Formation of key performance indicators. KPI system

The ultimate, and often the only goal of the commercial activity of an individual entrepreneur or organization is to make a profit. The more it is and the less effort you have to spend to get the result, the better; but how to achieve acceptable performance? Emotional motivation of staff and viewing are not bad, but not universal and not always working methods: both a novice entrepreneur and an already experienced businessman should not only plan future achievements, but also evaluate current ones.

One way to assess the profitability of an enterprise and the "usefulness" of employees is the introduction of KPI, or key performance indicators. How to implement and calculate C&I and how the remuneration of subordinates may depend on it - in the following paragraphs.

What is a KPI?

Like most modern marketing theories and systems, KPI is not a strange English word, but an abbreviation derived from the phrase key performance indicators. The word key in this case can be unambiguously translated using the adjective "key"; performance is, depending on the desire of the translator, "performance", "efficiency" or "effectiveness"; indicators - actually, "indicators" or "indicators". Each of the translation options has the right to exist, however, in the Russian-speaking environment, " key performance indicators”, or simply KPI.

Why are KPIs needed?

As follows from the decoding of the abbreviation, KPIs will be useful to an entrepreneur, director or head of a department to assess the effectiveness of labor: their own, employees of a particular department or the entire organization as a whole. The indicators most often have a quantitative expression (how to calculate KPI will be discussed below), but they can also be qualitative: it all depends on the working conditions and the goals set.

The results of calculating or evaluating the achieved KPIs can (at the discretion of the businessman) affect the remuneration of personnel, the payment of incentive benefits and the implementation of motivational events. At the same time, of course, one should not forget about the current legislation: no matter how horrific the KPIs of a particular specialist may be, this cannot cause non-payment or late payment of wages due to him in accordance with the terms of the employment contract.

You can understand why a KPI can be useful in a particular situation by looking at a simple example. Let it be a small retail outlet that sells elite processed cheese and shoe polish. The staff includes the owner of the store and seven account managers.

Key performance indicators (and, as you might guess, there may be several) for each of the managers can be chosen:

• the percentage of successful transactions (the ratio of real and potential buyers, expressed in shares or percentages);
• average purchase price (average check) of the client;
• fulfillment of an individual or unified sales plan (as a percentage or a fixed amount, up or down from the target);
• the proportion of visitors satisfied with the service (according to several indicators, based on a completed questionnaire or assessment in points).

By regularly (usually once a calendar month) receiving and processing the relevant information, the owner of the outlet will be able to assess the effectiveness of the team as a whole and regulate it, increasing the amount of remuneration and assigning bonuses to the most successful employees and dismissing or motivating negligent managers with the right words.

Indicator classification

There is no single classification of key performance indicators: everything, as usual, depends on standard and contingent circumstances and the interest of the entrepreneur. KPIs, like most other marketing tools, are flexible and can be customized to your specific needs without much inconvenience.

By time

One of the most common KPI classifications is temporary. As you know, key indicators do not have predictive use, and therefore can only be:

1. Operational, or leading. They are calculated in real time and help to understand whether production or creative processes are going in the right direction, whether there is a demand for manufactured products (especially if they are new) and whether buyers (visitors, customers) are satisfied with the service and quality of the goods. It is impossible to draw final conclusions on the basis of operational KPIs alone, but it is possible and even necessary to slightly correct the situation in the right direction.
2. Final, or delayed. They can be calculated only after the fact, based on the data obtained. Based on the results of the calculations, the head of an enterprise or department can choose ways to further increase productivity and profitability: increasing pay for distinguished employees or the entire department, if a collective indicator is taken into account, moving individual employees to other areas, increasing or decreasing the planned load, and so on.

By mass

The second classification is by mass character. Key performance indicators can be:

• Individual, that is, relating to only one employee;
• Collective- for example, for one department, workshop or division;
• General- for the entire enterprise.

Each of these types can be, depending on the circumstances and method of application, useful, not of particular importance, and sometimes even slowing down the work of the company, so the manager, when working with KPI, should not be limited to only one tool, and also be completely influenced by modern systems for determining efficiency.

According to the selected feature

The third, most extensive classification is according to the selected feature, around which key indicators are built. Such signs can be called as many as you like; the most common are:

1. Performance. In general, this is the ratio (in quantitative terms) of the efforts expended and the results achieved. For example, if in order to obtain a product output sold by a plant for 1,000 rubles, it is required to invest a total of 1,500 rubles, including man-hours, equipment depreciation and electricity costs, the enterprise, even without making calculations, can be called inefficient. If the total costs are kept at the level of 500 rubles and can be further reduced, the efficiency of the plant is obvious.
2. Expenses. A narrower indicator that allows you to evaluate the increase or decrease in the organization's expenses for the reporting period (usually a calendar month). After receiving the reporting information, it should be processed and KPI calculated - only then it makes sense to talk about the growing unprofitability or profitability of the company.
3. Result. It is not always the profit received by the firm or other material benefits. The result can be considered the release of a certain number of units of production, an increase in the number of regular customers, and even a decrease in the level of theft of fountain pens in the office. Result KPIs are calculated fundamentally in the same way as other key performance indicators, and they can influence the assessment of production to the same extent.
4. Environment. The profitability of the company, no matter how much the manager would like it, depends not only on the efforts of employees. External factors will inevitably intervene in the matter: rising prices for raw materials, a drop in the interest of the target audience, regular surprises from the legislator, and so on. It is difficult to predict them with sufficient accuracy, so it remains only to analyze and, based on the values ​​obtained, make management decisions - for example, start looking.
5. Process. Process KPIs can (for the reasons described above) only be operational, otherwise they turn into key performance indicators of the result. Research is carried out directly during work, KPIs are also calculated immediately; based on them, the manager decides whether to stick to the initially chosen line or whether it is necessary to make a course correction.

Important: KPI can also be classified based on the components included in the calculations. In this case, we are talking not so much about the final factors, but about the methodology of research and calculations.

The components used in determining the values ​​of key performance indicators include:

• income;
• net profit;
• the cost of goods produced or services rendered;
• the ratio of products of good quality and the total number of products;
• the volume of current assets;
• depreciation rate;
• the cost of funds;
• average material consumption per day, week or month;
• volume of work in progress;
• the amount of unused materials;
• employee productivity;
• the cost of repairing production equipment;
• the number of finished products in stock;
• sales of products.

All these components can be combined, used separately, or completely abandoned by switching to other methods for calculating and evaluating KPI.

Pros and cons of KPIs

Like every marketing research tool, the KPI system has its advantages and disadvantages. They manifest themselves in different situations in their own way: sometimes the introduction of KPI in production brings nothing but benefits; sometimes - leads to an increase in losses. Most often there are "average" options; then the entrepreneur must independently or with the involvement of specialists, weighing all the pros and cons, decide whether to continue using key performance indicators or to switch to other technologies for assessing productivity and profitability.

The undoubted advantages of KPI are:

1. Ability to motivate employees. Usually, when implementing key performance indicators, the remuneration of specialists directly depends on the success achieved, which encourages staff to work more efficiently than before. Distinguished not only receives b about large sums, but also serves as a positive example for other employees who, also wanting to increase their level of material well-being, are guided by a successful colleague.
2. Fair, unbiased and transparent evaluation of work. The values ​​of key performance indicators of an individual employee, department or the entire enterprise as a whole are not affected by any subjective factors. For calculations, one general formula is used, and any employee can, if desired, check his result by performing simple mathematical operations, as well as compare his KPIs with those of colleagues and understand what exactly he is doing wrong.
3. The ability to adjust the behavior of the object of study. Actually, key performance indicators are needed in order to draw conclusions based on the conducted research and take measures to correct the unfavorable situation of the enterprise, maintain the current level or increase productivity and profitability.
4. Unbiased control of certain aspects of the work of the organization and the involvement of employees in the overall production or creative process. Everything is obvious here: if the remuneration of each of the employees, the entire workshop or department directly depends on the calculated KPIs, by default they will be interested in joint achievement of the result, and it will become much easier to control their efforts than if they were divided by interests without the possibility ( and desires) to interact effectively.

Cons of KPIs:

1. Lack of a universal approach. The KPI system is quite flexible and diverse, but not suitable for all cases. And if the rejection of quantitative assessments in favor of qualitative ones is envisaged and quite acceptable, although it inevitably leads to an increase in the subjective component, then for some departments of the enterprise, for which the speed of response to the current situation is more important than achieving specific results (for example, in IT), the introduction of key indicators efficiency can have an extremely negative impact - and therefore slow down the growth of profitability of the entire organization.
2. The need for scaling. You can't just implement a KPI based on advice from the Internet. It is extremely important to think over all aspects - from the "mass character" of KPI (they will be calculated for each employee or for the department as a whole) to the regions of application: as mentioned above, the transition to key performance indicators does not always contribute to the growth of labor productivity.
3. Lack of positive motivation. This is more a flaw in the management policy than in the KPI system, but the connection is obvious: if an employee knows that for all achievements he will simply receive the salary that is due to him, and for the slightest lag behind the established norms he will lose his monthly bonus and earn a reprimand, he (if possible ) will prefer to work for a more adequate employer, and in its absence, will begin to sabotage the company's activities. Thus, without having properly thought out the system of rewards and punishments, the manager runs the risk of losing competent specialists or facing losses that were not previously observed and at first inexplicable.
4. Complete demotivation of staff. If the owner of a plant or company sets obviously unrealistic goals for employees (for example, increase the number of products produced from 100 to 10,000 units per month), he should be prepared for a response. Part of the workers will simply quit, realizing that it is impossible to solve the task; others, as in the previous example, will refuse to comply with inadequate management requirements, at best maintaining production profitability at the same level.
5. Difficulties of implementation. Not all employees, especially those who have been with the company for a long time, will enthusiastically accept innovations; some of them, without understanding and not seeing the benefits of KPI, quit; someone will continue to work "on the knurled", not particularly caring about achieving their goals; there will be understanding people who will become the core of change, but since their number is usually minimal, one should not pin all hopes on such leaders.
6. Possible distortions in assessing the quality of work of employees. KPI is a composite system that usually includes at least three components. Therefore, if mistakes are made in the development of labor assessment technology, a specialist who has not coped with the most insignificant task runs the risk of either being left without a bonus at all, or receiving it in the minimum amount, which, as usual, will affect both the productivity of the enterprise and its profitability. .

Advice: it is difficult for an unprepared person to understand the principles of operation of key performance indicators, and even more so to prepare an enterprise for their implementation. Therefore, if the result is needed urgently, but awareness has not yet come, it is recommended to contact a specialist (marketer or economist) who will develop a rating system and draw up an action plan or tell the entrepreneur in which direction to move, and if necessary, help.

How to calculate KPI?

As already mentioned, each of the key performance indicators is usually divided into several components, which are expressed in shares and can be conventionally called indices. The sum of the shares must be equal to one or, if percentages are used, 100%. You can calculate each of the current indices using a simple formula:

KPIt \u003d KPIi × (Rf / Rz), where

• KPIt- current, or current, index of key performance indicator;
• KPIs- initial index;
• RF- results in quantitative terms achieved during the reporting period;
• Rz- planned results in quantitative terms.

Consider an example. Let three components be allocated for one of the KPIs, the first of which is 0.30, the second is 0.55, and the third is 0.15. Over the past month, the following results were achieved for each of the indices (in conventional units):

• for the first: actual - 185, expected - 180;
• for the second: actual - 65, expected - 70;
• for the third: actual - 500, expected - 350.

As a result, we get the following:

• The first KPI index will be equal to: KPItp \u003d 0.30 × (185 / 180), that is, 0.31, or 31%.
• The second KPI index will be equal to: KPItv \u003d 0.55 × (65 / 70), that is, 0.51, or 51%.
• The third KPI index will be equal to: KPItt \u003d 0.15 × (500 / 350), that is, 0.21, or 21%.

Thus, based on the calculations of the current indices of the key performance indicator, we can conclude that during the reporting period, the employee (department or enterprise) began to work better on the first and third points (0.31 vs. 0.30 and 0.21 vs. 0.15) , but in the second, his successes clearly decreased (0.51 vs. 0.55)

At the same time, the overall value of the efficiency indicator for the past month was: 0.31 + 0.51 + 0.21, that is, 1.03, or 103% percent, which indicates at least a small, but still increase in productivity and profitability.

Important: the total value of KPI indices for the reporting period, unlike the initial one, may be more than one or 100% - this is a sign of an increase in labor efficiency. If the sum is less than or equal to 100%, one should speak of short-term stagnation or gradual decline, respectively. Both are not critical, but require corrective action - and the sooner they are taken, the better for both the businessman and employees.

Depending on the type of activity of an employee or department, it makes sense to calculate KPI based on the following indicators:

1. For specialists of the sales department (marketers, managers) - the volume of successfully concluded and completed transactions.
2. For employees of the accounting department - the number of payment transactions, actual and planned.
3. For specialists of the legal department - the number of concluded contracts, real and indicative.

Advice: Do not try to build your KPI system only based on the experience of other companies. What is suitable in one case (and in due time) may be unacceptable in another. Therefore, instead of adjusting the mechanisms to the standards taken from nowhere, it is better to spend a little effort on fine-tuning them: in this way, it will be possible not only to keep the nerves and good mood of employees, but also to increase their productivity, which is the ultimate goal of introducing key performance indicators.

Features of KPI implementation

Each enterprise, even operating in a niche that has been mastered for a long time, is unique in terms of the quantitative and qualitative composition of the personnel, the applied management methods, the main mission and additional goals and other parameters, and therefore it is impossible, without giving specific examples, to describe the features of embedding a system of key performance indicators in a business.

As an example, we will consider a medium-sized company engaged in distance sales using its own online store.

The first stage of KPI implementation is the definition of evaluation criteria and the selection of "experimental". It can be either individual employees (but then and in the future, key performance indicators should be applied individually), and entire departments. Since the firm under consideration is narrowly focused, it would be more logical to choose for the experiment (of course, with their consent) several managers.

The second stage is the development of new documentation. Depending on the size of the organization and management features, these can be memos, job descriptions, employment contracts or orders from management. The employees participating in the experiment must be familiarized with all these papers: under the signature, if it concerns documents, or in fact, if these are simple instructions and reference books.

The third stage is preparation and education. Despite the fact that the documents have already been read and signed, workers will not be able to immediately start working in a new way. They need to undergo appropriate trainings, receive additional clarifications, and also clearly understand that now their remuneration will directly depend on key performance indicators, and not on other factors or conditions of a previously concluded contract. Do not be too hasty with the transition to the next stage: the more time the employer agrees to spend on briefings and consultations, as practice shows, his subordinates achieve the best results in the future.

The fourth stage is the receipt and processing of the first results. Usually, a month is chosen as the reporting period; less often - a quarter. Let the indicators of one of the managers for the past month be equal to:

• the first index (number of sales) - 0.36 against 0.30 of the original;
• the second index (repeated visits) - 0.41 against 0.45 of the original;
• the third index (attracting new buyers) - 0.29 against 0.15 initial;
• the fourth index (positive feedback about the online store) - 0.12 against 0.10 of the original.

Then, in total for the reporting period, the employee showed efficiency (0.36 + 0.41 + 0.29 + 0.12), or 1.18 (118%), which clearly indicates the high productivity of his work. Based on the data obtained, it is possible to write out a financial incentive to a distinguished employee. There are many models for calculating motivating payments at the end of the month; below are two of the simplest and most popular.

1. First model involves the allocation of wages fixed (unchangeable) and variable parts. The first, as you might guess, does not depend on KPI; the second - depends on the percentage. So, if the fixed part of the manager's salary is 20,000 rubles, and the variable part is 15,000 rubles, then, having fulfilled the plan by 100%, he would receive 35,000 rubles. Since its efficiency indicator was 118%, for a month the employee is entitled to: 20,000 + 15,000 × 1.18, that is, 37,700 rubles, which is 2,700 rubles more than planned. On the other hand, if the manager had fulfilled the plan by only 96%, he would have received according to the same scheme: 20,000 + 15,000 × 0.96, that is, 34,400, which is 600 rubles less than planned.
2. Second model involves the recalculation of bonus payments based on a table of coefficients, for example, the following:
   • if KPI is less than 70%, the multiplier is 0;
   • if KPI is from 70% to 80% - 0.65;
   • from 80% to 90% - 0.75;
   • from 90% to 94% - 0.85;
   • from 95% to 97% - 0.95;
   • from 98% to 100% - 1.00;
   • from 101% to 104% - 1.25;
   • from 105% to 108% - 1.35;
   • from 109% to 110% - 1.45;
   • above 110% - 1.50.

Finally, the final stage of KPI implementation is processing the results, identifying errors (for example, neglecting external and biased factors) and scaling the system to the entire enterprise as a whole or to selected departments. In the future, it will be necessary to collect statistical data from time to time and adjust the program, but if key performance indicators “take root”, most likely they will not have to be canceled.

Summing up

KPIs, or Key Performance Indicators, are used to evaluate the productivity and profitability of an enterprise or the quality of work of individual employees. Indicators can be leading and final, mass and individual, as well as related to costs, results and other parameters.

KPI can be calculated using a simple formula, using actual and planned values ​​for the reporting period. Based on the results of the calculations, the employee or the entire department is assigned an increased bonus or the provided one is reduced. KPI should be implemented gradually, not by integrating the system into all production processes at once, but by selecting several objects of study and observing the changes taking place.

KPI (Key Performance Indicator stands for) is a key performance indicator. Simply put, this is an indicator of the achievement of a result in a particular activity, which can be digitized and measured.

Motivational KPI system - in the Russian version, the abbreviation KPI (Key Performance Indicators) is sometimes used - an indicator of the effectiveness and success of meeting the goals. The task of this system is to direct the actions of employees of all departments in a single direction through the implementation of specific indicators. The KPI of each individual employee determines the effectiveness of the performance of his specific work and is financially reflected in his salary, and in general is aimed at solving the business goals of the entire enterprise.

Key parameters can be divided into two types:

1. Operational, which fully reflect the current activities of the enterprise and allow you to solve problems in connection with changing conditions.
2. Strategic, which reflect the work of the enterprise for the entire period and allow you to make adjustments to the plan for the next working period.

There are the following types of KPIs:

• Cost KPIs - illustrate the amount of costs;
• Efficiency KPI - characterize the ratio of the result obtained to the costs;
• KPI functioning - evaluate the compliance of a process with a given algorithm;
• Performance KPIs - evaluate the ratio of the result to the time spent to achieve it;
• Result KPI - show what result you got.

The last indicator is of the greatest importance in personnel management, as it shows what results employees achieve as a result of their labor activity. Also, the KPI of the result is used when calculating the bonus part of the salary, if the enterprise has an appropriate remuneration system.

What is KPI in salary

When developing and implementing efficiency parameters for remuneration, it is necessary to clearly understand what goals the company is pursuing. These goals should have specific features, and for goal setting, verbs and numbers must be used.

For example:

• increase turnover by 20%;
• take 5th place in terms of brand awareness among manufacturers of this product;
• reduce logistics costs by 15%;
• increase sales profitability by 25%;
• reduce the average application processing time to 5 minutes;
• increase the number of site views by 1000;
• process more addresses per unit of time, etc.

Any motivational system should be aimed at increasing interest in the work and the quality of the indicators being implemented. But you also need to understand that not all departments can influence the implementation of the company's business goals. For example, a secretary or an accountant. But even for such employees, you can set criteria for the effectiveness of their work. Just tie them not to common business goals, but to the implementation of the goals and objectives of the unit.

For a secretary, this can be: the quality of processing incoming and outgoing documentation, the speed of answering incoming phone calls, and for an accountant, the time for processing documents or the quality of interaction in matters of document management with accountants of counterparties.

The implementation of the KPI system provides for:

• clearly defined goals for the business;
• development of the lowest and highest performance indicators;
• proper distribution of powers and responsibilities among employees;
• determining how and which indicators to achieve the goals are affected by each unit;
• finding out what exactly within the department an employee of the company can influence;
• search and formulation of specific indicators for each employee;
• creation of a new payroll algorithm taking into account KPIs.

When implementing a KPI system, it is advisable to first implement it as a pilot or test project in one department whose work has a direct impact on the company's financial performance (for example, in the sales department). And then, after correcting possible errors, extend its effect to all other units. In the event of a change in the conditions of the external market environment or a change in the strategy and goals of the company, KPI indicators are necessarily revised.

It is important that the development of the KPI system is not carried out only by employees of one department, for example, the personnel department. This should be a team effort of the heads of all departments in order not to make mistakes in determining the key parameters. Within the department, it is necessary to develop a system from top to bottom, i.e., first to the head, and then to his subordinates, so that the goals and objectives within the unit are uniform. Instead, it would not work that, for example, the head of the department should increase the sale of low-margin positions, and managers receive a percentage of the sale of positions with high profitability. With such indicators, managers are generally not interested in selling positions with low profitability, and the tasks of the manager will be difficult to fulfill.

In a properly built system, each KPI coefficient is a well-thought-out and defined value.

It is also very important to understand: KPI salary - what is it. One employee should not have many indicators for which he is responsible (3-5 is the most optimal number). Each indicator must have its financial value, which will be reflected in the salary. It is also recommended to keep the employee's salary, and make the motivational component additional, and not part of the former salary.

Development of KPI, rules and principles of implementation:

• there should not be many indicators;
• each indicator must be measurable;
• the costs (time and financial) for measuring a parameter should not exceed its cost.

When introducing a new wage system, you need to be prepared for resistance from employees. Often, employees assume that they want to deprive them of their salaries, and not increase their income, they are afraid of not meeting the new established standards and losing their jobs altogether. It is very important to explain to employees what this developed system is aimed at, what results management expects from them. And understand that the goals set by management may turn out to be radically opposite for employees to what they did before. It is especially difficult for workers of the “Soviet temper”, accustomed to other systems of motivation and remuneration, to get used to such innovations.

In general, the development of a KPI system is a very controversial topic for any leader. This process can be quite costly and painful for employees, but with the right approach, it is an excellent tool for motivating and stimulating employees to work.

How to evaluate performance

Evaluation of the fulfillment of the tasks set is an important element of the work of this motivational system. The standards of ordinary workers should be transparent in their assessment, so that a person himself can understand during the accounting period whether he fulfills them or not, and not learn about it after the end of the period. Managers may have indicators that may take time to determine the implementation of, such as % of the company's return on sales. But within a month, the employee should understand in which direction he is moving, and be able to evaluate his current work by other indicators.

In large companies, performance evaluation is usually automated, and the results are determined "with a button". In small companies, either managers or representatives of the personnel department are involved in evaluating the results.

Based on the performance of the indicators, a bonus is awarded.

The following calculation formula is usually used:

• KPI weight - the weight of each indicator of the system in the total amount equal to one. The maximum weight is given to the most significant indicator. For example, the main achievement of a sales manager will be an increase in the amount of sales;
• plan - the planned result that the employee must achieve;
• fact - the result actually achieved.

By calculating the index for each indicator, you can immediately see which tasks the employee had problems with and how this affected the overall results of his labor activity for the reporting period.

To determine the appropriateness of bonuses and calculate the bonus component of wages, a general performance ratio is used, which is the sum of all indices.

If it is more than one, then this indicates an overfulfillment of the set plan, which means that the employee can be rewarded.

This approach makes it possible to make the bonus distribution process more transparent and understandable both for the employee and for the company's management personnel distributing bonuses.

In addition to paying a bonus, an employee can be encouraged in some other way. For example, provide an unscheduled day off, transfer a more promising project to him, include him in the personnel reserve for a higher position, etc.

It is optimal to combine material and non-material incentives. It is this motivational system that will allow employees to work well and efficiently, and companies to achieve high financial results.

Pros and cons of the KPI system

Pros (and, as a result, the achievement of goals):

• the employee's ability to influence his salary;
• responsibility of the employee for his area of ​​work and transparency of tasks;
• participation of the employee in achieving the overall goal of the company;
• the possibility of adjusting the goals of the head in the process of work;
• the interaction of the leader with the subordinate in a more dense mode.

Cons (and, as a result, demotivation of the employee):

• unattainability of the set parameters;
• a small share of each indicator in the total bonus due to their large number;
• labor input of the system implementation;
• uneven problem solving due to incorrect determination of the cost of standards.

KPI examples for different positions

It is necessary to understand very clearly, speaking about KPI, what it is when paying. For different positions, even to achieve the same goal, it is necessary to use different indicators.

Consider examples of indicators for achieving the goal of “increasing profitability (delta between revenue and expenditure) of sales” in a company that sells sweets.

What is a KPI matrix

On the Internet you can find different interpretations of this concept. Sometimes the concept of "KPI matrix - agreement on goals" is used. But the most accurate interpretation is the efficiency matrix.

This table contains indicators of the employee's KPI system, planned and actual values, as well as the KPI coefficient for each item. The final average value in this matrix reflects the effectiveness of the employee in his activities within the framework of the tasks set and the indicators determined for his position.

An example of a KPI matrix for the above employees of a company that sells sweets, within the limits of the indicators defined for them.

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 - commonly 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 needs to be put in to achieve the desired salary level, whether this work will be up to 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. In 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 it is easier to describe the work of technical specialists (accountants, engineers, programmers) with a job description than to prescribe 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 accounting data or to IFRS indicators 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

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Kipiai, or key performance indicators, is a unique system that has recently come to Russian business. To date, there is no more reliable method by which to evaluate the efficiency of the enterprise, so the use of this system is practiced not only in Russia, but throughout the world.

The concept of KPI

To begin with, let's fully reveal the question of what it is - KPI, or key performance indicators.

Ki Pi Eye is a unique system with which you can calculate the performance of each individual employee of the organization. Thanks to such a system, one can not only understand how effective the activities of employees are, but also motivate them to improve their working skills. The most optimal performance indicators for each individual employee should not exceed the figure 5.

To understand how to operate this system correctly, it is necessary to more carefully and deeply study the types of performance indicators, as well as consider examples of KPIs.

Varieties and groups of KPI

Kipiai indicators are usually divided into several subgroups, based on the results obtained in the calculation of the results of a certain area of ​​activity.

1. Financial expenses.
2. The performance of the company, implying the calculation of kpi as a percentage. This percentage shows how high the capacity utilization of an enterprise is.
3. The productivity of the firm. This subgroup of KPI performance indicators is based on a comparison of certain data (for example, cost items and revenue for a certain period of time).
4. Final calculations, which are based on the quantitative expression of the results related to the activities of the company's employees.

A key performance indicator is built on several principles. If you do not take them into account, then the data obtained will be unreliable. These are the principles:

1. All indicators must be measured in quantitative terms.
2. The data obtained should be directly related to the activities of the company.
3. Results should not be costly, both in terms of time and resources.

Earlier, we considered the question of what is KPI, dividing it into 3 small subgroups. However, the gradation does not end there, since this system also has its own varieties. There are two of them in total. These are operational and strategic KPIs. Let's first understand what kind of operational KPI system it is.

Operational KPIs are indicators by which you can evaluate the effectiveness of the company's activities at the moment. Simply put, the data obtained when calculating kpi reflects how well the company's employees work in the current period of time.

In addition, kipiai operational systems help to compare the tasks performed by employees with the conditions that were created for this. Based on the results obtained, the management of the enterprise can evaluate the quality of the manufactured product, the conditions for its delivery and further distribution.

What is a strategic KPI? Such indicators reflect the performance of the company for a certain period of time. With their help, you can find shortcomings in the work of personnel and adjust its activities for the next period of time (for example, for the next month, quarter, six months, etc.).

In addition to the quality of work of employees, financial data can also be processed. Based on the results of the KPI calculation, cash flows are characterized, which help to understand how profitable the organization itself is, and how much the products produced by it are in demand.

Scopes of KPI and its calculation

Since we figured out what kpi is, or, in simple terms, key performance indicators, we need to move on to the next, no less important, question: where and why are they used? And also consider the formula by which they are calculated.

A performance indicator is a numerical measurement of the set (and achieved) goals and objectives that play an important role in the successful promotion of a business. Thanks to the prepared report, where all the necessary indicators are taken as a basis (they were discussed above), the management of the organization has the opportunity to fully assess how the developed plan was carried out, as well as what was achieved over a certain period.

KPIs are used in various business areas. Each of them has its own list of indicators that are being processed, and on the basis of which an indicator is calculated that reflects the efficiency of the enterprise.

Sales area

To multiply your fortune, you need to understand what KPIs are in sales and what an important role they play. These indicators can be calculated based on:

• received for a certain period of financial profit;
• proceeds from sales carried out by the firm;
• the cost of manufactured goods;
• the percentage of low-quality goods;
• amounts of current assets;
• the total value of all the company's inventory.

Retail KPIs are based on 5 key principles:

• percentage of sales for 1 hour or day of the outlet;
• the average amount of money paid by the buyer for the goods (this amount is calculated at the expense of punched checks);
• the number of products sold for 1 time;
• the ratio of employees' salaries to the proceeds from the sale of goods;
• sales conversions.

Thus, having received all the necessary calculations, you can quickly adjust the work of the staff, significantly increasing the number of transactions, which, in turn, helps to increase the store's income.

Manufacturing industry

What is a key indicator in production, and on what basis is it calculated? First of all, when calculating the efficiency coefficient, they take as a basis:

• indicators of the average daily consumption of raw materials from which products are made;
• volumes of raw materials used and remaining in stock;
• volumes of work in progress;
• work efficiency of employees;
• various production costs;
• equipment repair cost;
• conditions, terms and cost of storage of finished products.

To get the right data, you need to know how to calculate KPIs. There is a special formula for this:

(qf/ qpl)×100%

Now let's decipher the indicators:

• qf - the actual volume of all sales carried out by the company;
• qpl - sales volume, which is only planned to be carried out.

The data obtained through this form is the so-called performance criterion.

Examples of KPIs

To fully understand what kipiai is, let's look at some examples of key performance indicators. For a better understanding of the essence, each of the professions that are taken into account in the calculation will be considered separately. The table below shows not only the type of activity, but also the indicator on the basis of which the efficiency criterion is calculated.

If we again take the example of a sales manager's kpi as a basis, then with the help of the data obtained after the calculation, the head of the management department will be able to identify not only positive, but also negative aspects in the activities of his subordinates. So, he will know exactly how many calls and meetings the sales manager made, whether they were effective, how many people became regular customers, etc.

If the data obtained do not correspond to the developed plan, then this means that the person involved in this type of activity lacks either knowledge and skills, or perseverance and desire to work.

All the above examples of KPIs, or key performance indicators, fully reflect the essence of this concept. Of course, it is difficult to immediately understand all these subtleties (especially for a novice businessman). However, it is better to spend a little time on an in-depth study of this important topic than to incur financial losses that can seriously harm the development and successful promotion of a business.

KPI (Key Performance Indicators) - "key performance indicators", but more often translated as "key performance indicators". KPI is one of the tools with which you can analyze how effectively the staff works to achieve the company's goals.

KPI indicators are often used by larger companies (not where the owner, director, seller and loader are the same person), but vice versa when the company has a large number of employees and branches. The use of "kipiai" greatly simplifies the control of the efficiency of all departments of the company. Having key performance indicators, we get the opportunity to manage the process and make changes to it. Set goals for staff and motivate them to achieve them.

Let's look at an example of key performance indicators. You are the owner of a large household appliance store and you have 12 sales managers on your staff. The performance of each manager for a month can be assessed according to the following criteria:

• what % of the customers the manager interacted with made a purchase;
• average check of clients;
• (for example, the minimum bar for a month is 350,000 rubles, and the manager’s salary will depend on how much% he overfulfills the plan);

If, for example, you need to sell blenders of a certain model, you can set a minimum plan of 5 units for each manager, if more, then the seller receives 3% of its value from each “extra” unit. Thus, the goal is achieved to sell a certain product and motivate managers for this. As practice shows, the optimal number of KPI criteria for one employee is from 5 to 8.

2. Types and principles of KPI

Types of key performance indicators:

• KPI of the result - quantitative and qualitative indicators of the result;
• Cost KPI - the amount of resource costs;
• KPI of functioning - how the execution process corresponds to the established algorithm;
• Performance KPIs are derived indicators that characterize the ratio of the result obtained and the time spent to obtain it;
• Efficiency KPIs (performance indicators) are derived indicators that characterize the ratio of the result obtained to the cost of resources.

There are principles to follow when developing key performance indicators. The cost of measuring performance indicators should not exceed the managerial benefit from using the indicator. After all, you won't hire a person who will count the number and duration of the manager's calls, the result will not justify the costs. For a more accurate result and the possibility of comparison, the indicators should be measurable and as simple as possible, understood by each unit in the same way, in order to avoid misinformation. And, most importantly, that KPIs are necessary, if we do nothing based on the results of their measurement, then in this case they are meaningless.

3. Pros and Cons of KPIs

Key benefits of the KPI include:

• fairness, transparency and comparability of results (management and staff see who works and earns how much);
• adjusting the work of an employee according to a lagging indicator;
• involvement of personnel in achieving the goals of the enterprise;
• quality control of the performance of duties.

Despite all the positive aspects of the KPI system, it is not universal. Not all indicators in the work of personnel can be measured quantitatively, and therefore each business has its own ways of assessing efficiency, and finding them will require a lot of time, labor and finances.

4. How to calculate KPI. Example

There is no single formula for calculating KPI, since each company has its own specifics and, therefore, its own “kipiai”. Let's take an example of the calculation of the salary of a sales manager, taking into account his KPI in the Kotelok online store. The rate is 7,000 rubles. + 2% of personal sales (800,000 * 0.02 = 16,000 rubles) + bonus for fulfilling the plan by the number of new customers (2,000 rubles) + bonus for fulfilling the enterprise plan (for example, the plan is 100% completed - 5,000 rubles , by 70% - 3,500 rubles) in our case, by 80% - 4,000 rubles. In total, at the end of the month, the manager will receive a salary of 29,000 rubles. This scoring system motivates managers to sell to existing customers and attract new ones.

5. What is KPI in sales

In the field of sales, the main key performance indicators for the sales manager and the sales department are:

1. Sales volume. The manager is set a plan for a certain period of time (month, quarter, year). For example, in March, the manager must make sales for 1,300,000 rubles.

2. Number of sales. The number of customers who made a purchase (number of receipts).

3. Traffic. The number of customers who have learned about your product are potential buyers. Of course, attracting traffic is the task of marketers, but the seller himself can also influence the flow of customers, for example, using word of mouth.

4. Average check. Introduced in order to encourage the manager to sell additional products. For example, purchase a heat-resistant glass plate or baking dish for the oven.

You can develop a KPI system on your own, but this will require a lot of effort and eat more than one dog. Most large companies still prefer to entrust the construction of the Kipiai system to professionals with extensive experience in this field. If you need help implementing KPIs in your company, please contact us, we will be happy to help!