to calculate this indicator.
3. How to implement a KPI system in an enterprise.
4. About the pros and cons of this system.

What is KPI in simple words

KPI - this is a coefficient that determines the effectiveness of a particular enterprise: how well it functions, whether it achieves its goals.

The decoding of this abbreviation is as follows - Key Performance Indicators, which is usually translated into Russian as "key performance indicators".

If translated literally, the word “key” means “key”, “essential”, “indicators” - “indicators”, “indicators”, but with the word “performance” there are difficulties in translating, since it is difficult to interpret it unambiguously here. There is a standard that gives the most correct translation of this word, dividing it into two terms: efficiency and effectiveness. Efficiency shows how the funds spent and the results achieved are related, and performance - to what extent the company managed to achieve the result that was planned.

Therefore, it is more correct to translate KPI as “a key performance indicator”. In simple terms, so to speak, for dummies, you can see that this system helps to understand what measures need to be taken to improve efficiency. Efficiency covers all the actions performed for a set time period, as well as the benefits received by the enterprise from each individual employee.

KPI indicators are as follows:

• Performance KPIs- shows the ratio of the spent money and time resources with the achieved result;
• Cost KPIs- shows how many resources are involved;
• KPI result- illustrates the result obtained during the execution of tasks.

Because this system is not easy to implement, you should adhere to certain rules and principles that can become indispensable helpers when switching to KPI:

1. The 10/80/10 rule. It states that a company must define 10 key performance indicators, 80 performance indicators, and 10 performance indicators. It is not recommended to use many more KPI indicators, because this is fraught with overloading managers with unnecessary unnecessary work, and managers will certainly attend to finding out the reasons for not meeting indicators that have little effect on performance at all.
2. Coordination of production indicators and strategic plan. Performance indicators are of no value if they are not correlated with the current Critical Success Factors (CSF) combined in a balanced scorecard (BSC), and .
3. Manageability and controllability. Each division of the company responsible for its indicator must be provided with resources to manage it. The result must be controlled.
4. Integrate performance measurement, reporting, and performance improvement processes. It is necessary to introduce a procedure for evaluating indicators and reporting that will push employees to the required specific actions. For this purpose, reporting meetings should be held to consider the issue being resolved.
5. Partnership. In order to increase productivity successfully, it is worth building partnerships between all involved employees. Therefore, the way to implement a new system needs to be developed together. This will allow everyone to understand what the advantages of innovation are, as well as to be convinced of the need for change.
6. Transferring efforts to the main directions. In order to increase productivity, it is necessary to expand the powers of specialists: help in, offer to develop their own KPIs, provide training.

How to calculate KPI

Paragraph 1. To calculate KPI, you need to select from three to five performance indicators, which will be the criteria for evaluating a specialist. For example, for an Internet marketer, they might be as follows:

1. The number of visitors to the site attracted by the specialist.
2. A figure that shows how many purchases were made by customers who have previously contacted the company.
3. The number of commendable recommendations, customer responses in social networks or on the organization's website after purchasing a product or service.

1. new customers - 0.5;
2. buyers who made a second order - 0.25;
3. positive recommendations - 0.25.

Point 3. Now you need to analyze the data for all selected indicators for the last six months and draw up a plan:

Item 4. The next step is to calculate KPI indicators in Excell. It is necessary to use the KPI calculation formula: KPI index = KPI Weight * Fact / Goal.

Here, the goal is the indicator that the employee must achieve according to the plan, and the fact is what he has worked out in reality. The final indicator is 113.70%, this is a good result, however, if we look at the table in more detail, we can see that the marketer did not fully comply with the planned standards.

Item 5. We calculate wages. We will be based on the fact that the total earnings of a marketer are $800, of which the fixed part (salary) is $560, and the variable (bonus) is $240. For a 100% index, the employee is entitled to a salary and a full bonus, but due to the fact that the plan is overfulfilled, the marketer will receive additional bonuses in the amount of 13.7% of the bonus part, that is, $ 32.88. As a result, the employee's salary will be $560 + $240 + $32.88 = $832.88.

But when an employee does not fulfill the plan, and his performance indicator is below 99%, then the size of the bonus is proportionally reduced.

With the help of such calculations and drawing up a table, you can see the problems and difficulties that an Internet marketer faces.

Poor performance may be due to the fact that the plan is drawn up incorrectly or the loyalty strategy itself is incorrect. The problem area needs to be controlled, and if things do not improve over time, then the right way out of the situation is to change the performance indicators.

Thanks to this approach, an understanding of the principle of operation of KPI is formed. Focusing on the goals, the calculation can be supplemented with new values. It can be a system of fines, the number of solved and unsolved problems, and much more. For example, if the work according to the plan is less than 70% done, the employee will not receive a bonus at all.

There is also an alternative way to calculate salaries in relation to the percentage of the plan completed:

KPI in practice

KPI-performance indicator is used by almost all companies that are engaged in direct sales. Consider some examples for a sales manager. Having adopted the approved key indicators, he will see a clear picture of his activities: it will become clear to him how much goods need to be sold in order to reach a certain income, which ones.

For an insurance consultant who is new to his profession, the optimal performance indicator would be 1/10: to sell one insurance policy, you need to meet with 10 potential buyers.

There is also a result KPI, for example, “the number of new customers is not less than n”, “sales volume is not less than n”, etc. These indicators are personal, and it is better when their number is less than 5, and most importantly, they should be easily measurable and clearly articulated.

In addition to motivating employees, company leaders use KPI as a tool to analyze the work of their subordinates.

This system allows you to clearly see the gaps in activities and at what stage they arose. For example, the boss keeps track of the manager's client base, how many calls and meetings the employee makes. If these indicators are met in sufficient volume, but there are few sales, it can be concluded that the employee lacks certain knowledge, skills or personal qualities for successful work.

KPI and enterprise planning

KPI indicators can be used in planning and monitoring activities. After the work has been done, the actual indicators are measured, and if they seriously deviate from the planned ones for the worse, then further activities are analyzed and adjusted. Since all indicators are "dictated" by the real process, and not invented independently, such planning will contribute to the achievement of the necessary goals of the organization.

How to motivate staff to achieve KPIs

Thanks to the use of the KPI system, planned and actual indicators are recorded when paying for labor. This gives the manager a clear understanding of how to motivate an employee and for what. At the same time, the employee also clearly sees the pros and cons of his work and is aware of what actions can bring him a reward, and for what a penalty is due.

For example, an insurance consultant sold more insurance policies than planned and expanded the client base with many new clients. Thus, he exceeded the plan and, in addition to his salary, he will receive a bonus in the form of a bonus. On the other hand, if the same manager sold much less policies than planned, he may lose the bonus altogether and receive a “bare” salary, because his personal performance will be low.

However, you can motivate employees not only with money.

For the achievement of indicators, you can be rewarded with interesting trainings paid for by the company, unscheduled days off, gifts and other “carrots” that will inspire the employee no worse than money. But in this case, the employee's salary is always fixed, and according to the KPI system, points are calculated that the employee can exchange for the desired bonuses.

To create a KPI for employees, you need to focus on a common goal for all employees and strong motivation. Working in a team of interested specialists, like a clockwork, can lead the company to achieve all its goals in a short time.

When is KPI not needed?

In a young company that has just begun its existence, it is not advisable to introduce a KPI system. The management system has not yet been formed here, and successful development is due to the work of the General Director. Most often, he also performs the functions of specialists in finance and personnel.

And also, you should not implement KPIs in those departments that, because of this, may adversely affect other departments of the company. For example, an IT service, whose representatives must solve the problems posed to them (repair of office equipment) as soon as possible. After all, it happens that one of the employees' computer failed, and the work stopped, and the entire department depends on the work of this employee.

If the salary of an IT specialist is calculated according to the KPI system, then he will not immediately go to work. First you need to make a request for the elimination of damage. This application must be approved by a senior specialist of the IT department, after which the task is queued for implementation and awaits consideration.

As a result, a task that takes 5 minutes to complete takes much longer, during which the work of the entire department, where one computer has broken, does not move at all.

That is why it is useful to implement a KPI system wisely, otherwise it can do much harm.

Mistakes when implementing KPIs

The most common mistake is introducing KPIs for statistics alone.

Ultimately, it turns out that the indicators of one division have no connection with the indicators of another.

For example, the supply service of one enterprise needed to cut costs. Therefore, in order to receive raw materials at a discount, employees purchased them in large volumes, and also purchased defective goods. This led to the overcrowding of warehouses, the freezing of finances in raw materials, which blocked all the advantages.

Meanwhile, the production department had its own priority indicator - the utilization rate of the production equipment. To make efficient use of time, employees churned out certain products to save valuable minutes on machine tool conversions. But this inevitably affected the implementation of the sales plan by the commercial department, because there was no necessary assortment, and in a specific period of time the client could purchase only one type of product.

As a result, a situation has developed where everyone pulls the blanket over themselves, and no one reaches the goal. The result was reduced to zero, and all the work was done in vain.

Another common mistake is focusing solely on material indicators that are the result: sales, income, and so on. However, only when key indicators are not financial, but proactive in nature, it is possible to achieve goals much more effectively.

For example, how many calls should a sales manager make, how many meetings should be held, how many contracts should be concluded in order to achieve the same resulting KPI? It is on the basis of such non-financial factors that the system of employee motivation should be built, and the heads of departments should be guided directly by financial factors.

And also a serious mistake will be the situation when the persons responsible for this or that indicator are not indicated. For example, the order of incentives does not imply bonus payments or their reduction by the head for the performance or non-performance of the plan. In this case, the boss cannot be responsible for the actions of subordinates, because he has no way to influence them.

Pros and cons of implementing a KPI system

Working on a KPI system has many advantages:

• It has been established that in companies with such a system, employees work 20-30% more efficiently.
• Specialists will clearly understand what tasks are priorities and how to accomplish them.
• With a well-implemented system of indicators, the control of the company's activities is greatly facilitated, due to which problems are detected already at the stage of their occurrence and are solved without having time to cause harm.
• When calculating wages, the principle of justice applies: those who work diligently get more. This allows the organization to retain valuable staff.
• The wage fund becomes a means of motivating staff, and not the main source of expenses.

There is a KPI system and disadvantages. First of all, the disadvantage is that a lot of time and effort is spent on implementation, because all indicators need to be worked out in detail. Most likely, it will be necessary to retrain employees, explain to them information about changing working conditions and new tasks.

However, the main drawback is that the effectiveness in the end is not always evaluated correctly. This can be avoided if, at the stage of system development, the criteria by which the qipiai will be assessed are flawlessly formulated.

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. We offer an algorithm for developing a KPI system from scratch (when there is nothing yet), ending with the final result - a working system.

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 an IT project company implementing large and technically complex projects.

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

1. Where can I get these same KPIs, and what should they be? Will these KPIs be achievable, and how to determine this?
2. Which KPIs are important and which are not?
3. 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?
4. What project implementation methodology should be used? Let's say we chose the Balanced Scorecard (BSC) methodology - Balanced Scorecard. What should be done next?
5. How to start such a project, and how should it end? Etc.

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

If a 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. These are the classic 4 "walls" ( rice. one). 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 (capable of this) to create competitive products, they need to be paid, they need to be trained and developed, etc. Then they will create products, products will be sold, and the company will be in order financially. 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 essence of the Balanced Scorecard (BSC) methodology - a 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

1. Finance. Simple parameters: income, expenses (payments to suppliers, salaries, rent, overdraft rates, foreign exchange losses, taxes, etc.), profits, etc.

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 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.

Action plan example:

1. Prepare/adjust product line for new Industry segment 2(for short - new industry - "BUT"). This is the "wall"
2. Find a professional sales director for "BUT". This is the "wall" of B and D, since this is a task for the company's sales director and for HR:

• Develop a customer profile "NO". This is the "wall" B.
• Develop a profile for the NO director. This is the "wall" B.
• To develop the main parameters of the motivation of the director of "NO". This is the "wall" B.
• Develop a motivation sheet for the director of "NO" and agree on it. This is the “wall” D.
• Carry out a search/hunting for the director of "NO". This is the “wall” D.

• Assign tasks to the director of "NOD". This is the "wall" B.
• Develop the main parameters of the motivation of sellers of "NOD". This is the "wall" B.
• Develop motivational lists for NOD sellers and coordinate them. This is the “wall” D.
• Transfer part of the sellers, hire part of the "NOD", part, perhaps, dismiss. This is the "wall" of B and D.

Goal tree and KPI example

"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 (sales director of the company):

• 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 the "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 (NOD):

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 the closure 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 corresponding 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:

• List No. 1. Large and medium-sized companies in which it makes sense to look for a director or deputy director of a similar direction. It doesn't work, then:
• List No. 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:
• List No. 1. Look for a strong salesperson in large and medium-sized companies, not a manager. Also for growth. It doesn't work, then:
• List No. 1. Look for a director who is close in terms of industry, taking into account his ability to master a new industry.
• And so on. There were other options.

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.

KPI details can be generated using, for example, the well-known S.M.A.R.T. goal setting methodology. So step 4.

Step 4. Review 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 is important - a meaningful approach to solving problems!

Step 6. Checking 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!

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 paragraph 3).

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

Example. Incentive 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 the content 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.

This will protect against mistakes and give an initial experience. This will be the beginning of the practice and the beginning of the creation of the KPI system.

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? Execute pp. 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 “increase business efficiency”, “ensure further growth of the company”, etc. I will give an example of a range of practical goals for creating a KPI system:

• Objective 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.
• Objective 1.2: checking the effectiveness of the company's business areas (sales, production, presale, marketing, etc.) with the same goal.
• 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.
• Objective 1.4: To test the ability of managers to set achievable goals (and objectives), their mastery of goal setting, etc.
• Goal 1.5: Testing the company's ability to achieve its goals and objectives.
• Goal 1.6: verification of the achievement of the set goals and objectives, as well as a comparison of “where we strived” and “where we came”. A very interesting goal! Let's say they were striving for one thing, and the market "corrected" the company's movement, and the company came to better results! It rarely happens, of course, but it does happen. This is a good reason to analyze last year's business planning, taking into account the KPIs set, and draw conclusions. Excellent result!

2. The action plan must be checked for feasibility so that it does not contain 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.

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. Etc.

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're starting at the top "Finance" and you're worried about "margin". 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:

• 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):

• 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.
• 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>.
• 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.
• 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. Etc.

The introduction of KPI allows you to make employee performance management more efficient. Almost any company leader will agree on how important the right motivation of employees is. An organization in which employees get paid just for being in the office from 9 to 18 will never be successful.

What is a KPI?

KPI (key performance indicators) is an assessment of the results actually achieved. It is most often used for business process management in various areas. The development and implementation of a KPI system allows you to accurately change the efficiency and effectiveness of the performance of business processes.

The development and subsequent implementation of the KPI system in the library of the university, in the store and in any other places is carried out with specific goals:

• integration of the general goals of the enterprise and personal goals of employees;
• increasing the motivation of employees, the growth of important performance indicators;
• creation of a clear scheme of the immediate and distant goals of the organization for their consistent achievement.

BSC and KPI development and implementation

BSC is a balanced scorecard that can be applied in different areas. The development and implementation of the system is carried out in several stages:

• drawing up a plan with a detailed description of all work;
• description of required resources;
• system development;
• implementation of the new system and its operation in parallel with the old one;
• Demonstrating to employees the benefits of the new approach.

Specialists in the development or implementation of KPI are advised to follow certain rules:

• The minimum set of indicators should be sufficient for full-fledged business process management;
• All indicators must be realistically measurable;
• The cost of measurement should not exceed the managerial effect of using this indicator.

These rules are relevant for the implementation of KPIs in the work of the university library, and for sales, and for any other areas.

KPI development and implementation is used to evaluate various indicators.

Types of key indicators

Depending on the field of activity of the enterprise, key performance indicators are selected. Examples of the most common KPIs are shown in the table below.

Development and implementation of KPI in retail

The use of the KPI system in retail has long shown its effectiveness. The development and subsequent implementation of KPI in a company that sells services or goods to the end consumer provides the following benefits:

• Sellers motivation. After the development, testing, implementation of the KPI system, the efficiency of the staff increases by at least 10%;
• Broadcasting the priorities of the enterprise, the main tasks. The introduction of a performance evaluation system will allow employees to clearly understand what their actions will help achieve goals that are important for the company;
• Performance monitoring. It is convenient to use BSC and KPI to evaluate the performance or efficiency of an enterprise. The development and implementation of these systems allows you to monitor the success of the organization, learn about emerging problems in time and eliminate them;
• Attracting and retaining good people. The introduction of KPI in the company allows you to achieve a fair payment of wages: competent employees who work efficiently get more;
• Turning the wage fund into an effective tool. KPI consultants note that when using measurable performance indicators, the payroll fund becomes a means of motivating staff, and not a usual source of expenses.

With proper alignment of the KPI system, all employees understand how their duties affect the achievement of the most important goals of the company.

Implementation of KPI in an organization: an example

The development and implementation of a KPI system in our material will be considered using the examples of a technical support worker and a sales manager.

Support

A technical support worker should advise real customers, help potential customers. In this case, the set of possible performance indicators can hardly be called wide. The work of a specialist is evaluated on the basis of data:

• number of consultations held;
• quality of service;
• customer satisfaction.

Sales

The duty of the sales manager is the direct execution of sales, i.e. conclusion of contracts with clients. The development and implementation of KPI in retail can be performed based on the following indicators:

• the number of new customers;
• volume of completed sales;
• average sale amount;
• knowledge of a foreign language.

Universal KPI systems

The implementation of KPI in an organization (an example is given in this article) can be carried out without developing individual assessments - using universal indicators.

Educational videos on developing and implementing KPIs

The vast majority of business owners are dissatisfied with the performance measurement systems they use. The problem is that there is no clear sequence between planning, execution and the result. Moreover, no one knows how to connect staff motivation with the goals of the organization. KPI development helps change the picture. This system allows you to control the business activity of employees and the enterprise as a whole and takes the company to a new level.

General concepts

The KPI indicator is voluminous and contains the degree of achievement of the result, as well as the costs of obtaining it. Formation of the system is possible in absolutely different areas of activity. The implementation of KPI is accompanied by special indicators that help create an effective system of motivation and incentives for employees of the organization. Of course, we are talking about those employees whose activities directly affect the income of the enterprise. KPI is also developed for employees of administrative and management personnel to determine the effectiveness.

Key performance indicators are divided into subspecies:

1. result KPI. Displays both the quantity and quality of the result.
2. Cost KPIs. Shows nested resources.
3. KPI of functioning. It includes performance indicators of intended operations and allows you to compare what you expected with what you got.
4. performance KPIs. Forms indicators that characterize the ratio of the result to the time spent.
5. efficiency KPIs. It characterizes the relationship between the result and the invested resources.

The development of KPI in the company is convenient not only for the director, but for each employee. The system helps to most transparently calculate the steps that an employee needs to take in order to achieve the desired result. That is, each employee clearly understands the algorithm of necessary actions to increase personal sales and the income of the entire company.

What does it look like?

Let's give an example of using KPI in business. In the field of direct sales, performance indicators are actively used. Indicators reveal the relationship between calls, meetings with a client and the number of sales. The consultant is explained how much product needs to be sold in order to reach the planned figure, as well as how many calls and meetings are needed to do this. An example of a KPI result in this case will focus on the minimum allowable number of customers, as well as on sales volume not below the established limit.

When developing KPIs, the main thing is not to get carried away. Remember that personal indicators should be at least three, but not more than five. The main thing is a clear formulation and easy measurability.

In addition to incentives, the KPI system helps the director determine at what stage a particular employee experienced a sharp decline. If we take the same sales manager as an example, then thanks to KPI indicators, you can see the number of calls and sales, as well as consider the client base. If everything is fine on these points, but for some reason there are no sales, then professionalism is the weak point of the employee. In other words, there is no necessary knowledge or ability to convince.

Application in practice

So, you've decided to apply the system within your organization and don't know where to start. The development of KPI at the enterprise includes the stages of a certain sequence. First of all, it is necessary to carry out some pre-project work.

After receiving approval from the management, the planning phase of the project begins. Here, key performance indicators are formed, all the subtleties are developed and taken into account. A project team is being created, which conducts all the necessary research.

The preparatory activity smoothly flows into the development of the system methodology. At this stage, attention is paid to the optimization of the organizational structure. For this, a methodological model is developed on the basis of regulatory documentation. The company management process is completely transferred to the KPI system.

Having developed regulatory and methodological documents, it is worth moving on to organizing an information system. Namely, a TK is created with further programming customization. As soon as everything is ready, the staff should be involved in the implementation of the system. A competent briefing on the use of the program is carried out, examples of developments and their practical application in practice are clearly demonstrated. At the final stage, KPI is put into operation.

It is important to know!

The efficiency of the system is based on the following points:

• it is important to correctly develop a tree of company goals;
• it is necessary to correctly distribute all performance indicators;
• it is important to clearly define the responsibilities between employees for goals and processes;
• it is necessary to introduce an accounting system that will make it possible to calculate all KPI formulas;
• it is necessary to involve disinterested people who will be specially trained for this in the maintenance of the accounting system.

The last item must be restricted. The group of persons responsible for the accounting system cannot include employees who fulfill these KPIs. Otherwise, it may adversely affect the operation of the entire system.

There are several points that have an extremely unfavorable effect, and sometimes even interfere with the operation of the system. The main negative factors can be identified. The KPI system will not start correctly if the director did not participate in the development of goals, and also if all performance indicators were not taken into account when planning.

The created accounting system must reflect absolutely all data. Therefore, if at least part of the information is missing or it is entered incorrectly, you should expect trouble. In the case when KPI indicators are applied only in certain departments, the desired result cannot be achieved either. The system should cover every department.

If the indicators are not tied to motivation, nothing will work. When building a system, the personal goals of employees should be taken into account. In addition, it is important not to delay the payment of performance bonuses for more than three months. Otherwise, employees will get tired of waiting, and motivation will disappear.

Eventually

Building KPI is directly related to motivation, the whole system of which is based on the primacy of the company's goals. In this case, personal goals are also taken into account. Remember that people are most motivated to act when they believe their work will lead to their specific desired goal.

In this article you will learn

• What is KPI and what types of key performance indicators are there
• Why KPI systems often don't work
• How much does it cost to implement a KPI system in a company

This article is about developing KPI in the organization and understanding of the necessary criteria that must be taken into account in order to increase the effectiveness of the implementation of the new system.

Any system of staff motivation should be aimed at finding the relationship between the goals of the enterprise and the employees themselves. The effectiveness of such a link between personal and corporate goals is possible in a situation where employees clearly understand the goals of the enterprise and understand the opportunity to influence their income (and not just receive a standard salary that does not depend on the employee's performance). Therefore, in the remuneration of employees from the level of heads of departments, a variable part should be provided - approximately 25% of the total income.

What is a KPI?

By itself, the KPI system cannot be considered a personnel motivation system. It is just a tool for the management system. Today, almost any indicator is called KPI. I can't understand why many businesses refer to the KPI as paying percentage of sales to managers. Or why KPI is usually called the coefficient of labor participation - probably just some fashion trends that are not entirely correct.

KPI - key performance indicators (performance indicators). Setting up a management system based on KPI is based on the ability to achieve the main goal of the enterprise through the implementation of performance indicators for employees from various departments.

Types of KPIs

1. Target indicators. These indicators reflect the degree of proximity to the goal. We will pay special attention to these targets in the article.
2. process indicators. Evidence of the effectiveness of the process. They allow you to assess whether a certain process can be completed faster or reduce costs without affecting quality.
3. Design indicators. These indicators are related to the specific goals of the project - they indicate the effectiveness of the implementation of the entire project and its individual parts.
4. Indicators of the external environment. These indicators cannot be directly influenced. However, they should be taken into account, for example, when developing targets. Among the external KPIs, one can note price fluctuations, the prevailing price level in the market.

Is the KPI system effective in small businesses

It makes no sense to introduce KPI if the enterprise does not have a management system - when success depends solely on the efforts of the owner, who combines the functions of the chief financier, general director, chief personnel officer (mostly these are enterprises in the 1st phase of development).

The success of KPI integration is not affected by the number of employees. It is necessary to comply with another condition - the appropriate maturity of the business and an adequate accounting system. One of the classics of management emphasized that it is impossible to manage what cannot be counted. KPI - countable key indicators. They can be qualitative (in the form of a rating, points, etc.) or quantitative (time, money, volume of goods, people, etc.). However, in any key performance indicators should be countable for objectivity and comparison of data.

Not necessarily a mature accounting system includes, for example, a trendy CRM module or other popular applications. It is possible to fix and process the corresponding parameters in the Excel program. The main condition is the maintenance of not just formal accounting in the company, but also management accounting. Consequently, there will be a clear understanding of the trajectory of the movement of their money, the budget of income and expenses, there will always be an understanding of business trends, with the ability to calculate the balance.

When deciding on the relevance of KPI in your company, you need to take into account that the implementation of the system will require expenses of at least a million rubles. Therefore, when investing in such a project, it is necessary to understand the expected return and the period of its receipt. With the normal operation of your system, with the achievement of your goals and business development, but at the same time, old, already proven management tools are used, you need to switch to KPI settings only for a certain expressed reason, and not just to follow fashion trends. The KPI system will ensure the effectiveness of the result within the framework of projects for diversifying the product, significantly scaling your business, increasing the market share by an order of magnitude, entering the regions, etc.

KPI development: how to implement key performance indicators

It is recommended to develop KPIs in a hierarchy from top to bottom - from the main goal of the enterprise to the goals of departments and functions. Sometimes formation starts from the bottom - from the indicators and goals of a certain performer (as a rule, from a top manager to a middle manager), then the upward path begins to form towards a common goal. Indeed, at the level of everyday consciousness, one gets the impression that it is much easier to set a goal for an employee than to achieve an understanding of the overall goal of the organization. But under this condition, there can be no guarantee of achieving the desired results on the scale of the work of the entire enterprise, if the stake is on individual employees. Therefore, it will be necessary to verify the compliance of individual goals with the overall goal of the enterprise. In fact, you will need to do the same job twice.

Determining the overall goals of the enterprise when implementing KPIs

First of all, when planning the creation of KPIs, a company needs to answer the question “why?”. What is the company's activity for, for what tasks did it come to the market, why do consumers need it?

The chosen direction of activity in the market will depend on the answer to this question - from its current position to the chosen final goal.

You need to define your goal, which is set for the long term - for example, after 3 years. When formulating an answer, it is not recommended to focus on financial aspects. After all, finances are quite a relative component, which is confirmed by the recent crisis.

It is better to formulate the goal in such a way that financial desire follows from it, but is not clearly spelled out. This increases the stability of the system, despite changes in market parameters. The goal should not be associated with a specific unit, but with the market - therefore, actions will be initially set up for market changes.

You can formulate your goals as follows - to be in the top three in the Russian yogurt market, to break into the TOP-10 companies in the furniture market, to enter the market of terminal communications in Moscow and St. Petersburg, and to become a leader in certain regions.

From the formulation of goals in the form of a desire to achieve high or leading positions in a particular market, all financial aspects will follow. Goals for profit, turnover, share of costs and growth dynamics of the enterprise will become clear.

After determining the overall goal of the company, it will need to be divided into sub-goals by asking the question “What needs to be done to achieve the main goal?”. Immediately you should pay attention - not what needs to be done, but what "to do". In the context of this formulation, “to do” means to move in a certain direction. And “do” implies the implementation of a specific action. If the main goal of the organization is presented as a specific action plan, then there is a risk of not achieving it if one of the planned activities turns out to be impossible. With a correctly set direction of your movement towards the target, there will be an opportunity to maneuver - therefore, it is possible to choose plan A, plan B, etc.

KPI selection

In most cases, there are no problems when compiling a list of possible KPIs. Since managers are well aware of the parameters by which it is possible to evaluate the performance of units. However, problems are accompanied by the selection of key, most significant KPIs.

The presence of many key performance indicators, like the choice of only one indicator, leads to a deterioration in the ability to manage. Since too many indicators complicate the calculation procedure. When choosing only one key performance indicator KPI, 2 options arise - to confirm its achievement or non-achievement. But there is no room for maneuver, making changes to the work process in a situation where the results do not meet expectations.

Therefore, only a set of several top-level KPIs allows for the possibility of maneuvering - two or three are better. They can be selected based on an assessment of the significance of each of the KPIs, by analyzing their weight.

For each indicator, its own weight is assigned by expert means, so that the combined sum of the weights of all KPIs is one. You can not limit yourself in the number of KPIs. Weight must be determined taking into account the principle of necessity - what indicators need to be met to achieve the goal (which are not just desirable, but necessary, without which it is simply impossible to achieve the goal). These indicators are characterized by the greatest weight. Then we remove the indicators with a weight below 0.1, and again distribute the weights between those KPIs that remain. The output will be no more than 3-5 indicators. Indicators with a very small weight can then be taken into account for the motivation scheme as conditions for lowering or increasing the size of the bonus.

The balance is usually handled by the CEO with a team of top managers, taking into account the priority of the company's tasks. By the weight of the indicator, you can understand what actions the company should bet on in the foreseeable future (see Fig. tab. 4).

Identification of "leading" and "lagging" KPIs

Leading indicators - allowing, in case of noticed deviations from the path to the goal, to intervene in a timely manner and make the necessary corrections to the situation. They support the management of movement towards the goal. An example of such an indicator is the level of inventory in a warehouse. This parameter can be controlled in the low or high season, making sure that there is enough raw material in the warehouse to produce a certain amount of products, or you need to purchase it additionally. Or there may be an excess of raw materials in the warehouse, it is old and must be sold to free up space for the placement of a new one. By taking into account the indicator "level of stock of raw materials", it is possible to make managerial decisions aimed at improving production efficiency.

There are not only leading, but also lagging KPI key performance indicators. According to these indicators, the achievement or non-achievement of one's task can be stated, however, without the possibility of making adjustments while moving towards one's goal. Therefore, if the goal is not achieved, lagging indicators simply indicate damage to the enterprise. Consequently, lagging indicators play the role of stop factors within the framework of bonus schemes. In fact, if this indicator is not reached, the bonus will not be paid in full or it will be significantly reduced. An example of such an indicator is staff turnover. After all, this indicator can be stated only by the fact - how many employees the company has lost over a certain period. Acceptance of managerial actions can only apply to the next period. But it will not be possible to influence the current losses - they can only be fixed for the future.

Therefore, when calculating the bonus scheme, the formula includes not only the weight and percentage of a certain KPI, but also the number of leading and lagging indicators.

In addition to calculations, it should be recalled that the seller's remuneration should not be tied solely to one indicator (for example, to revenue or turnover), without taking into account market features and seasonality. Since otherwise the business may face the trap of satiety - material factors lose their power of motivation. Consequently, the return for every ruble invested in employees gradually brings less and less return. And over time, the amount of investment in employees begins to exceed the return. A similar danger arises when an employee is provided with an income that exceeds the level he needs for his usual lifestyle (as a rule, it is achieved with 2 incomes of a specialist in his region in this specialty). The only way to treat the “satiation trap” is to dismiss an employee who has ceased to bring returns - it will no longer be possible to achieve the desired effect by changing the payment scheme.

KPI Based Bonus Calculation Formula for Head of Commercial Department

Bonus = (BF KPI 1 × A + BF KPI 2 × B + BF KPI 3 × C) × D, where:

BF KPI 1, 2, 3– max bonus fund, which is multiplied by the weight of KPI 1, 2, 3.

A- correction factor to KPI 1 with a threshold value of 70% (if the plan is less than 70%, no bonus will be accrued for this indicator (A = 0); if the sales plan is fulfilled by more than 70%, the corresponding bonus is accrued in proportion to the implementation).

B- correction factor to KPI 2, the threshold value of which is 85%. If this indicator is met by less than 85%, it is B = 0. If the level of 85% is reached or exceeded, the bonus will be accrued in proportion to the performance. The coefficient is blocking - if the threshold value of KPI 2 is not met, no bonus will be paid, regardless of the results of KPI 1 and KPI 3.

C- correction factor to KPI 3 (threshold value 60%). If the indicator is less than 60%, then C will be equal to 0, if it is performed by 61-100%, the accrual is proportional to the performance.

D– stop factor, which is a general blocking correction factor, with the bonus payment reset to zero if the minimum threshold values ​​for any KPI were not reached.

Under the proposed scheme, the seller's attention is on the amount of receivables along with the cost of the sales process and the level of sales, and not limited to achieving growth in turnover at any cost. Thanks to this, the company manages to achieve timely receipt of money, refusing interest-free lending to staff or customers.

When KPIs will work and when they won't

An effective KPI system will be under the following conditions:

• with the correct weighing and arrangement of all KPI indicators;
• correct creation of a tree of company goals;
• the accounting system will allow you to calculate all the KPI calculation formulas;
• correct distribution of responsibility for goals (and processes) between performers;
• entering data into the accounting system by trained, uninterested people - not those who performed these KPIs. In this case, it is necessary to enter reliable information;
• linking KPI to the personnel motivation system. The motivation system should be built with the priority of the goals of the enterprise over the goals of employees, but with their obligatory consideration.

When the KPI System Doesn't Work:

• The company's management did not participate in the creation of the goal tree.
• It is impossible to calculate KPI due to the lack of data in the accounting system, subjectivity or unreliability of their assessment.
• Incorrect development of KPI - without taking into account the relevant indicators for achieving the goals.
• There is no binding of KPI to the motivation system.
• The implementation of KPI is not for all departments. The control system in this case will be skewed.
• KPIs are tied to the current motivation system, however, without taking into account the personal motivation of employees for whom KPIs are introduced.
• The achievement of KPI and the payment of a bonus for them for a period of more than 3 months are divided. In this case, employees simply get tired of waiting, ceasing to link the correctness of actions and reward. For long-term projects in a company, you need to link KPI and a bonus for achieving goals not only to the final results of the project, but also to intermediate stages.

How to overcome staff resistance when implementing a KPI system

1. Employees need to be explained that what is being implemented is related to what they have already done the day before. Thanks to this, there will be no expectation and fear of cardinal changes every Monday with the cancellation of past results.

2. KPI is a fairly complex tool. Therefore, it is necessary to explain this technique to all users in advance - in order to receive feedback in test mode, discussion, discussion of questions that have arisen, etc.

3. A critical success factor is participation in the KPI motivation project for the CEO and the top management team. If the management has doubts about the overall success of this project, such undertakings do not make much sense at all.

4. Top managers should also involve middle managers in the KPI development workflow - that is, employees who will be forced to evaluate and plan their own actions according to the new approved system. They must work together to create a phased implementation plan for a new project - usually the commercial departments are the first to test the system, and the back office at the very end.

5. It is necessary to encourage the activity of employees in the implementation of changes - you need to celebrate any, even the smallest victories.

6. Ensure that the workflow is consistent with the changes being made. Therefore, it is necessary to separately plan the transition from the current system of regulations to the new one - this will not happen instantly, therefore, it is necessary to separately take into account and control the time of this transition.

7. It is necessary to adhere to continuous changes in the company. However, in order to ensure continuity and consistency, the optimal situation is when all changes flow from the main goal of the organization.

• Motivation, Incentives and Remuneration

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