Home › Apartments for sale › What KPI system do companies use? What are KPIs and how to work with them. Types of Key Performance Indicators

What KPI system do companies use? What are KPIs and how to work with them. Types of Key Performance Indicators

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, result, motivation. Today, KPI allows, using the data it generates, not only to evaluate the performance 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:

Lagging that is, those that will reflect the results of work over the course of some time;
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 if necessary, they are involved in analyzing the work of the enterprise at the current time, giving an objective assessment of the quality of current activities, the degree of satisfaction of customer needs, how satisfied they are with the cooperation, identifying the possibility of increasing cash flows for the future, and assessing 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:

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

Development of KPI methodology. At this stage perform:

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

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

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

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

development of KPIs as a holistic development strategy;
availability of explanation of the benefits of KPI for personnel;
identification and clear recording of corporate key success factors;
creating understandable reporting for all levels;
ways to clarify KPIs to maintain their relevance when existing business conditions change;
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:

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;
Correct orientation- KPIs must correspond to key development projects, strategic goals of the company, key business processes;
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%;
Openness to action- KPIs should be set so that there is the possibility of intervention in processes to improve them;
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;
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;
Ease of perception- KPIs must be accessible to their understanding by performers;
Balance and interconnectedness- key performance indicators should not be in the zone of mutual conflict, they should complement each other;
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;
Easy to measure- KPIs should be left in such a way that users can independently quantify progress;
Reinforcement- KPIs must motivate employees, that is, be supported by individual material incentives;
Relevance- since over time the influence and effectiveness of even professionally created KPIs can significantly weaken, they need to be updated periodically;
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;
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, certain rules must be followed.

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 allows managers to avoid overload, as well as significantly reduce the time that management spends discussing program implementation.
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.
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.
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).
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.
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?

Make a very large deal with one very wealthy client. But there are few such clients, and there is an active struggle for them.
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:

sales volume;
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.

In this article we will tell you what key performance indicators (KPIs) are and how KPIs are calculated. We provide a detailed step-by-step algorithm for implementing KPIs. We'll tell you how to use this indicator to motivate staff. Bonus - a table with examples of KPIs for HR officers.

From this article you will learn:

★ Staff motivation

What is KPI

The decoding KPI means in translation from English (Key Performance Indicators) - “key performance indicators”. KPIs are sometimes translated as “key performance indicators,” but this variant is less common. The KPI system is used by large corporations with a developed network of branches and a large staff.

KPI is an important and effective tool for an HR manager that will allow you to:

Assess staff performance.
Monitor the maintenance of efficiency during the work process.
Manage the workflow.
Set specific goals for staff.

Explaining to management and employees what KPI is in simple words will help you Alla Piskunova, HR director of LGK-logistics company:

Example of Key Performance Indicators (kpi)

A large household appliances store has 12 sales assistants on staff. The store's HR manager evaluates the performance of sellers based on the following criteria:

Criterion No. 1- the ratio of the number of buyers with whom the seller communicated with the number of those who subsequently made a purchase (in percentage);

Criterion No. 2- average customer bill;

Criterion No. 3- percentage of exceeding the plan.

This minimum set of criteria already allows you to calculate the KPI (key indicators) of the seller and evaluate its effectiveness. The HR manager can monitor the implementation of KPI indicators and maintaining efficiency throughout the day or month. Experts from the HR Director magazine will tell you

By definition, KPI allows you to manage the work process and set specific tasks for staff. How this happens in practice:

In our example, the minimum set of criteria for calculating KPIs. In practice, the average number of KPI criteria is 5-8.

Examples of KPIs for a HR document management specialist

Types of Key Performance Indicators

Key performance indicators are simple and derivatives.

Examples of simple KPIs:

KPI results (result indicators expressed quantitatively or qualitatively);
Cost KPI (cost quantity indicators).

Examples of derived KPI indicators:

Performance KPI - the ratio of results and time spent;
Efficiency KPI - the ratio of the result and the resources spent.

Experts from the HR Director magazine will tell you

and understand if you made a mistake when setting KPIs for them.

3 main principlesKPI development

Principle No. 1.KPI indicatorsshould be simple and easily measurable.

This will allow comparison and prevent misinformation.

Principle No. 2. The cost of measurement must be lower than the benefit fromKPI implementation.

A too complex and expensive procedure for measuring indicators will negate all the advantages of switching to KPIs.

Principle No. 3. The measurement results must be used in work.

If you measure indicators only for the report and do not take any further steps, then the measurements are meaningless.

Experts from Sistema Personnel will teach you competently

Pros and cons of KPIs


employees work 20-30% more efficiently; employees understand which tasks to perform first; the employee adjusts the work according to the lagging indicator; problems can be detected at the stage of their occurrence; fair calculation of wages; effective system of material motivation.	not all performance indicators can be measured quantitatively (for example, in education, medicine); implementation of a KPI system is an expensive, time-consuming and labor-intensive procedure. each indicator must be measured and described in detail; At first, employees will be hostile to the new system. It will take a long time to explain, convince and retrain.

Howcalculate KPI: algorithm and example

AlgorithmKPI calculation

Step 1. We select from 3 to 5 performance indicators.

For example, indicators for an online store seller:

New customers.
Buyers who have made a repeat order.
Positive recommendations.

Step 2. We determine the weight of each indicator. The total weight of the indicators is 1, and the most important one has the highest weight.

New customers - 0.5.
Buyers who made a repeat order - 0.25.
Positive recommendations - 0.25.

Step 3. We collect and analyze data on selected indicators throughout the month.

Step 4. We calculate KPI using the formula:

KPI index = Indicator weight*Fact/Plan

Fact - actual result

A plan is a planned result.

Step 5. We calculate salaries taking into account the KPI index.

Example of KPI calculation

This payment system motivates sellers to attract new customers and work with old ones.

Use the materials from the Personnel System:

From this article you will learn:

What is KPI

What examples of KPIs for representatives of various specialties can be taken into account?

How to calculate KPI in EXCEL using an example

The method of personnel assessment using key performance indicators KPI (Key Performance Indicator) is based on the methodology of “management by objectives” by Peter Drucker. In Russia it has been used since the early 2000s. In this article we will describe the essence of KPI, give examples of KPI and show the prospects for applying and improving the KPI method at Russian enterprises.

What is KPI with examples

Since July 1, 2016, Russian enterprises have been introducing professional standards as the basis for developing personnel policies. To assess the success of meeting standards, a system for assessing the quality of workers’ work is needed.
The criteria that characterize the quality of work are presented in Figure 1.

Figure 1. Structure of labor quality criteria for enterprise employees.
Level I criteria- these are actually the names of the two main classes of criteria.
Level II criteria– generalizations suitable for submission for an award (but not for evaluation).
Level III criteria– unified indicators that allow for an approximate assessment of the effectiveness and reliability of an employee’s work. Almost all known methods of personnel assessment are focused on assessing level III criteria. Depending on the education and literacy of the authors of the methods and consumers, the most often chosen are:

Purely economic KPI criteria. Applicable to managers and specialists directly involved in financial management and product sales.
Questionnaires in the form of forms for experts to assess competencies.
Psychological criteria (Cattell test, etc.) - on the assumption that the quality of work is determined primarily by personal characteristics.
Job profiles based on specialized (mainly psychological) sets of indicators.

Let's consider the most popular assessment technology based on KPIs.

Main idea of KPI– detailing the strategic goals of the enterprise down to the employee level. As a rule, financial and economic indicators act as strategic goals. There are several subgroups of KPIs based on quantitative measures of activity:

Cost– in value terms.
Performance– percentage of equipment load.
Efficiency. Most often this is the ratio of revenue to cost.
Results. For example, the number of products produced.

Key performance indicators can be operational or strategic.

Operational indicators characterize the current performance results of the enterprise and its divisions. They allow you to quickly monitor technological processes, material support, product quality and adjust control parameters in accordance with changing conditions.
Strategic indicators allow you to monitor the generalized results of the enterprise for a month, quarter, half year and make decisions to ensure that these results comply with the planned ones. Short-term forecasts of the efficiency of departments and profitability for the coming period are calculated.

KPI are numerical indicators of the degree of success in achieving specific goals. This allows you to use the KPI system as the basis for motivating management of employee activities.

Examples of KPIs for representatives of various specialties

KPIs are most convenient for assessing the labor efficiency of administrative and managerial personnel (managers, economists, financiers, etc.).
Key performance indicators of trading activities are calculated based on the following data:

Key production performance indicators are calculated based on:

Specific examples are presented in the following table:

Job title	Indicator	Estimated value, %
Head of Marketing Department	Sales plan completion percentage	100, where Q f – actual sales volume, Q pl – planned sales volume
Marketer	Product market share	Data from external marketing agencies
Chief accountant	Timely filing of tax returns	Federal Tax Service information
Accountant	Timeliness of payments (as a percentage of the total)	100, where Op cp is the number of payment transactions completed on time; Op total – total number of payment transactions
Head of Legal Department	Percentage of cases won (out of total number of cases)	100, where Q in is the number of cases won, Q total is the total number of cases
Lawyer	The amount of money that is collected and retained for the company	Data from the legal department (as a percentage of the plan)

Example of KPI calculation in EXCEL

Each enterprise develops its own KPI assessment system. Key performance indicators are established for each position independently. Their total number for a specific position/workplace is no more than five. At the end of each month (for some enterprises - a quarter), the final individual KPIs of each employee are calculated as a weighted average of private KPIs. The simplest algorithm for combining private indicators of an individual workplace:

where are private performance indicators;
n – number of private indicators ( n≤5) ;
– weights of individual (private) KPIs. Usually
The weights vary because the significance (importance) of individual indicators may not be comparable. Weights are normalized:

Formulas for calculating bonuses based on values K(decision rules) can be expressed as a simple linear or step function TO.
The values of motivational coefficients (that is, conversion factors K bonus) can be determined, for example, according to the following algorithm:

The following figure shows a clear example of calculations using Excel.

Figure 2. An example of assessing the success of an activity.
Explanations:

Salary– fixed part of the salary. It is proportional to the number of hours worked. To simplify the calculation example, the fixed and variable parts of the salary are assumed to be equal.
Percent fulfillment of the sales plan and work plan is calculated based on the ratio of actual indicators to planned ones (as in the above table of calculated values).

Formulas in Excel for calculating KPI for each employee: =(50% × (IF(D3<80 %; 0; ЕСЛИ(D3<90 %; 0,5; ЕСЛИ (D3<100 %; 1; 1,5))))). Влияние показателя 1 и показателя 2 на сумму премиальных считается одинаковым. Коэффициенты тоже равны. В связи с этим для расчета показателей 1 и 2 берутся одни и те же формулы.

The formula for calculating the amount of premium to accrue is =C3 × (F3+G3). The planned bonus is multiplied by the sum of indicator 1 and indicator 2 for each employee.
Salary – salary + bonus.

In order to evaluate the work of employees according to several key performance indicators, a matrix of the following form is compiled:

Figure 3. Worksheet form.

Key indicators A – private KPIs (.
Weights B – .
Base C is the minimum value of the indicator.
Norm D – planned level.
Goal E is the value to strive for. Excessive indicator.
Fact F – actual results of work.
KPI G index – level of result in relation to the norm.

Formula for calculating the KPI index:

An example of filling out a matrix for an office manager is shown in the following figure.

Figure 4. Example of KPI calculation.
The performance coefficient is the result of calculation using formula (1).

How to implement a KPI system in an organization

As can be seen from the above example, the implementation of a system of motivating personnel management based on key performance indicators does not require serious investments and highly qualified developers. No special training is required for HR specialists - the ideology is simple and popular. There are many enterprises that operate semi-automated Excel-based systems. The whole question is how effective personnel management is when using the technology discussed.
As can be concluded from the example, the KPI system is best suited for enterprises with discrete production, for example, mechanical engineering enterprises. For industries with a continuous process (for example, nuclear power plants, chemical plants), the main attention should be paid to the technological component of control, its reliability and safety. In this case, for example, it is impossible for an occupational safety inspector to formulate appropriate assessment criteria related to the financial well-being of the enterprise.

To correct this shortcoming, you can supplement the KPI assessment complex with a competency assessment subsystem. An example of a fairly successful solution is the STP 001.089.010-2005 standard, developed at OAO Irkutskenergo.
At OAO Irkutskenergo, special forms are used to assess competencies, which are filled out by experts - the head of the person being assessed and his colleagues. A sample of such a form is presented in Table 1.
Table 1. Employee competency assessment.

Evaluation criteria (competencies)	Grade			Average competency score
Evaluation criteria (competencies)	Supervisor	Colleagues (average score)	Self-esteem	Average competency score
Initiative(willingness and ability to solve professional problems and issues, caring attitude towards work situations, desire to actively participate in work, influence the results of activities)
(ability to set priorities, stick to a task plan)
Knowledge of work(professional literacy, practical knowledge and skills, understanding of the content of the work, knowledge of methods, procedures, rules)
Responsibility(timeliness, integrity and quality of task completion)
Communications with the manager(informing the manager about the degree of completion of work assignments, consultation with the manager on work performance standards)
Communications with colleagues(effectiveness of teamwork)
Discipline(attitude to working time, its use, adherence to working hours)		X
Average score for competencies (Ok)	X	X

Experts assess the employee’s compliance with the job requirements using points. In this case, competency dictionary scales are used. Examples of scaling of two competencies are presented in Table 2.
Table 2. Scaling competencies.
Initiative

*Point*	*Characteristic*
1	Does not show personal initiative when solving production issues
2	Very rarely makes constructive proposals
3	Often makes proposals that are rarely implemented
4	When solving production issues, he constantly makes constructive proposals within the framework of his job responsibilities and brings them to practical implementation.
5	When solving production issues, he constantly makes constructive proposals not only within the framework of job responsibilities, but also concerning the work of the department as a whole. Brings proposals to practical implementation

Ability to plan work effectively

*Point*	*Characteristic*
1	Unable to plan even the simplest work or determine time costs. Doesn't know how to identify stages of work
2	Copes poorly with planning and does not attach importance to the costs of completing a task. Does not know how to break down a task into work stages and set priority for completion. Plans are mostly unviable
3	Doesn't handle planning very well. Makes mistakes when determining costs, priorities, and methods of achievement. Plans very often turn out to be unviable
4	In general, he copes with planning; when drawing up plans, he takes into account the costs of achieving his goals. Typically, all assigned tasks are aimed at achieving the overall goal of the activity.
5	Well determines the costs of implementing the plan. The goal is divided into stages of achievement. Correctly sets priorities at all stages of plan implementation. Always strives for viability and realism of the plan

Key performance indicators allow you to evaluate the effectiveness of the actions performed. They can be used to evaluate the performance of the entire company, its individual divisions, and specific employees. Using the KPI system, you can not only monitor and evaluate the effectiveness of the actions performed, but also build an effective remuneration system. The condition for the indicator to work is the ability to measure it.

Often, a company's work contains many words and few numbers. Moreover, sometimes there are no numbers at all - they are replaced by emotions, personal opinions and subjective assessments. If the company does not have a system of motivation for results, conversations with managers will have the nature of persuasion. If this meets the company's goals, you can continue working in this format.

If the goal is to obtain a specific result, it is recommended to develop tools to achieve the required indicators and implement them in everyday practice, as well as develop and implement a staff motivation system “tied” to specific numbers and indicators.

KPI(key performance indicator) is a key performance indicator. They allow you to evaluate the effectiveness of the actions performed. KPIs can be used to evaluate the performance of the entire company, its individual divisions, and specific employees. Using the KPI system, you can not only monitor and evaluate the effectiveness of the actions performed, but also build an effective remuneration system. The condition for the indicator to work is the ability to measure it ( table 1).

Table 1. The most common KPIs and their measurement/calculation system

Key Performance Indicators	Measurement/calculation system
Commercial indicators
Revenue	Plan/actual (ratio of actual revenue to revenue plan)
Profit	Plan/actual (ratio of actual profit to profit plan)
Accounts receivable (RE)	Plan/fact (relationship of the fact of the remote control to the plan of the remote control)
Other indicators	Plan/actual
Non-commercial (qualitative) indicators
Timely submission of reports	Plan/actual (the ratio of the actual deadline for submitting the report to the planned deadline for submitting the report)
Implementation of the client visit plan	Plan/fact (ratio of the fact of customer visits to the plan of customer visits)
Staff turnover	Plan/actual (the ratio of the actual percentage of turnover to the planned percentage of turnover)
Number of new clients attracted	Plan/actual (ratio of the actual number of attracted clients to the planned number of attracted clients)
Other indicators	Plan/actual

Requirements to the KPI system:

each indicator must be clearly defined;
indicators and standards must be achievable: the goal must be realistic, but at the same time be an incentive;
the indicator should be the responsibility of those people being assessed;
the indicator must be meaningful;
indicators can be general for the entire company, i.e., “tied” to the company’s goals, and specific for each division, i.e., “tied” to the goals of the division.

I. Payroll system as part of the motivation system

The personnel management system has the risk of being high-cost and low-effective if the personnel do not feel loyalty to the company. To build employee loyalty, it is useful to have an idea of what motivates them to perform their duties most effectively, that is, their motivation. There are many definitions of motivation, but in our case, by motivation we will understand the process of stimulating employees to achieve their goals and complete tasks.

It is desirable that the staff motivation system includes material and non-material motivation. Below, the main attention is paid to the material component - this is the payroll system (motivational scheme), to which employees of any organization are most sensitive.

KPI-based remuneration system allows:

ensure control over the current and long-term performance of the organization;
assess the personal effectiveness of each employee, department and organization as a whole;
direct staff to achieve the required results;
manage the payroll budget and reduce the time for its calculation.

II. Methodology for forming a remuneration system

1. Determine the list of positions (positions) in the company structure for which the following motivational scheme will be formed (the principle of correspondence of key performance indicators to the level of the organizational structure):

Level “General Director” (business owner) - Achieving the first level goal (plan/actual)
“Management” level (heads of departments) - Achieving second level goals + indicators of organizing planned work (plan/actual)
Level “ordinary personnel” - Achieving set goals + fulfilling current tasks (plan/actual)

2. Determine the key performance indicators (KPIs) for the position and the weight of each, based on the goals set for this level of the organizational structure.

3. Determine the procedure for calculating indicators ( table 2):

Table 2. Linking goals to key performance indicators

№ p/p	Company goals	Possible key performance indicators and calculation procedure (measurement)
1	The commercial goal is to fulfill the monthly sales plan for product A in the amount of 350,000 rubles. per month in territory B from 01/01/11 to 31/12/11	1. Key performance indicator - sales plan. Measurement system: (actual sales) / (sales plan). 2. Key performance indicator - 20% growth. Measurement system: (actual growth) / (planned growth).
2	Commercial goal to increase the average shipment amount by 15%	The key performance indicator is the average shipment amount. Measurement system: (actual average shipment amount) / (planned average shipment amount as of date).
3	Qualitative goal to increase the number of clients by 10% in the period from 01/01/11 to 07/01/11 in territory B	A key performance indicator is the number of clients in the company's database. Measurement system: (actual number of clients in the database) / (planned number of clients in the database).
4	The qualitative goal is to develop and conduct an event for 50 clients (30% key and 70% potential) during the period from 02/01/11 to 03/01/11	1. Key performance indicator - customer attendance at the event. Measurement system: (actual number of visitors) / (planned number of visitors). 2. Key performance indicator - event budget. Measurement system: (actual budget) / (planned budget).

4. Determine the spread of the percentage of indicator completion, the value of the indicator coefficient and the meaning of its value ( table 3):

Table 3. Percentage of indicator completion and coefficient (example)(*)

	Coefficient	The meaning of the coefficient
Plan fulfillment less than 50%		Unacceptable
Plan fulfillment 51–89%	0,5	Low level
Implementation of the plan by 90–100%	1	Achieving the target value (fulfilling the plan)
Plan fulfillment 101–120%	1,2	Leadership
Plan fulfillment more than 120%	1.5, 2 or 1(**)	Aggressive Leadership or Planning Precision Management**
() This table is a sample. The coefficients are given as a possible option. (*) The coefficient is set depending on what policy the company has regarding exceeding the plan. A coefficient of 1.5 or 2 means that the employee is motivated to significantly exceed the plan. If there is no such task, then the value of the coefficient = 1 will serve as a restriction for the employee - he will not underestimate the plan in order to then overfulfill it, since in this case he will receive a coefficient corresponding to the implementation of the plan at 100%, and no more.

5. Create a motivational formula that will be used to calculate wages. Determine the ratio of “fixed part”, “variable part” and “bonus” in wages.

6. Determine the formula for calculating the variable part of wages.

7. Perform a check: calculate all possible salary options for all possible KPI values.

8. Draw up a document “employee motivation scheme”.

As can be seen from point 1, key performance indicators (KPIs) vary depending on the level of position in the organizational structure and correspond to the goals of this level. This connection, using the example of second-level goals, was discussed above in table 2.

Key Point in the measurement of an indicator - the ratio of the actual result obtained to the planned one.

Example of calculating the indicator “Monthly sales plan”

Planned value of the indicator per month: RUB 350,000.
The actual value of the indicator at the end of the month: RUB 330,000.
Calculation of the percentage of plan completion = 330,000: 350,000 x 100% = 94.3%.

***
Once the percentage of plan completion is established, you need to determine what meaning the result has for the company. In other words, is meeting your monthly sales target by 94.3% good or bad? This meaning is reflected by the value of the coefficient and directly affects the employee’s salary.

The spread of the percentage of plan fulfillment and the value of the coefficients (meaning) is determined by the company independently (they are influenced by: the size of salaries for a given position, the result to be obtained, the specifics of the market and the company’s product, goals, mathematical calculations of payroll standards).

In a motivational scheme, it is optimal to use 3–5 KPIs.

III. Principles of forming a motivational formula

The standard motivational formula looks like:

Salary = Fixed part (salary) + Variable (changeable) part.

If payment of bonuses is provided, then:

Salary = Fixed part + Variable part + Bonus.

The ratio between the fixed and variable parts will vary depending on the goals, the situation in the company and the specifics of the market in which the company operates. For example, if you are just introducing a product to the market, you need an aggressive scheme in which the fixed part can be 30% of the planned income, and the variable part, respectively, 70%.

Example

Let’s assume that the average salary in the market for the position “sales manager” is 30,000 rubles. per month. It can develop in different ways. For example, 30% of the fixed part, i.e. 9,000 rubles, and 70% of the variable part, i.e. - 21,000 rubles. Total: 30,000 = 9,000 (fixed part) + 21,000 (planned amount of the variable part). This is an aggressive scheme that can be used, for example, when introducing a product to the market.

If the company already occupies the desired market share and the task is to maintain it, the situation in the company and on the market is stable, then the fixed part can be equal to 70%, and the variable part 30%. In this case, 30,000 = 21,000 (fixed part) + 9000 (planned amount of the variable part).

This is a rare case when changing the places of the terms does not change the sum, since the total amount of the variable part can have different values.

For further examples, let’s take the ratio of the fixed and variable parts in wages “50 to 50”, i.e. 30,000 = 15,000 (fixed part) + 15,000 (planned amount of the variable part).

IV. The impact of key performance indicators (KPIs) on the variable part of wages

We will determine key performance indicators for the required position, for example:

KPI1 - percentage of sales plan fulfillment;
KPI2 - percentage of completion of the work plan.

To establish to what extent each of the selected KPIs will influence the variable part, we determine the contribution (weight) for each of them ( table 4):

Table 4. The influence of the indicator on the variable part of wages (example)

As can be seen from table 4, both indicators influence the variable part of the salary equally. This means that achieving each of them is equally important.

Table 5. Indicator coefficients depending on the percentage of plan completion

To simplify further calculations, we will set the same coefficient values for KPI1 “fulfillment of the sales plan” and KPI2 “fulfillment of the work plan” ( table 5 will be suitable for calculating each of the indicators).

V. Possible scheme for calculating the variable part (PV) of wages

IF = Planned amount of variable part x (KPI1 weight x KPI1 coefficient + KPI2 weight x KPI2 coefficient)

Table 6. Checking all possible salary options for all possible KPI values
(with detailed explanation of some meanings)

KPI1/KPI2	<50%	51–89%	90–100%	>100%
<50%	5000 (option 4)	18 750	22 500	26 250
51–89%	18 750	22 500 (option 3)	26 250	30 000
90–100%	22 500	26 250	30 000 (option 1)	33 750
	26 250	30 000	33 750	37 500 (option 2)

Option 1

Fulfillment of sales plan 90–100% (KPI1 coefficient value = 1). Fulfillment of the work plan 90–100% (KPI2 coefficient value = 1). The variable part (PV) is 50% and equal to 15,000 rubles.

IF = 15,000 rub. x (1 x 50% + 1 x 50%) = 15,000 rub.

Monthly salary = 15,000 (fixed part) + 15,000 (variable part) = 30,000 rubles.

Conclusion : the employee receives a planned salary established according to the payroll standard.

Option 2

Fulfillment of the sales plan more than 100% (KPI1 coefficient value = 1.5).

Fulfillment of the work plan more than 100% (KPI2 coefficient value = 1.5).

IF = 15,000 rub. x (1.5 x 50% + 1.5 x 50%) = 22,500 rub.

Monthly salary = 15,000 (fixed part) + 22,500 (variable part) = 37,500 rubles.

Conclusion : the employee receives 7,500 rubles more. the planned salary, but also the implementation of the plan for each of the indicators is more than 100%.

Option 3

Fulfillment of sales plan 51–89% (KPI1 coefficient value = 0.5). Fulfillment of the work plan 51–89% (KPI2 coefficient value = 0.5).

IF = 15,000 rub. x (0.5 x 50% + 0.5 x 50%) = 7,500 rub.

Monthly salary = 15,000 (fixed part) + 7,500 (variable part) = 22,500 rubles.

Conclusion : the employee receives RUB 7,500 less. planned salary.

Option 4

Fulfillment of the sales plan is less than 50% (KPI1 coefficient value = 0). Fulfillment of the work plan is less than 50% (KPI2 coefficient value = 0).

IF = 15,000 rub. x (0 x 50% + 0 x 50%) = 0 rub.

Monthly salary = 15,000 (fixed part) + 0 (variable part) = 15,000 rubles.

Conclusion : the employee receives less by 15,000 rubles, since the variable part is equal to 0 due to the implementation of the plan for each indicator is less than 50%.

Calculate what amount of wages will be accrued if the implementation of the sales plan is 101%, and the implementation of the work plan is 49% (the correct answer is RUB 26,250)

Table 7. Completed form illustrating the methodology for creating a motivational scheme

№ p/p	Methodical procedure	Actual value
	Determine your position within the company structure	Sales Manager (Sales Department)
	Determine the key performance indicators (KPIs) for the position and the weight of each, based on the goals set for this level of the organizational structure	KPI1 - fulfillment of the sales plan. Weight - 50% KPI2 - implementation of the work plan. Weight - 50%
	Determine the procedure for calculating indicators	Fact: plan x 100%
	Determine the spread of the percentage of indicator completion, the value of the indicator coefficient and the meaning of its value	*Indicator completion percentage*	*Coefficient*




	Create a motivational formula that will be used to calculate wages. Determine the ratio of “fixed part”, “variable part” and “bonus” in wages	30 000 = 15 000 + 15 000
	Determine the formula for calculating the variable part of wages	IF = planned amount of the variable part x (weight KPI1 x coefficient KPI1 + weight KPI2 x coefficient KPI2)
	Perform a test: calculate all possible salary options for all possible KPI values	See above “Checking all possible salary options for all possible KPI values (with a detailed explanation of some values)” ( table 6)
	Complete the document “employee motivation scheme”

To stay afloat and make a profit, a business must operate with maximum efficiency. Just literally two decades ago, no one thought about how efficiently a particular enterprise, leader, manager or mechanic worked. The main thing is that it makes a profit. But now the approach has changed. You've probably heard about key performance indicators KPI. What is it and why is such a system needed? Let's look at this in this article.

KPI - what is it?

The performance assessment system appeared in Russia literally five years ago and is still rarely used anywhere. It is mainly used in IT and other modern industries. Let's take a look what is KPI and why this assessment system is needed.

KPI is a key indicator of personnel or enterprise performance

KPI stands for Key Performance Indicator, which translated into Russian means key performance indicator. This system is a set of several indicators that evaluate the performance of each employee at the enterprise. Knowing the KPIs for different groups, you can develop average productivity indicators and introduce a system of active motivation for productive employees.

Please note:efficiency is a relative indicator. It can be calculated both for a specific employee and for a department, workshop, or enterprise. Effectiveness can be expressed in quantitative results.

It is believed that the optimal key performance indicator for an employee should be no higher than 5. The KPI indicator can be divided into several types:

By cost item (how many resources were spent in monetary terms).
According to the productivity item (what percentage of capacity was loaded).
According to the article of efficiency or ratio of indicators (for example, the ratio of the amount of revenue to the amount of costs).
According to the final article (general quantitative indicator of productivity).

KPIs must be expressed in specific numbers. They shouldn't take a lot of time or resources. It is best to tie indicators to the overall performance of the company.

In practice, it often happens that most of the indicators are intertwined with each other. This allows for collaboration and assessment of a group of specialists or departments, motivating them and constantly achieving better results. Managers and supervisors at all levels must monitor the results, coordinating their actions for maximum efficiency.

KPI is divided into strategic and current

Types of KPIs

Enterprise performance indicators there are two types:

Strategic. Thanks to this data, you can find out how efficiently the enterprise operated over a certain period (the longer the time period, the more accurate the result). Thanks to strategic indicators, you can build action plans for the next period of time. Basically, strategic KPI shows the passage of cash flows, on the basis of which the profitability of production and sales can be calculated.
Operational. This data shows the real current situation in the company, division, department. Thanks to these values, it is possible to adapt the tasks or goals of the enterprise to dynamic conditions. Using this KPI indicator, you can evaluate the efficiency of logistics, production organization, sales of manufactured goods, etc.

Why is all this needed?

Using the KPI system, you can really evaluate and measure the rate of achievement of goals and tasks assigned to a specialist. By calculating all the values and indicators, you can evaluate the performance based on the achieved results and compare them with the planned ones. You can also calculate whether the planned indicators for a specialist/department/enterprise were calculated and compiled correctly. Numerical values help to correctly build strategy and tactics for the future, assessing the real result, not the imaginary one.

Please note:the key indicator is tied solely to the result. If some parameters do not affect it in any way, then they can be freely discarded.

KPI was developed based on two ideologies:

Target management of an organization or department (movement from goal to goal).
Full control over the goals set and their revision under certain conditions.

Thanks to KPI calculations, you can properly motivate your staff

The very idea of KPI allows not so much to evaluate personnel, but to draw up real plans and anticipate the results of the enterprise. It is beneficial for everyone: ordinary employees are engaged in routine, while striving to complete the tasks assigned to them, and not scatter themselves and delay the result. Criteria for assessing the performance of other personnel allow him to be motivated: the more tasks are completed, the higher the salary or bonus. Managers benefit when tasks are resolved on time and not scattered among employees. the enterprise benefits because it makes a profit and can make realistic plans for the future based on numerical values rather than empirical ones.

At the moment, the KPI system is considered the most accurate and profitable. It allows you to motivate and stimulate staff and evaluate the activities of managers at any level.