KPIs are key performance indicators of a company or a separate division. In this article, we’ll look at examples of KPIs for various specialists and look at how to develop and implement the system.

What is KPI

KPI stands for Key Performance Indicators - key performance indicators.

The KPI system is a reward system built on the basis of key indicators.

Working under such a system allows employees to better understand what they need to do to be effective. Moreover, efficiency refers not only to the amount of work they perform, but also to the benefit received by the company.

How to develop a KPI system

To create a C&I system in a company, you need to:

1. Select a key performance indicator model.
2. Define KPIs and distribute responsibility.
3. Create reporting.

How to choose a KPI model

There are many methods for defining and grouping indicators. In Russia, the classical approach is most often used, as well as the Balanced Scorecard (BSC).

The classical approach is based on the use of predominantly financial indicators, such as; see picture.).

Drawing. Tree of key indicators based on EVA

Note that to implement the developed strategy, financial indicators alone may not be enough. No less important for business is the development of relationships with clients, personnel management, product quality, that is, those aspects of activity that are difficult to assess.

Within the framework of the balanced scorecard, there are four main aspects of the company’s work, which provide answers to the following questions:

• how the company is assessed by shareholders (“Finance”);
• how clients evaluate it (“Clients”);
• how to improve the quality of activities (“Personnel”);
• what processes can provide the company with an exceptional position in the market (“Business Processes”).

What to choose

Which approach to choose depends on the level of business. For small companies, the classic approach is more suitable, since it will not require significant costs for attracting consultants and implementing an information system. In the future, it will be possible to refine the created classical system by including non-financial criteria.

Large companies should use the balanced scorecard, as it gives a more complete picture of the company's performance.

How to develop KPIs for finance employees

The editors of the CFO System have prepared motivation schemes and KPI performance reports for financial service employees. Download and use in your company examples of C&I for the chief accountant and other employees of the accounting department, employees, budgeting department and other departments.

How to choose key indicators

To determine which KPIs to use, you need to:

1. Identify groups of indicators and distribute the responsibility of managers at different management levels for each group.
2. Make the most detailed list of KPIs used by management.
3. Select the criteria that best characterize the achievement of strategic goals.
4. Formalize algorithms for calculating each of the keys.

Identification of groups of indicators

If a company uses a classic approach to developing a KPI system, then the following groups need to be distinguished:

• ;

Responsibility for each of the groups will be distributed among managers at all levels of management. For example, the general director is responsible for the whole, while management should be delegated to department heads.

When using a model that includes both financial and non-financial KPIs, the following groups of key performance indicators can be distinguished:

• financial and economic – for business in general;
• customer satisfaction;
• main and auxiliary business processes (see how to describe them);
• staff efficiency.

After identifying the main groups, it is necessary to determine who will be responsible for their implementation. For an example of the distribution of responsibilities, see Table 1.

Table 1. Groups of indicators and distribution of responsibility

Detailing

The list of keys for each of the selected groups should be as detailed as possible. Ask the managers who will be responsible for a particular group to create such a list. For example, the CEO should indicate what criteria he uses to evaluate “shareholder(s) satisfaction.”

As a result, the general list of KPIs may include several hundred criteria. It is obvious that the construction of such a system is unjustified, since it will lead to a significant increase in the workload on personnel associated with the collection and processing of data necessary for calculations. Therefore, from the general list, you need to select the data that management really needs for management and will allow you to assess the degree to which your goals have been achieved, and will not just be monitored “for information.”

KPI selection

To select KPIs, form an expert group. As a rule, it includes division directors and department heads. Their task is to characterize each of the indicators according to the following criteria:

• does it reflect the degree to which the company’s strategic goals are achieved;
• is it clear, first of all, to those managers who will have to make decisions based on it;
• Is it useful for decision making?

In addition to those listed, other criteria may be applied, for example, the ability to use performance indicators in planning or analysis.

The assessment procedure can be formalized based on the use of a point assessment system. For example, 1 point – the criterion is not met, 2 points – partially meets the given criterion, 3 points – satisfies the given criterion. The indicators that received the highest number of points during the expert assessment will be included in the CI system.

As a result, a “short” list of key performance indicators of the company will appear (see Table 2).

table 2. Example of a CPI trading company(fragment)

KPI group	Key performance indicators	Responsibility
Satisfaction indicators
Shareholders	Return on total assets, return on equity, return on sales or profit margin, return on cash flow	CEO
	Sales market share, number of defects in products, number of claims from customer-buyers, turnover of active customer-buyers, duration of the functional cycle of order fulfillment, availability of inventory for customers
Staff	Depending on the specifics, as well as on the information needs of managers, management reporting can be generated in a variety of analytics (by brands, product groups, categories of personnel, types of assets, sales channels, etc.). Conclusion In the process of creating a KPI system, you will have to face various problems: employee resistance, the need to adjust accounting policies for accounting and management accounting purposes; ensure the collection of the necessary data to calculate the identified key performance indicators; etc. However, organizations that have implemented KPIs, as a rule, achieve good results, since the company creates a system of performance indicators that is understandable to management, and responsibility for management is delegated to a wide range of managers. After implementing a KPI system, it is important to constantly analyze its relevance, since the company’s business processes, strategic goals, and external environment may change, so some indicators may lose their relevance, while others may lead to unplanned results.

You will learn:

• What are the pros and cons of the KPI system?
• Which employees should not implement KPIs?
• What KPIs should the manager set?
• What to do if employees sabotage KPI implementation.
• How to revise the KPI system.

What is a KPI system

KPI is a special system of indicators, using which employers can evaluate the performance of subordinates. At the same time, KPIs - the key indicators of each employee - are tied to general business indicators (level of profitability, profitability, capitalization).

Materials for download:

There are different KPI goals, but the main one is to create a situation in the company in which employees from different departments could act together, without their business actions contradicting each other. The activities of one specialist should not interfere with or slow down the work of another. All employees must strive for a common goal and work effectively, receiving bonuses for this.

There is an opinion that KPIs are directly related to the BSC (Balanced Scorecard), but this is not the case. The creators of BSC did not use the term KPI. They used the concept of “measure,” “meter,” or measure.

KPI and BSC are indirectly related to each other. BSC has a business process perspective with associated goals. To measure the extent to which these goals have been achieved, specialists use KPI business process indicators.

Materials for download:

So, what is KPI in simple words? These are certain indicators that make it much easier to understand what actions should be taken to improve efficiency. At the same time, efficiency represents not only the number of manipulations carried out over a certain time period, but also the benefit that the enterprise received from the work of an individual specialist.

Company KPIs are general. However, in departments they are divided into small ones, called personal. There can't be many of them. 3-5 clearly defined and understandable indicators are enough. The main requirement is the ability to measure them simply and quickly.

Here are some KPI examples . Possible KPIs for a sales manager are the following: “Sales volume is not less than...”, “The number of new clients is not less than...”, “The amount of the average contract for a client is approximately...”, “The degree of English proficiency is not less than...”.

Another KPI example. You are the owner of a large outlet selling household appliances. You have 12 managers working for you. How effectively each of them works during the month is assessed based on the following indicators:

• how many people the manager talked to bought equipment (in percentage);
• average check amount;
• how much the sales plan has been fulfilled (for example, the minimum monthly amount is 350 thousand rubles; the manager’s salary will be affected by the level of exceeding the plan as a percentage).

For example, you need to sell mixers of a certain brand and manufacturer. In this case, it would be reasonable to set a plan for each manager with a minimum number of mixers equal to 5. If the manager sells more equipment than the planned quantity, he receives 3% of the cost from each “extra” mixer. This is an excellent motivation for specialists; KPIs of this type allow them to successfully sell products. Experience shows that the optimal number of KPI criteria for one specialist is from 5 to 8.

3 interesting facts about KPIs

• The Key Performance Indicators system has been used in the West for over 40 years. In the CIS countries and Russia it has been used for about 15 years.
• In a number of countries (Korea, Singapore, Hong Kong, Japan, Malaysia, Germany and the USA), the Key Performance Indicators system is a national idea. KPI is not just a concept, but the basis for the work of all companies.
• Russian President Vladimir Putin proposed creating a Key Performance Indicators system to evaluate how officials work.

How to avoid mistakes when implementing KPIs

The editors of the General Director magazine reviewed 6 popular mistakes in the KPI system and gave advice on how to avoid them.

Where does KPI development begin?

KPIs should be created from the top down, starting from large-scale company goals to the tasks facing an individual employee. In order to fully solve problems, it is necessary that all personnel be involved in preparing the KPI system. We are talking about employees working in economic planning, finance, specialists in managing the organization of labor activities, a team of personnel departments, sales, and technology departments.

First, the organization needs to figure out which KPI is a priority. To do this, the enterprise clarifies and verifies strategic and operational goals. The formulation of the goal should ideally be such that it does not clearly indicate the financial component as the main indicator. It is better if the financial indicator follows from the main task. With this approach, the company will be able to feel confident even during a crisis.

A connection between the goal and the market environment and changes in the market is required. For example, a company may set a goal to become one of the TOP-3 in the market for its products or take a leadership position in a certain territory. After the main goal is formulated, subgoals are identified.

After setting goals, you should analyze how effectively the company is currently operating and how it solves current problems. At the same time, it is necessary to determine how employee salaries will be calculated.

When creating KPIs in an enterprise, it is important to draw up a budget for personnel costs. In this case, it is divided by type of payment. In addition, it is necessary to take into account salary indexation and career growth of specialists.

At the final stage of development, regulations are created, KPI maps are prepared, the methodology for calculating each key indicator is prescribed, and the system is agreed upon with the management of all independent units in the company.

The KPI statement must include information about the goals and objectives pursued by the system:

• Improving results and increasing the efficiency of specialists. Development and implementation of employee motivation.
• Increasing the company's profitability. Developing goals and performance indicators for each position in the departments and divisions of the company.
• Creation of an information base that will allow you to make the right management decisions. Ensuring prompt collection of information and control over the functioning of the system.

Key performance indicators and their types

Key KPIs are:

• lagging, reflecting the results of work upon completion of the period. We are talking about financial KPIs that indicate the potential of the company. However, such coefficients cannot show how efficiently departments and the organization as a whole operate;
• operational (anticipatory), which allow you to manage the state of affairs during the reporting period in order to achieve your goals upon its completion. Operational performance indicators help to understand how things are now at the enterprise, and, at the same time, demonstrate financial results in the future. Based on operational KPIs, one can also judge how well the processes are proceeding, whether the products are good, and how satisfied the clients (consumers) are with them.

Basic conditions - indicators must contribute to the implementation of intermediate and final goals, and all indicators can be quickly and easily calculated. Coefficients can be different - qualitative (in the form of ratings or points) and quantitative (in the form of time, money, volume of production, number of people, etc.).

KPI Examples

KPI for technical support worker. A specialist of this profile must advise those who are real buyers and help potential clients. The set of KPIs in this case is small. The employee’s work is evaluated based on how well he provides consultations, in what quantity, and whether clients are satisfied with the service.

Key performance indicators for a sales manager. The number of new customers should not be below a certain level, the sales volume should not be less than the established limit, the size of the average contract for a client should be within the designated boundaries, and English language proficiency at one level or another.

The KPI system consists of a number of indicators, but the universal ones are:

• Process ones, indicating what results the process brought, how requests from consumers are processed, how new products are created and launched into the market environment.
• Client: how satisfied are clients, how is interaction with sales markets conducted, how many buyers were attracted.
• Financial ones allow one to judge the foreign economic situation of an enterprise. Here we are talking about the level of profitability, turnover, market value of products, financial flow.
• Development criteria show how dynamically the company is developing. This is the degree of productivity of specialists, the level of staff turnover, the cost of each employee, and the motivation of employees.
• Indicators of the external environment: how the price fluctuates, what is the level of competition, what is the pricing policy in the market. These indicators must certainly be taken into account when creating KPIs.

How to calculate KPI

Stage 1. Selecting three key indicators of a specialist’s effective performance:

• the number of users who were attracted to the site;
• number of repeat orders from existing consumers;
• the number of recommendations and positive reviews that appeared after purchasing a product or ordering a service on the website and social networks of a trading organization.

Stage 2. Determining the weight of each indicator. The weight in the total amount is equal to 1. In this case, the largest share belongs to the priority indicator. As a result:

• the number of new clients is assigned 0.5;
• number of repeat orders – 0.25;
• reviews – 0.25.

Stage 3. Analysis of statistical data for the past six months for each KPI and development of a plan:

Stage 4. KPI calculation. An example is presented in this table:

KPI calculation formula: KPI Index = KPI Weight * Fact / Goal

In this case, the goal is the marketer’s planned indicator. A fact is a real result.

It becomes clear that the specialist has not fully achieved his goals. However, based on the overall score of 113.7%, it is safe to say that the actual result is quite good.

Stage 5. Payroll preparation.

In total, the marketer is owed $800, of which $560 is a fixed portion and $240 is a variable portion. The full salary of a specialist is paid for an index equal to 1 (or 100%). Thus, the figure of 113.7% indicates that the plan was exceeded, which means that the marketer is paid a salary with an additional bonus.

Result:

560$ + 240$ + 32,88$ = 832,88$.

If the KPI index is less than 99%, the bonus amount is reduced.

A table like this allows you to see the problems in the work of a marketer, the difficulties that he cannot cope with. Possibly, insufficiently good performance results may be caused by an incorrect strategy for increasing the level of customer loyalty. At the same time, it is possible that the plan itself was initially drawn up illiterately. In any case, the situation needs to be controlled. If things don't improve further, reconsider your performance indicator requirements.

If you adhere to this policy, you will learn what KPIs are in the production process, sales, etc. You will better understand what indicators should be calculated and the actual process of their implementation.

The calculation can be modified taking into account the planned results, supplemented with new values: an indicator of the number of solved and unsolved tasks, a system of fines for poor performance on the main points in the plan.

So, for fulfilling the plan less than 70%, the employee may not receive a bonus at all.

There is also the following scheme for calculating the bonus part of the salary for a specialist who has fulfilled the sales plan:

Implementation of KPIs in the company

Both employees and third-party consultants can be responsible for the process of implementing the KPI system created in the company. At the same time, one should take into account what the specifics of the enterprise are, how business processes take place in it, what goals and objectives the company sets for itself. It is necessary for ordinary personnel to understand how the wage system will change. Make it clear to employees that the main indicator will be their level of performance. When introducing a KPI system, specialists should be trained. Staff must understand that change is mainly beneficial for them. The implementation of the system involves the development of special documentation: employment contracts, staffing schedules, collective agreements and other papers related to payment for employee activities.

Before introducing a KPI system, test it through a pilot project. Take 1-2 departments and pilot new processes and payroll formation in them. The ratio of fixed and bonus components of payment can be adjusted in real time, taking into account target indicators for specific groups of personnel.

When the new order in the company has been tested and fully adjusted, it can be introduced into other departments. Remember that it is better not to implement a KPI system without testing. As part of the pilot project, it will be possible to clearly understand what difficulties the system causes for staff, learn about possible shortcomings and quickly eliminate them. All specialists of the enterprise must work to achieve a common goal. Otherwise, employees will only experience discomfort, and all actions and aspirations will be in vain.

In the process of introducing KPIs in the company, make sure that the indicators can be adjusted if the need arises. Thanks to constant monitoring of indicators, it will be possible to timely adapt to changes in the market environment and edit the working strategy. In addition, every year the model for generating bonuses should be improved, that is, optimized. As part of optimization, the assessed indicators are changed to others that are more relevant for certain employees and departments.

What KPIs to set for the manager

KPIs of personnel and management should be related to the main objectives of the enterprise. You need to know exactly what you want to achieve after a certain period. You can strive to get ahead of competing companies and become a leader in your industry. Another option is that the head of the company wants to sell the business at a favorable price. The KPI for the first case is an increase in the customer base and sales volumes; for the second, it is an increase in the company’s capital and achieving maximum sales value.

The main goal must be written down and formalized, and then divided into subgoals. When specialists successfully complete sub-goals, they move closer to solving the main task of the enterprise.

If we are talking about a large organization or holding, the director’s KPI is required for each division and branch. If the owner of a large enterprise plans to compare the performance indicators of General Directors who are geographically distant from each other, the development of a unified evaluation system is required. It must be remembered that KPIs that are easy to achieve in large regions are not always easy to achieve in small ones. In this regard, the system can be formulated approximately the same, but the indicator numbers should be different for managers in different regions.

When preparing KPIs, try to set indicators in optimal quantities so that the employee can easily track work performance. It would be better if there were five KPIs. When installing more indicators, the director may not pay attention to the main ones and focus on the minor ones.

When creating a KPI system for management, a combination of general and personal indicators is optimal. General indicators are the performance results of a department subordinate to a specialist. Based on general indicators, it becomes clear how the team works and how interested the manager is in solving the assigned tasks. Personal indicators refer to individually achieved goals and performance results.

If the KPI system is created with high quality, the coefficients show how each of the managers works, and this information is useful for the company.

The implementation of a KPI system is an important step for a company towards increasing the efficiency of each employee and the enterprise as a whole.

Western companies have long been using a system of key indicators to motivate employees, but in our country only large organizations are beginning to gradually introduce a similar approach, and not always correctly.

A well-built KPI system allows you to best configure the work of the organization, all its departments and each individual employee. It allows:

• find out the company’s goals and convey them to employees;
• motivate the team to achieve goals and perform high-quality assigned duties;
• ultimately increase the growth of the enterprise's performance.

But you shouldn’t take KPIs as a panacea. It is not enough to simply “set the bar” for each employee, tie wages to this bar, and watch employees jump over their heads in pursuit of a bonus. The implementation of KPIs is a complex and lengthy process that requires a lot of time and effort from both the manager and employees. The entire company should be involved in the process of developing a system of key indicators - this is the only way to avoid the effect of “rejection of novelty” and the most adequate perception of the new work scheme.

KPI is best introduce gradually. Observe the reaction of your employees - if they are negative about this idea, it is better not to rush, but first conduct extensive outreach and training. Only if the staff is favorable towards the changes and understands why they are needed will it bring good results.

Definition of key indicators

It is very important to develop such KPI , which will be consistent with the main goals of your company and will be realistically achievable. That is, those that can be influenced by the employee himself. There is no point in setting indicators that a person cannot influence in any way - for example, the number of calls from the website for the sales department (for tracking connect call tracking). ThisKPI for a marketer or SEO specialist.

Think about what role the employee plays in your company, and what you want him to do better. This could be an option KPI. Each employee in the company should have their own performance indicators.

For a sales employee these will be: the number of outgoing calls, the size of the average check, transactions concluded, the number of CP sent.

Lawyer KPI– the number of cases won and funds saved for the company.

Marketing job can be assessed by the market share that the enterprise occupies, by the number of attracted customers and by ROI.

ForSEO specialist Key indicators can be site positions, ROI, the number of applications from the site.

Developing KPI, it is very important to correctly write down the calculation formulas, explain them, and agree with each employee. It is important to achieve an understanding of what exactly and how the salary will be calculated for each employee. A person must understand what he can influence and how to earn more and improve the state of affairs in the company.

The implementation of the key indicator system takes place in several stages.

1. Development of KPIs in relation to the goals and overall strategy of the company.

At this stage, you must initially determine the overall goals of the company. This could be entering the top 10 companies in its niche in the region, a certain sales turnover, entering the international market, and others. Once you have identified your goals, you need to divide them into important (priority) and non-priority. Otherwise, you may direct your employees' efforts in the wrong direction.

Involve department heads and employees in creating the goal pyramid. The more people involved in the process, the better. The more information you collect, and if you listen to the opinions of the employees themselves, the more likely it is that the goals will be realistic and achievable.

Let's take the sales department in your company as an example. Discuss with the department head and employees how realistic it is to increase sales by X percent. To do this, each employee needs to increase the average bill by X, and the number of calls to customers. Determine specific numbers that are not divorced from reality - this can become a KPI for employees of this department.

2. Introduction to the process, explanation to employees.

The implementation of the system must begin with an explanation to employees why it is needed. If you simply implement key indicators, as directed from above, you may encounter misunderstanding and rejection of this system. If the opinions of employees are not taken into account and they are simply presented with a fait accompli, it will not be possible to create a strong team and achieve your goals.

When developing a strategy, you should already take into account the wishes of your employees. Now all that remains is to gradually introduce a new work scheme.

Each new employee, when hired, must be familiarized with the performance evaluation system and explained what stands behind each indicator.

3. Control.

Now the next question arises: you need to somehow determine the performance of employees, monitor and keep track of key indicators. This is the only way you can pay them fairly for their work. You will have to calculate and take into account specific key indicators: for example, the number of calls per day for the sales department, the number of units of production for the production department, etc. Therefore, it is necessary to think through and introduce a reporting system and automate the process of recording indicators.

If you have a good IT department, you can develop your own Excel-based reporting solution.

You can choose some good tracker for team work - there are a lot of them on the market.

The ideal solution should:

• ensure control over the work of each employee;
• collect data in a unified format and bring it into one database;
• help calculate payroll.

4. Performance analysis and revision.

If you did everything correctly, then each employee will be able to track their indicators and the relationship between them and wages.

Analyze the effectiveness of subordinates. A correctly introduced system for assessing key indicators will allow you not only to summarize the results at the end of the month or quarter - you will be able to see inconsistencies even in the process of completing the work. Your task as a manager is to identify such problems in a timely manner and eliminate them.

If an employee shows poor results, this is not a reason to fire him or deprive him of a bonus. Consider the possibility of advanced training, training, and additional clarification of the work system in the company.

You will also need to periodically review key metrics for each employee. You can do this every month when calculating wages. Some of them may become irrelevant, some may lose weight, or the quantitative indicators will need to be revised. You can assign this task to a member of the HR department.

Be sure to give feedback. An employee must understand which actions lead to a positive result and which do not. It may be possible to develop a development system for each individual employee.

What will definitely emerge over time is that you will see who is ready for a promotion and who has no place at all in your company.

Payroll calculation taking into account KPI

The introduction of a KPI system must necessarily influence the procedure for calculating wages. The following scheme is usually used: wages are divided into salary and bonuses. The employee receives a salary in any case, no matter whether he has achieved key indicators or not. But the amount of money in the bonus part directly depends on the employee’s efforts, on how many indicators he has achieved or not achieved.

Common mistakes when introducing KPIs and changing payroll calculations:

• When KPIs are introduced, salaries are cut. If an employee received 15,000 rubles, and after the introduction of a system of key indicators, his salary dropped to 10,000, and the rest still needs to be earned, this poorly motivates a person not only to work, but also to stay in your company in general. Therefore, before introducing a KPI system, you need to think about the budget - you should have additional funds allocated for bonuses to employees;
• an insignificant bonus, or, conversely, a too small salary. In the first case, the employee has little financial motivation to work well enough, in the second, too, since if the indicators are not achieved, the person will be left with nothing. And this will discourage new potential employees from working for your company. The ideal ratio is 75% salary and 25% bonus.

You can use the formula for calculation:

And always keep your promises. If a person has earned a bonus, he should receive it in any case.

The implementation of a KPI system is a long and painstaking process. It requires not only time, but also resources - moral, material. But soon, after a certain period of adaptation, you will see qualitative and quantitative growth of your company. It will immediately become clear which employees are ballast, and those who do their jobs well will be rewarded as they deserve. And most importantly, everyone will understand the common goal of the company and contribute to its achievement.

KPI key performance indicators: what are they, examples of such systems, as one of the tools for increasing business profitability, are becoming increasingly popular in the information sphere dedicated to entrepreneurship.

KPI solves the problem of transferring the assessment of a company's performance from the sphere of subjective assessments into the world of reality and objectivity, allows us to identify weak and bottlenecks of a business, and optimize activities aimed at obtaining the highest possible profitability.

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

What does KPI mean?

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

• effectiveness, according to the standard this corresponds to the degree of achievement of planned results;
• efficiency, this concept determines the correlation between the resources expended and the results that were achieved through their use.

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

Understanding the term KPI in this interpretation makes it clear that it can be used to evaluate the company’s activities only in connection with the content of the goal, its content. Therefore, it was KPI that formed the basis of the modern management concept “Management by Objectives”. And KPI itself is used to monitor the business activity of employees, divisions of the company, and the success of its activities in general.

Advantages of the KPI system

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

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

Not every indicator can be considered key. This includes only those indicators that are related to the purpose of the business and for which targets and standards are set for employees. For example, it is illiterate to include accounting reports submitted on time as KPI indicators, since it has nothing to do directly with the specifics of the department’s activities.

Types of KPIs

KPIs are divided into several types:

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

In turn, efficiency KPIs are divided into:

1. Lagging that is, those that will reflect the results of work over the course of some time;
2. Leading(another name is operational) - these are those that allow management to manage work during the selected reporting period, allotted for obtaining specified results after its end.

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

Leading Indicators are used, if necessary, to analyze the work of the enterprise at the current time, give an objective assessment of the quality of current activities, the degree of satisfaction of customer needs, how satisfied they are with the cooperation, identify the possibility of increasing cash flows for the future, and evaluate the quality of products.

What to follow when developing KPIs

When developing indicators, the following rules should be followed:

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

KPI development algorithm

This work is carried out in several stages.

• Pre-design work. This stage consists of:

1. obtaining approval from a senior manager and figuring out how to interact with him;
2. project initiation and planning;
3. creation of a project team;
4. work on conducting pre-project research.

• Development of KPI methodology. At this stage perform:

1. optimization of the organizational structure;
2. develop a methodological model;
3. develop a company management process using KPIs;
4. develop regulations (a system of normative and methodological documents).

• Stage of development of the KPI information system. It includes:

1. development of technical specifications for setting up the information system and its configuration;
2. user training;
3. carrying out trial operation.

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

1. development of KPIs as a holistic development strategy;
2. availability of explanation of the benefits of KPI for personnel;
3. identification and clear recording of corporate key success factors;
4. creating understandable reporting for all levels;
5. ways to clarify KPIs to maintain their relevance when existing business conditions change;
6. development of coordination and application of decisive KPIs.

• Project completion stage. Putting the KPI system methodology into practical use.

Characteristics of effective KPIs

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

1. Address affiliation. This means that each KPI must be associated with a direct executor (this can be either an individual employee or a structural unit), who are responsible for the results of activities within their area of ​​responsibility;
2. Correct orientation- KPIs must correspond to key development projects, strategic goals of the company, key business processes;
3. Reachability- implementation of KPIs must maintain a balance between the necessary efforts to achieve them and the probability of their implementation, it should be between 70% and 80%;
4. Openness to action- KPIs should be set so that there is the possibility of intervention in processes to improve them;
5. Providing Forecasting- it must be possible to assess factors that directly determine the planned results and have a direct impact on the value of the business itself;
6. Limitation- KPIs should be oriented in such a way that performers focus on completing priority tasks and do not waste their efforts on completing unimportant ones;
7. Ease of perception- KPIs must be accessible to their understanding by performers;
8. Balance and interconnectedness- key performance indicators should not be in the zone of mutual conflict, they should complement each other;
9. Initiating change- KPI measurements should cause positive changes in the company like a chain reaction, that is, the implementation of some causes a natural process of improvement of others;
10. Easy to measure- KPIs should be left in such a way that users can independently quantify progress;
11. Reinforcement- KPIs must motivate employees, that is, be supported by individual material incentives;
12. Relevance- since over time the influence and effectiveness of even professionally created KPIs can significantly weaken, they need to be updated periodically;
13. Comparability- KPIs should provide the possibility of comparison in such situations, for example, it would be incorrect to use the ratio of average revenue per day for single-format retail outlets, but having such different locations as a regional center and a small regional town;
14. Reasonableness- each indicator must provide the ability to conduct analysis based on it and carry a semantic load. As a negative example of the lack of meaning, one can cite such a key performance indicator, which is calculated as all expenses for maintaining the administrative apparatus to the amount of profit (total). Such an indicator will meet the above characteristics, but in reality it will be meaningless.

General principles and rules for implementing KPIs

To successfully complete the tasks that the system is aimed at solving, you must adhere to certain rules.

1. Rule "10/80/10" this rule sets the number of key indicators in the system. It states that a company must have ten key performance indicators, no more than eighty key production indicators, and ten key performance indicators. This ratio avoids overload of managers, as well as significantly reduces the time that management spends discussing program implementation.
2. The rule of compliance with the principle of controllability and controllability. It states that each department that is responsible for a certain indicator must be provided with the necessary resources for implementation and management, and the result must be monitored.
3. Rule of the partnership principle. When developing and even implementing, the imperative aspect of establishing an effective partnership between all elements of the system, employees, and a clear understanding of the need for change must be taken into account.
4. The principle of focusing efforts on the main direction. This principle establishes the need to analyze the activities of employees in order to identify the possibility of expanding their powers, identifying those who require advanced training, determining what training employees need, assigning them responsibility for developing their own KPIs, establishing effective communication links (both vertically and horizontally).
5. Principles for integrating performance improvement, reporting, and performance measurement processes. It is important to think through and implement reporting and evaluation systems that would be aimed at stimulating specific actions and understanding of one’s responsibility. A strict schedule for reporting meetings should also be established.
6. The principle of consistency between the overall strategy and production indicators. This principle requires linking key performance indicators to the current critical success factors and inclusion in the overall balanced scorecard and strategy of the company.

Variability of KPI selection options

KPI- these are indicators that form the direction of employees’ actions and are the main indicators on the basis of which the effectiveness of their work can be assessed

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

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

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

How the KPI system is built

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

• volume of sales;
• percentage of customer base service;
• quantity of goods sold x and y;
• extra charge.

Errors when creating KPIs

As an example, we can look at the creation of a KPI system for a company that produces and sells its own products.

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

• the department that purchases the necessary materials;
• division engaged in production;
• division providing sales;
• financial division.

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

For a production department, the main KPI is equipment utilization (it should be above 80%). For example, if you produce two types of products, you need to have an effective scheme for redirecting the operation of equipment so that it does not stand idle.

Now let's look at the mistakes that will inevitably occur if KPIs are implemented mechanically, without taking into account the strategic activities of the company.

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

• purchases in large quantities, and this, in the case of excess materials for the production unit, will entail additional costs for storage and freezing of money in inventories;
• purchases of lower quality materials - this may cause equipment failure;
• purchases on prepayment - this entails freezing of funds.

The second mistake is introducing KPIs without taking into account employee motivation. To work effectively, it is necessary to ensure a connection between KPIs and the system of bonuses and fines, that is, to the system of material motivation.

The third mistake is replacing KPI indicators with outcome indicators, for example, revenue, profit, marginal profit. KPI indicators are correlated with the employee’s activities in order to achieve such a result that must be specifically fulfilled today, tomorrow, the day after tomorrow, that is, the leading indicators described above. If we consider a sales manager it will be:

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

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

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

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

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

How to evaluate an employee's performance

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

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

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

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

How to develop KPIs for a specific department, examples

Although the competent development of efficiency coefficients is an individual process, carried out taking into account all the specific features of the company or production, it is still possible to give examples of typical developments. This is especially applicable for services with standard functionality, for example, accounting. Below are some examples. It should be taken into account that properly created KPI systems also take into account the workload factor, if it is more than 100% - the employee is rewarded, and if it falls below 70% - the manager is fined because he was unable to provide employees with work.

You can learn more about KPI, its development, implementation and use by watching the webinar recording.

KPIs and staff motivation. A complete collection of practical tools Alexey Konstantinovich Klochkov

Chapter 3 Development and implementation of the KPI system

Development and implementation of the KPI system

3.1. Stages of KPI system development

The KPI system in an organization can be implemented either independently or with the involvement of consultants. When using the methodology described in this chapter, when goals and KPI indicators are developed directly by department heads in accordance with the target management system in business, the implementation period is reduced as much as possible and efficiency is increased.

It is very important to note that if this system is implemented independently, by the efforts of its employees, it is necessary to relieve these employees from their positions at least for the duration of the project. An objective approach to development is one of the most important factors for the success of a project. Over many years of analyzing the experience of independent implementation, we can state the fact that, as a rule, in 90% of companies this implementation was accompanied by internal conflicts between the development group and heads of functional areas. Implementation by internal specialists, as a rule, did not produce noticeable results and was of a formal nature, although among companies there are 5–10% in which the initiation of such projects took place on the part of management and was accompanied by participation in the development of each “KPI Matrix”. When deciding to implement this system, we recommend assessing the costs of development by external or internal forces and the consequences for the company. In general, the use of modern and effective personnel management methods helps to form and strengthen the image of the enterprise as an attractive employer, which helps attract highly qualified candidates and retain valuable specialists in the company.

Let's consider the algorithm for implementing the KPI system with the participation of an engaged trainer-consultant, whose functions are shown in Fig. 3.1.

Rice. 3.1. Functions of a trainer-consultant hired to implement the KPI system

Project goals

Create a cohesive team of professionals and effective managers. To develop knowledge and skills as part of training in KPI development technologies for company department managers. Each of the training participants, under the guidance of a trainer-consultant and project managers, should receive not only knowledge of technology and development methods, but also develop goals and indicators for their departments.

Increase business efficiency, profitability and reduce costs. Develop goals and KPIs for all department positions.

Increase the effectiveness and efficiency of employees. Develop and implement staff motivation for results - KPI.

Create an “information base” for making the right management decisions. Ensure rapid collection and control of KPI performance data. Automation of the KPI system.

Brief description of the project

1. Preparatory stage.

Interviewing and consultations with company representatives.

Studying the organizational structure of the company.

Study of the strategy defined by shareholders. Studying the strategy (key competencies and success factors) of the company for a year. Conducting PEST (analysis of the company’s external macroenvironment: Political (political), Economic (economic), Social (social), Technological (technological)), SWOT analysis (analysis of strengths ( S trengths) and weak ( W eaknesses) sides, possibilities ( O pportunities) and threats ( T hreats)), BCG matrix (developed Boston Consulting Group) to form strategic success factors for 3 years.

Study of key functions (business processes) of all positions involved in the project.

2. Development of a KPI system and a KPI-based motivation system.

Development is carried out with the involvement of managers and key employees of the company. The materials for development are the goals and KPIs that will be developed by managers during the training process, as well as the methodology developed by the consultant. The FTG methodology described in this book uses key strategic priorities (success factors) and an understanding of the employee's functions. It allows you to develop goals, KPIs and tasks to achieve them in the shortest possible time.

Development of a “Work Plan” for each KPI (by departments independently).

Preparation of documents for approval by management.

Coordination of final documents with the company management.

3. Automation of the KPI system in the KPI.BZ program.

Entering all data into the system.

Setup and trial operation.

Project results

Final report containing a hierarchical list of goals and KPIs for the entire company.

Knowledge and skills of performance management among all company managers.

Key performance indicators – “KPI Matrices” for all positions for the year.

? “Work Plans” for the year for all positions.

Automated KPI system and KPI-based motivation system in a unified information environment, for example using the KPI.BZ program.

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