In this article you will learn

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

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

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

What is a KPI?

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

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

Types of KPIs

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

Is the KPI system effective in small businesses

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

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

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

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

KPI development: how to implement key performance indicators

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

Determining the overall goals of the enterprise when implementing KPIs

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

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

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

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

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

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

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

KPI selection

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

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

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

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

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

Identification of "leading" and "lagging" KPIs

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

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

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

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

KPI Based Bonus Calculation Formula for Head of Commercial Department

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

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

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

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

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

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

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

When KPIs will work and when they won't

An effective KPI system will be under the following conditions:

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

When the KPI System Doesn't Work:

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

How to overcome staff resistance when implementing a KPI system

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

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

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

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

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

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

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

• Motivation, Incentives and Remuneration

Top management uses project scorecards, also known as balanced scorecards, to ensure that project events are aligned with the organization's strategies and vision. The scorecard is a bit like putting the reader in the driver's seat of a car. They need to look through a clean windshield to determine which direction the project is heading, and equipment such as the speedometer, tachometer, oil pressure gauge, and water temperature gauge to make sure the machine is working properly and there is no risk of it failing.

Incidentally, this is why these scorecards are more commonly referred to as "balanced scorecards". Prior to their appearance, the performers had an idea only about the financial indicators of actions or projects. A need was found for a more "balanced" view of activities that would include measurements of other aspects of job performance.

Project scorecards must meet two project requirements: the need for a mechanism to communicate project results and status to the people involved, and the need to compare performance across multiple projects.

The tips and tricks described in this article are taken from the project management best practices described in the PMBOK (Project Management Body of Knowledge). You can master these best practices by completing a quality project management course or a project management exam preparation course.

Balanced Scorecard (BSC)

Balanced Scorecards, or BSCs, were developed and introduced by David P. Norton and Robert S. Kaplan in 1992 to complement the limited view of organizational performance provided by measuring instruments in past. Job performance was measured on a financial basis, and the disadvantage of measuring financial performance was that it did not take into account other elements of job performance. For example, an organization that has taken on a $5 million project that aims to increase the company's market share by 10% (which is worth $4 million per year) would look great if it was completed at a cost of $4.5 million, but the return on investment cannot be measured until at least a year has passed since the completion of the project.

Norton and Kaplan proposed measuring organizational performance in 3 additional areas: Customers, Internal Business Processes, and Learning and Growth (development) to get a more balanced view of organizational performance. Norton and Kaplan argued that an organization that performs well in these areas can expect good financial results his work. Measuring the quality of performance in these areas will also help implementers proactively address issues that could lead to poor financial performance, rather than reacting only when the organization is already performing poorly.

Balanced scorecards were designed to measure performance across all areas of an organization, not just project performance. Projects can fall under any of the 4 performance areas, or even several, but only one aspect of the organization's performance will be considered. The organization's use of the BSC will definitely affect the development of the project scorecard, but the project scorecard cannot duplicate the BSC format because the information available does not meet the BSC requirements.

Key Performance Indicators (KPIs)

Key Performance Indicators, or KPIs, is an acronym often used in conjunction with Balanced Scorecards. Balanced scorecards use 5 or 6 indicators in each of the 4 areas of organizational performance as a metric. These 5 or 6 metrics can be any of the thousands that have been measured, but the choice is limited by the nature of the field (finance, customers, business processes, learning and growth), the nature of the organization, and the nature of the processes and tools appropriate to measure the metrics. These metrics are called Key Performance Indicators, or KPIs.

This article contains practical advice on compiling a scorecard for your project and choosing the indicators that accompany it, and not the theory of balanced scorecards and KPIs.

Selection of indicators

Tasks and goals

When choosing which metrics to base your scorecard on, remember that quality is the ability of a product to meet customer requirements. The first question a senior manager might ask when considering your project is: strategic objective or the goal of this project will help me realize?" The answer to this question should be present in your business case and/or in the project charter. These documents should describe one or two main objectives that answer this question. Strategic goals are those goals or objectives that your organization will be able to achieve as a result of the implementation of the objectives and goals of your project.

The goal of your project may be to create terms of reference and a system that can store up to 100,000 previous software orders and up to 10,000 customized software packages, process a customer order, and produce software operating system telephone exchange of the client's central telephone exchange. Offering customers the ability to manage the configuration of their software with your new software system, your organization's strategic goal might be to increase market share by 10%. (offering customers the ability to manage their software configuration with your new software system.) Note that a project manager should not be responsible for achieving a 10% increase in market share. This goal will be achieved by creating and developing software and a configuration management system that top management trusts.

Select high-level objectives and project goals that are consistent with the strategic goal of the organization, and point them to that goal. For example, you can make the strategic goal the main item in the list, and make the project goals sub-items:

• Increasing the company's market share by 10%
• Presentation of the terms of reference and configuration system, which will:
  • Store up to 100,000 previous software orders.
  • Manage up to 10,000 custom software packages per order.
  • Handle customer orders and create an operating system.
  • Manage the program library rules that define the configuration.
  • Manage the rules for working with the market.
  • Determine the software composition of each client switch.

The top item on the list should be strategic goal, which should be accompanied by no more than a one-page list of secondary tasks and goals of the project.

Overall project performance

The overall project performance indicator should be derived from 3 or 4 project status indicators. They are: performance on budget, performance on schedule, performance on scope and quality. The overall project performance indicator is a subjective assessment of the state of the project; there is no indicator for it that could be used.

Red, yellow and green colors are commonly used to indicate the overall health of a project, with red indicating a project that is doing poorly and needs intervention from sponsors or a steering committee to get it back on track. Yellow indicates a project that is not running to established standards, but that can be recovered using the resources currently available to the project. Green indicates that the project is doing well.

Regardless of which means you use to indicate the overall performance of a project, you should use the performance indicator for the worst-performing project area to show the overall health of the project. If schedule performance is yellow, then overall performance cannot be green

Budget Performance

Earned Value Management (EVM) provides useful and commonly used metrics for measuring the performance of a project against budget. The goal is to determine whether you have completed the planned work on the project within the budget you planned. The budget will include the cost of all goods, services, resources (human and non-human) and administrative services consumed by the project. There are several different ways to get the readings needed to make these measurements. The simplest is an MS Project file for a project that can track all of these metrics. MS Project shows the costs in the same units as the work to complete the project. The budget for C++ programming was exactly 72% used, while C++ programming was 72% complete. It may not be exactly what your audience expects from you.

Check the reports issued by your finance department that measure your project's budget consumption. It is likely that these reports will be reviewed by senior management and issuing your own financial statement that does not match that of the finance department could result in wasted a large number time to reconcile the two reports. Some points to consider when collecting indicators:

• Does the finance department use any time tracking tools to track labor costs?
• When does the finance department consider that the labor budget has been spent? When are the funds being held? When is the check issued? When is a check exchanged for money?
• When does the finance department consider that funds for materials have been spent? When are the materials purchased? When are they delivered? When are they used? When is the check issued?

Use the finance department reports as the basis for your reports and explain how you used them, if possible. If financial reports based on the project are not available to you, study the methods used by the finance department to compile their reports and align your metrics with the methods financial reporting your organization.

There are some various indicators EVM efficiency using financial indicators. Deviation from standard costs is the simplest. It only compares the Actual Cost of Work Done with the Planned Cost of Work Done (CV = BCWP - ACWP). A negative value indicates that the project is over budget, a positive value indicates that the project is within budget. Executed Value is actually an EVM concept that stands for Planned Cost of Work Done (CV = EV - ACWP).

The Cost Recovery Rate, or CPI, is another metric financial position project. Cost characteristic is an absolute value in money, while CPI is a ratio that can be used to compare the performance of a project on budget in one period of time with another period or with another project. The CPI is calculated by comparing the variance with 1, with a 1 that exactly matches the budget. The formula for calculating CPI is BCWP/ACWP. A CPI greater than 1 indicates a project under budget, and a CPI less than 1 indicates a project over budget.

Average Monthly Cost is the third metric used to indicate how well a project is delivering on budget. The average monthly project cost is simply a measure of how the project budget is being spent. Faster than expected? Slower than planned? Or right on schedule? Average Monthly Cost is the inverse of CPI, so the formula for calculating Average Monthly Cost is: Average Monthly Cost = 1/CPI. An average monthly cost greater than one means that your project is consuming the budget faster than planned and will use up the entire budget before all the work is completed. Average monthly costs less than one means that your project is consuming your budget more slowly than planned and will be completed before the entire budget is spent.

Schedule efficiency

Schedule Efficiency is a measure of how quickly a project is progressing. Is it being completed on time? Ahead of schedule? Behind schedule? Your project may perform well on schedule but perform poorly on budget, so the metrics you use to measure cost characteristics, cannot be used to measure schedule performance. Your project may be ahead of schedule because you spent your budget on overtime work to gain an advantage (to make a leap forward).

Your MS Project file may be your only source of metrics you need to measure the performance of your schedule. The file must save graphs as time - hours, days, weeks or months. The main measure of schedule performance is Schedule Variance, or SV. SV can be calculated in terms of currency (as prescribed by the EVM) or in units of time, as long as you stick to one unit of measure and use it consistently throughout the project. The EVM formula for calculating SV is: BCWP - BCWS (Expected Cost of Work Done – Planned Cost of Scheduled Work). You can use currency, hours, days, weeks, or months as units of measure for BCWP and BCWS. A positive schedule variance indicates that the project is ahead of schedule, and a negative schedule variance indicates that the project is behind schedule.

Chart Performance Index, or SPI, is the chart's equivalent of CPI, calculated using the formula SPI = BCWP/BCWS. An SPI greater than 1 indicates that the project is ahead of schedule, and an SPI less than 1 indicates that the project is behind schedule.

Scale

You can look at the scale with two different ways: The match of the project to the original set of deliverables defined for it and the amount of time or cost for approved scope changes. Validate your project's scalability by showing planned deliverables for the project, delivered deliverables created, and costs of new features approved for the project. Limit deliverables to key deliverables and whether they are planned or already in production.

Scale changes can be shown as a difference from the project's planned scale. Show additional features and features, their associated costs, and show features and features removed from the plan along with their cost.

Quality

Quality Score can be measured in a variety of ways. Your primary source of quality metrics should be the issue tracking tool used to record bugs found by the QA (Quality Assurance) team. This tool should be able to generate almost any report you need and be able to separate reported issues into the following categories:

• By severity.
• For a reason (program error, data, question, etc.)
• By area of ​​application.
• By status (open, temporary (interim), eliminated, closed, etc.)
• By Owner (Software Developer, DBA, etc.)
• For newly opened tasks.

There are two metrics that will be of interest when performing quality control activities: the number of tickets opened per period and the number of tickets closed per period. You can also report the number of bugs found per 1,000 lines of code, or any other measure of the quality of your design work. Remember that the ultimate goal of Quality Management is to produce a product that meets customer requirements, so reporting a large number of open tickets should not be cause for alarm. If there are many more tickets opened than closed in the same period, or a huge number of newly opened tickets, this can be a cause for alarm.

Accuracy

The value of your scorecard will depend very much on the accuracy of the metrics it consists of. Be careful when choosing indicators for a report. Choose only those that you can test. Be careful when collecting and storing the information you use; start by keeping your MS Project file accurate and up-to-date.

It is likely that your data will not be 100% accurate no matter how carefully you inform your audience of your assessment of data accuracy, and how the data is stored and retrieved for the scorecard report.

Multimedia

Don't try to create a scorecard report using only text. The report will be unreadable. Use multimedia as the best accompaniment to the metrics you report on. You can follow the car dashboard/windshield analogy, whereby a traffic light showing red (stop), yellow (carefully), or green can be an effective visual indicator of overall project performance. A speedometer showing the range of Cost Recovery Rate with an arrow pointing to the current value of the indicator is also a good visual indicator.

Bar charts are ideal for displaying statistical information such as trends. Displaying a project's current CPI or SPI values ​​tells the viewer whether the project is on schedule, behind schedule, or ahead of schedule for the reporting period, but displaying a maximized window for 10 reporting periods is worth the CPI or SPI values ​​telling the viewer the same, plus whether increasing or decreasing efficiency. The trend lines will make the picture clearer and the 1.0 line will show how the project should be carried out.

Scatter plots are useful for showing a causal relationship between two variables, one of which is controlled experimentally. The control, or independent variable, is plotted on the horizontal axis, and the dependent variable is plotted on the vertical axis. This chart type is useful for displaying the results of process changes as a quality score.

There are many toolkits available that will take whatever metrics you need for a report and present them in a great visual form. You can use one of these tools and experiment with its features, choosing a combination that suits your audience, or you can use the visuals available to you to modify them to suit your own requirements.

To evaluate the work of a manager, you can implement a system such as KPI in a company. It has already proven itself well in the West and has been successfully used in Russia for several years now. The system can be used in both small and medium big business. With its help, you can identify the weak links in the company's work and build a long-term development strategy. The work of top managers is one of the most important components of success, and we will look at how the KPI of a leader is measured.

Some Features

It is important that the tasks assigned to the manager be realistically fulfilled. If the requirements are too high, then the manager can simply give up immediately. To accurately assess the achievements of the leader, you need to take a time period equal to one year. This optimal time for which the employee can prove himself and achieve improvements in performance. It is best to combine personal indicators with general ones, so the picture will be much more objective. General indicators are those data that the department shows. And, the higher the level of a manager, the more important it is the general indicators for evaluating his work.

KPIs are always specific values ​​expressed in numbers. But you should not take a lot of indicators at once, otherwise the result will be blurry. It is best to focus on 5 indicators - this number is optimal, according to experts.

Achievement levels

For the top management, certain levels of achievement are established:

1. The minimum threshold below which bonuses are no longer accrued.
2. Target - a bar for paying out bonus money.
3. Exceeding. If the manager exceeds the target threshold, then he is awarded an increased bonus as an incentive.

For the head of the department, indicators can be, for example, as follows:

• How the plan is carried out.
• How the reporting on documents is observed and discipline is maintained in the department.
• How efficient are employees.

Moreover, for the heads of different departments, their own performance indicators should be set, which correspond to the direction of the work of the unit. For example, some managers are engaged in personnel, while others are in sales. For these people, of course, the indicators will differ.

Eventually

The well-being of the entire company depends on the effectiveness of the work of top managers. Therefore, it is beneficial for the owner to introduce a KPI system in order to monitor the work of their managers and identify all their shortcomings. From this we conclude that the KPI of the project manager is a very important thing.

We are opening a new cycle dedicated to the topic of KPI, launched last year1. This time we will consider the main steps for implementing a personnel motivation system tuned to KPI. Let's focus not on the method as such and general approaches to functionalities, but on key indicators that usually fall into the company's top management scheme. Assimilation of this material will require a certain amount of patience from the reader, because the presentation general principles perceived is always easier than parsing particulars.

Sustainability is progress without impatience.
Nassim Taleb

For top managers, as for all other employees of the company, there are general rules, but there are rules that apply only to a specific position.

How to send an employee to

Usually, the general rules for motivating all managers (including "tops") include the following:

• objective analysis and assessment of the position held - the complexity, area and degree of responsibility of the work performed;
• are taken into account key features and the goals of the employee and the share of their participation in achieving the goals of other employees;
• at least three and no more than five KPIs of employees are taken into account for the main goals of the employee 2 ;
• business processes in which employees participate, the degree of personnel involvement in the main business process are taken into account.

However, along with the general rules, there are also specific rules for each position, taking into account individual responsibility top manager for the area of ​​activity (process, project) headed by him and goals.

The specific rules for the CEO (CEO) are usually set by the shareholders of the company, as the CEO is the spokesman for their interests, the "translator" of strategic desires and intuitive expectations from the business into the language of operational management. Sometimes shareholders define these specific rules for key top positions, for example, for commercial director, financial director, director of production.

Usually, shareholders indicate what they would like to see as the final result of the company's activities, and it is in connection with this that certain KPI parameters of top managers are called. Often this sounds very general, for example: “All top managers should participate not only in profits, but also in the risks of the company” - translated into KPI language, this is likely to be at least two indicators: total profit and on the profitability of activities in the context of departments. The remaining indicators relate directly to the goal or functionality for which each top manager is responsible.

The CEO is "easiest" because he is responsible for everything. The duty of the State Duma is to ensure the effective functioning of the economic object entrusted to it. And this means that the projections of all goals and processes are reflected in the area of ​​his responsibility. Figuratively speaking, the CEO is responsible for everything he does and for what his top managers do.

If this is taken literally, the KPI diagram of the State Duma will be voluminous and confusing, because it will have to reflect the KPI of all his deputies, as well as his own indicators, since, despite the popular saying “do nothing yourself if there is a good deputy”, The active CEO has a lot to do on his own.

To build a target 2 KPI chart for the CEO, you can go one of two ways.

Method 1 (more correct, but also more complex) - building a Strategic Map of the CEO.

strategic map includes all the goals of the GC (and usually these are all the goals of the top-level company), distributed across four main perspectives: development, processes, customers and finances 3 . At the same time, the goals are not arranged in an arbitrary order, but in a hierarchy, reflecting the connectedness (which goal must be achieved earlier in order to move to the next one) and the strength of the connection (to what extent the achievement of the previous goal is a necessary and sufficient condition for the fulfillment of the next one). An example of a Strategy Map is shown in figure.

The numbers next to the targets indicate their weight. The goal that includes the maximum number of connections from other goals has a weight of 1, and the rest of the goals - proportionally. In the presented figure, the most important, weighty financial goal for the State Duma is to “increase the capitalization of the company”. It includes with an equal weight of 0.5 (equal weight is an assumption to simplify the example) two more goals: the client one “to have at least 70% of the market share in the regions of presence” and the process one “to provide necessary resources for development". The client goal includes three more goals from a process perspective. Their weight is divided proportionally already in relation to the weight of 0.5. The KPIs developed for each goal with SC are reweighted according to the weight of the goal, and only those KPIs that receive a weight of at least 0.1 are left for the final calculation.

As a result, there will be some KPI table, which fully takes into account all the nuances, but requires a really advanced accounting system of the enterprise in order to be able to calculate everything in the correct way. We will not give all table, since this is quite a voluminous material for an example, we will limit ourselves to two goals with SC and KPI for them.

The KPI sum is not equal to one, because for the example we did not use all the goals from the CEO's Strategy Map.

Premium / bonus \u003d (BFKRP x A + BF KPI2 x B + ....) x D,

where BF is the maximum bonus fund according to the indicator. The share of each KPI in the total BF is proportional to its weight;

A, B, ... etc. - coefficients for the performance of indicators;

D is a stop factor blocking the payment of the bonus if the minimum threshold values ​​for each indicator are not reached (these can be different “thresholds” for different indicators or a single rate for the company, for example, 80% of the plan). Failure to reach the minimum threshold accepted by the company for any of the indicators included in the calculation formula blocks (or significantly reduces) the bonus payment. That is, the value of the coefficient D changes from 0 to 1.

This method is correct, because it allows you to take into account the significance of both goals and KPIs, but it is usually difficult to implement, so it is used when the company does not have a clear understanding of the specific significance of goals, i.e. it is difficult to prioritize their achievement "on the forehead", directly, and it is required to carefully trace the connection, the conditionality of some goals by others, so as not to miss anything in the final KPI scheme.

If the company clearly understands exactly what goals it sets for the foreseeable period and in what sequence, then you can use an easier way to create a KPI chart for the CEO.

Method 2. Development of a KPI map "on the forehead".

When implementing this method, all the goals of the CEO are written out, which are indicated to him by the shareholders (most often it is all the same profit and profitability), KPIs are determined for them, their weight is assigned by an expert (which should be equal to 1 in total) and the conditions under which the bonus is paid in full or reduced amount. The strategic map is not built.

Let's assume that the goals of the CEO, as outlined to him by the shareholders, are measured by the following KPIs:

• Admission Money(PDS).
• Profit.
• Repeated contracts with clients for the period (in kind or in monetary terms).
• Percentage of timely completion of tasks (upper management level).

Revenue per one employee of the company (it can be broken down by departments or separately production personnel and office staff). For each KPI, two threshold values ​​are set: the first - if it is not reached, the bonus is not paid for this particular KPI, and the second - if it is not reached, the bonus is not paid at all, regardless of the percentage of other KPIs. The CEO bonus/bonus formula thus includes five indicators, each with its own threshold value. Then the CEO bonus calculation table might look like the one shown in table 2.

The calculation is made on the basis of those planned and actual values ​​that are entered into the table from the company's accounting system.

The main rules that should be taken into account when linking KPIs to the system of motivation for top managers are as follows:

1. Indicators must be supported by the accounting system.

2. The performance of the CEO should include the performance of other top managers (in fact, the performance of the CEO is the performance of the company).

Indicators should not be more than five or less than three.

3. The weight of the indicator correlates with the share of the bonus fund allocated to the total premium.

4. Each indicator has threshold values ​​at which no bonus is paid for this particular indicator.

Often, a general stop factor 4 is introduced - the minimum value of the performance of indicators, the failure of which at least for one of the indicators cancels or significantly reduces the total bonus, regardless of the percentage of performance of the remaining indicators.

Approval of the scheme of indicators and bonuses to the CEO is usually carried out by shareholders. The general director's bonus scheme serves as the basis for further development of bonus schemes for the rest of the company's top managers.

The head of sales is the hope and support of the team, the main role model. No matter how great a specialist he is, you still need to control the work. For motivation, you can use the same method as for ordinary merchants - the introduction of KPI indicators.

KPI of the head of the sales department - what is it?

The salary of the head of the commercial division, as well as his subordinates, consists of a salary (a smaller part, you can not use it) and bonuses based on the results of work. The amount that will be added to the salary depends on the implementation of the plan. The senior manager's utility factor corresponds to a number of characteristics.

KPI for the head of the sales department - transparent and understandable

To calculate the value, do not invent cumbersome formulas. "Tie" it to the amount that the boss received from clients per month, the number of meetings with the conclusion of the transaction or the number of new clients for the period. A percentage that is clear in the calculation is more convenient to use in management. And the head of the department is already so busy with work to unravel the meaning of the formulas composed by the manager. Everyone benefits from simplicity.

KPI for the head of the sales department - commensurate with the team

The leading employee does not force people to “plow under pressure”, but sets an example with his own achievements. At the selling part of the company common goals, and, therefore, the tools to achieve them are the same. The overall evaluation system makes the boss closer to the subordinates.

By the way, how effective is your sales department? I suggest you check, for this I will leave you the self-diagnosis questionnaires of the sales department. Enjoy!

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KPI of the head of the sales department (example) - the number of calls, the result of which was a meeting with the client. In this case, the value applies to both managers and the lead merchant. But the number of calls per month for the latter will be higher. It's your the best employee, is not it? He is distinguished from ordinary businessmen by his experience and professionalism, so the minimum results should be higher. The coefficient allows an ordinary employee to understand the difference in their results and a higher colleague. The manager sees what indicators to achieve in order to provide himself with an income similar to that of the manager. And the guru of the division is trying not only to earn money, but also to confirm the status of a professional.

The leader's KPI matches the company's strategy

The best people in the organization don't make decisions typical tasks. Yes, the sales manager makes phone calls, but he assigns himself the most “difficult” tasks. If it is important for a company to attract new customers, an experienced employee will solve the problem. The development of the VIP division will also fall on the shoulders of the leading merchant. Taking into account the goals of the company for the future, a system for measuring efficiency is determined.

Achievability of the indicator

Even a manager with ten years of experience is not a superman. No matter how high results your employee achieves, the numbers for motivation must be real. Determine motivation based on business experience. The easiest way: take the average result (for example, 10 meetings per month that ended in a contract), increase it to the maximum achieved in the department (for example, 15 meetings). As a result, we get the number that each employee strives for. In this case, for the boss, the number increases again (for example, up to 20). You can "draw" any figure, but if you want 200 successful meetings a month, even the best businessman will not be able to fulfill your desire.

KPI of the head of the sales department (an example for different departments)

Large companies create several sales divisions. One operates on the incoming flow, the other deals with active sales on a “cold” basis, the third works with VIP clients. For the head of each element of the company there will be a coefficient depending on the functionality of the employees. As a value, the number of calls with an appointment, the number of personal meetings, the amount of funds paid, the number of questionnaires filled out by contractors are suitable. It is possible to unify the motivation system for the leading managers of all departments if all values ​​are converted into monetary values. But this measure is not suitable for every business. Measures for motivation are developed individually for management tasks.

In the personnel management system, not a single efficiency ratio is used, but their system. The more complex and diverse the functionality of a merchant, the more indicators are created. But you shouldn't get carried away.

Motivation must also take into account complex schemes of work. For example, an incoming call from a client results in a signed contract and payment six months after the first contact.

Relationship with personnel results

Personal profit is important for gurus, but team profit is even more important. The income of the leading merchant depends on the achievements of the team to such an extent that their own achievements are perceived as a contribution to the common cause. KPI is "tied" to the indicator of the team. This helps to motivate both the boss and his team.

Another important point- constancy. The first manager strives not only to achieve a key value with his team, but to repeat it from month to month. Even better, if the actual sales rate increases over time. Stable growth is paid accordingly.

The income of the manager of the sales department may look like this:

Money earned on completion own plan; Award for achieving KPI level by subordinate managers; Persistence payout.

At the same time, all values ​​for determining the effectiveness are transparent and commensurate. The first point of this chain may be a permanent - salary - part. You should not give her more than 30%. The larger the variable part of income, determined by efficiency, the more subordinates will strive to attract a new client and fulfill the plan.

Metrics are not everything

The introduction of a motivation system with the help of KPI solves many difficulties with the management and control of subordinates. It is quite realistic to calculate the number of successful transactions and profit per month per manager. Not everything is measurable, even in a work setting. For example, creating a system for measuring authority is problematic. But this factor cannot be ignored, because the authority of a superior colleague determines the result of work.

The ability to make decisions in difficult situations, the ability to direct the development of subordinates in the right direction, the willingness to demonstrate by example the work with complex stages of implementation - the qualities that a leading employee possesses. It is difficult to "drive" such concepts into the system because of their immeasurability.

But do not forget that a true professional with leadership qualities and the ability to manage people, will show excellent results from month to month in a measurable "field". After all, it is impossible to bring a stable profit to a company without the classic qualities of a sales guru.

© Konstantin Baksht, CEO Baksht Consulting Group.

The best way to quickly master and implement the technology of building a sales department is to visit K. Baksht's sales management training "Sales System".