In the article we will tell you what key performance indicators (KPIs) are, how KPIs are calculated. We give detailed step by step algorithm to implement KPIs. We will tell you how to use this indicator to motivate staff. Bonus - a table with examples of KPI for a personnel officer.
From this article you will learn:
★ Staff motivation
Documents to help you develop KPIs for employees:
KPI (key performance indicators): what is it
KPI or Key Performance Indicators - key performance indicators. The term is sometimes translated as "key performance indicators", but this variant is less common. The Key Performance Indicators system is used by large corporations with a developed network of branches and a large staff.
KPI is an effective tool for an HR manager that will allow you to:
- Assess the performance of staff.
- Monitor how efficiency is maintained throughout the workflow.
- Manage workflow.
- Set specific goals for your staff.
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Types of key performance indicators
What is KPI in simple terms explains Alla Piskunova, HR Director of LGK-Logistics
3 main principles for developing KPIs
Principle #1. KPIs (Key Indicators) should be simple and easily measurable. So you can compare them and avoid errors in the calculations.
HR cheat sheet: how to check if you made a mistake when setting KPIs
Principle number 2. The cost of measurement should be lower than the benefit ofimplementation of KPI. Too complicated and expensive procedure for measuring indicators will negate all the advantages of switching to KPI.
Principle number 3. The measurement results should be used in the work. If you measure indicators only for the report and do not take any further steps, then the measurements are meaningless.
Questionnaire to help you perform KPI analysis
Pros and cons of KPIs
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If you think that there are more advantages for your organization, proceed to the calculation of indicators and the implementation of the system. Keep in mind that this will take time, effort and money. It takes the longest time to calculate key performance indicators in large companies with many employees. In this case, it is more rational to involve third-party experts or create a large working group of employees of the organization.
How to implement a system in a company: 7 steps
Stage 1. Find out what indicators affect profits. Determine who in the company influences these indicators. Establish which of the employees works at half strength and interferes with business processes.
Spot lazy careerists - host a coaching session
Stage 2. Select key indicators, that is, those that have the greatest impact on profit. Designate a person responsible for them. For each department, define 2-3 clear KPIs.
Stage 3. Explain to employees how the achievement of key indicators affects pay. Try to motivate them.
Checklist: how to create a comprehensive motivation system
Download checklist
Stage 4. Monitor whether the employee is meeting targets. If yes, go directly to Stage 6. If not - to Stage 5.
Stage 5. Find out the reasons why the targets are not being met. If the employee is not at fault, change the conditions. If an employee fails, assign duties to someone else. You can improve the performance of newcomers by mentoring.
Checklist: how to evaluate the work of a beginner
Stage 6. Constantly adjust the KPI system - remove obsolete indicators and add new ones.
Stage 7. Adjust the system of motivation. Explain to employees what KPI means, what parameters are set and how they will affect wages.
Recommendations for HR: how to communicate the need for change to employees
Howcalculate employee KPI
There is no single standard formula for calculating. Each company has its own specifics and its own set of performance indicators. There is general algorithm and base formula.
AlgorithmKPI calculation
Step 1. Choose from 3 to 5 performance metrics. For example, metrics for an online store salesperson:
- New customers.
- Buyers who have reordered.
- positive recommendations.
Step 2 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 second order - 0.25.
- Positive recommendations - 0.25.
Step 3 Collect and analyze data on selected indicators during the month. Use different evaluation methods to see if subordinates are doing well.
Comparison of different assessment methods
Download full table
Step 4 Calculate KPI using the formula:
KPI index \u003d Indicator weight * Actual / Plan
Fact - actual result
Plan - planned result.
Step 5 Calculate salary based on KPI index.
KPI (key performance indicators): examples
In the state of a large store household appliances 12 sales consultants. The HR manager of the store evaluates the performance of the sellers according to the following criteria:
- criterion #1- the ratio of the number of buyers with whom the seller communicated with the number of those who subsequently made a purchase (in percent);
- criterion #2- average check of the buyer;
- criterion #3- the percentage of overfulfillment of the plan.
This minimum set of criteria already allows you to calculate the performance of the seller and evaluate its effectiveness. The HR manager can monitor the implementation of KPIs and maintaining efficiency throughout the day or month. It turns out that the indicators allow you to manage the workflow and set specific tasks in front of the staff.
Example: how to calculate KPI
- In the store, the manager sets the task - to sell Philipps coffee makers.
- The manager motivates employees to complete the task - to sell these particular coffee makers.
- Another criterion is added to the KPI of employees: the percentage of overfulfillment of the sales plan for Philipps coffee makers. For example, for each Philipps coffee maker sold over plan, the seller receives 3% of its value.
- The staff receives additional financial incentives for coffee makers sold in excess of the plan.
In practice, the average number of indicators is 5-8 KPIs. The examples show that the minimum set of criteria for the calculation was initially laid down. You need to develop more. Keep in mind that introducing more than 10 key indicators is also undesirable - you will get confused in the calculations, make the system voluminous and incomprehensible.
KPIs are Key Performance Indicators. The indicators are different. The key ones are those that affect the profit. The indicator itself can change quite a bit, but the profit can be noticeable.
For example, the owner of a barbershop calculated that if he increased the average bill of a barber by 100 rubles, the annual revenue would increase by 300,000 rubles. If costs remain the same, profits will also increase. Average check barber for a barbershop is a key indicator.
Why KPIs are needed
The task of KPI is to make life easier for the head of the enterprise, the owner of the business and ordinary employees. I implemented the KPI system when our team grew from two people to 22. Too much time was spent on the decision operational tasks, began to miss him for direct directorial duties. Thanks to KPI, I delegated authority and responsibility to the level of department heads and ordinary employees, but nevertheless I control everything.
When KPIs are not useful, the point is that the company is not working with them correctly. This is exactly what happened to the co-owners of the cosmetology clinic. They worked with the sales funnel, collected indicators, but did not know what to do with them next. And when we figured out which indicators affect and who should be responsible for each, in three months they made the business profitable from unprofitable.
How to work with KPIs
We implement KPI
The authors of books on management portray the implementation of KPI as a multi-stage procedure: to paint the organizational structure of the company, financial structure, business processes. With this approach, the process threatens to drag on for at least six months. Big business this is possibly feasible. But small businesses cannot afford to stagnate for so long.
But there is a simpler fast way. You will need to determine which metrics have the biggest impact on profits and who in the company influences those metrics. There is no universal set of indicators. For each business they are individual. For sales via the Internet, the key indicators are the cost per click and the conversion of the site. For a call center - the duration of the agent's conversations.
We singled out an indicator that affects profit, understood who it depends on, and appointed a responsible person.
We motivate staff
The next step is to create a personnel motivation system. A popular option, when an employee's bonus is tied to the overall result of a company or division, does not work well. The employee is responsible for own result. But how will it affect the results of colleagues? Therefore, you need to know what a particular subordinate influences and is responsible for, and tie the bonuses of each to his individual result.
It must be taken into account whether the employee directly or indirectly affects financial results. Our team includes an editorial team that produces content for the site. Content works to increase demand, but indirectly. Revision is the cost center. Therefore, it makes no sense to tie the motivation of the editor-in-chief to profit. But the sales department has a plan for the number of calls and the conversion of applications into sales. They directly affect revenue.
A sign of a good KPI motivation system is when an employee sees in the middle of the month how much has already been done and what needs to be done to get as much as he wants.
Drawing conclusions based on KPI
Employees don't always reach their targets. And not always their own fault. When you see that something is going wrong, do not rush to shoot the staff in the corridor. First, figure out what is the reason. If the employee is not guilty, then it is necessary to help him and create conditions under which he can achieve the target indicators.
If an employee does not fulfill the plan from month to month and the point is precisely in him, all that remains is to replace him with someone who will cope. Neither charm nor a good attitude of management will save here. Against indicators, these factors are powerless.
We audit the KPI system
Implementing and setting up a KPI system is not all. You need to understand: the system that you have implemented is not once and for all. In business, things are constantly changing. With each change, the KPI system may need to be adjusted. You have to be ready for this.
When you need to adjust the KPI system, figure out which indicators are no longer relevant, which ones need to be replaced, and who should be responsible for the new indicators. Correcting a system is easier than building one from scratch.
The motivation system also needs to be adjusted. It is best to do this with the involvement of employees. Each employee has personal goals. And the motivation system works best when both you and the employee understand what he wants and what he must do for the company in order to realize his personal goals. If an employee wants to earn 150 thousand a month, let his salary be 75, and the rest - bonuses. So he will understand that he is worth 75 thousand, but he can earn 150 if he is a successful professional.
Remember
- Understand what indicators affect profits and who in the company influences them.
- Select key indicators that have the strongest impact on profit, and assign responsibility for them. Set 2-3 clear KPIs for each department.
- Motivate employees by their key performance indicators.
- Monitor whether employees are meeting targets.
- When the indicators are not achieved, figure out what is the reason. If an employee needs help, help. If that's the case, replace it with another one.
- Constantly audit the KPI system and motivation. Make adjustments when you realize the system needs them.
Today, many companies are trying to get their employees to work according to the KPI system ( Key Performance Indicators- key performance indicators). What are the monetary pros and cons of KPIs?
The goal is one, the tasks are different
KPI is a scorecard by which employers evaluate their employees. It has much in common with the usual planned approach. With one major difference: the performance of each individual employee is tied to the overall KPI of the entire company (such as profit, profitability or capitalization). The purpose of the system is to make sure that the actions of employees from different departments are not contradictory and do not slow down the work of specialists from other departments. Everyone contributes to the common cause, works to achieve their goals and as a result receives bonuses for their implementation.
KPI work allows specialists to better understand what they need to do in order to be effective. By "efficiency" is meant not only the amount of work done per unit of time, but also the benefits received by the company from the activities of the employee.
In each department, the company's general KPIs are "split" into smaller ones - personal ones. There should not be many key indicators for each. Three to five well-defined KPIs are enough. The main thing is that each of them can be easily measured. An example of the indicators of one of the sales managers: "sales volume is not less than ...", "the number of new customers is not less than ...", "the size of the average contract for a client is within ...", "the level of knowledge of English is not lower than .. .".
Measure of result
In large Western companies, where everything is spelled out and detailed to the maximum, work on the KPI system is a good option for employees. The specialist understands how much, for what and when he will receive in excess of the salary. And what is included in his salary. Clear, documented information about what the employer expects from you makes the job very easy. Each employee has personal tasks and deadlines for their implementation, and the company regularly monitors his work with the help of evaluation.
In many companies, in addition to monthly monitoring, the results of all KPIs are taken as the basis for an annual assessment of staff performance. After the annual assessment, the personnel directorate compiles lists of the most promising specialists to enroll them in personnel reserve companies and promotions.
But if the “head office” helps foreigners in developing goals, then domestic employers, in order to determine the goals and objectives of their specialists, act in different ways. Some invite consultants, others manage on their own: the goals are prescribed by the personnel directorate. Since neither the first nor the second features of the work of each particular specialist are known, it happens that the indicators are formulated inaccurately.
“At the exit”, the employee is faced with the fact that his KPIs turn out to be impossible. Or, on the contrary, such a system allows the specialist to find legitimate “loopholes” so as not to strain especially. The IT director of an industrial holding, Alexander, recalls that before the introduction of KPI, his subordinate "system administrators" solved user problems "on the first call." Now, when calls like “Help! Computer froze!" they react "bourgeois". They demand that they write a request with the essence of the problem and pass it on to the senior “sysadmin”. Then it is queued for execution. “Yes, I could do it in three minutes, but it will not be recorded anywhere. What do I care about the difficulties of other employees and departments? I will be evaluated according to KPI, the achievement of which I am motivated.”
Plus bonus
The described system is good for employees whose work results most affect the financial and economic performance of the enterprise. In trading companies, these are, first of all, top managers and sales managers, in recruiting offices - recruitment consultants.
Communications manager Elena says that in her company, the achievement of goals by an employee also affects custom size annual review wages: the higher the score, the higher the percentage of wage growth. “The managers' annual bonus consists of two variables, which depend on the results of meeting individual goals and on the achievement of company performance indicators. This approach encourages better performance of functional duties.
For employees from different departments, the size of the bonus, which is affected by KPI, can range from 20% to 100% of salary.
At the same time, the formula for accruing the bonus itself is quite complicated: it takes into account the number of KPIs, the coefficient of completion of each of them, as well as its “weight”, that is, the coefficient of influence (the more important the indicator for the company, the higher the “weight”).
If the KPI scale is compiled incorrectly, there will be little result from it. For example, if there are too many KPIs, the impact of each on the amount of the total bonus will be small. Economist Lyudmila says that at first she had about 20 KPIs, but a year later they were reduced to five. “Most of the indicators accounted for a small share of the bonus, and for me the loss of 5% in the bonus was not of particular importance. A 20% KPI weight motivates much more effectively,” she admits.
System Disadvantages
One of the main disadvantages of KPI is that if a department performs poorly, all of its employees can lose salaries at once. After all, personal KPIs are associated with key indicators of the entire department. If the planned indicators are systematically not achieved, the employee may be demoted. Therefore, KPI forces you to always be in shape. Who does not withstand this rhythm, he leaves himself.
The disadvantages of working in the system of key indicators include the fact that not all employees can directly influence the company's strategic KPIs. If the bonus depends on net profit and sales, it is unlikely that sitting in the office, a secretary or an economist will be able to influence it.
Very often, in Ukrainian companies, the KPI motivation system is “one-sided”: everything that an employee overfulfills is just a job well done, for which he receives a salary, and for underfulfillment he is deprived of some part of his salary. Or another option: a system of key indicators is being introduced, but there is no link to the employee motivation program.
work technical specialists(accountants, engineers, programmers) are easier to describe with a job description. And it is very difficult to find a fair “line” for them.
And further. Keep in mind that planning and KPI calculations take time. Director of logistics Department transport company Roman is dissatisfied with the fact that the introduction of this system turned out to be additional hours of work for him. “Now, at the end of each month, I have to spend time setting and calculating KPIs for all my subordinates. All indicators have to be coordinated with the HR Directorate. At the same time, they don’t pay me extra for calculating the size of bonuses,” he complains.
The transition to a KPI system is usually accompanied by unrest among employees: some innovations are “quietly sabotaged”, others do not completely accept it and leave the company. It is difficult to immediately change your habits, the order in which functions are performed, and get used to the new conditions of remuneration.
Andrey, a former regional manager of a confectionery company, recalls that when he was given the goal of “selling not a lot of cheap sweets, but a lot of expensive ones,” he had to change a lot in his work. Misunderstanding of innovation by the team and partners interfered. While he was retraining his subordinates, some of the people left. And when he negotiated with retail chains, based on the new goals of the company, he was forced to agree to more stringent conditions.
Recently, the scope of application for the procedure for assessing the productivity of employees has been expanded - it has become used not only for top managers. Evaluation of key performance indicators (KPI employees) has ceased to be a distinctive feature foreign companies, case studies can be found in different industries and for a wide variety of categories of employees from marketers and business analysts to financiers and economists.
Managers are assessed by competencies by Aleksey Shirokopoyas, Expert in the development and assessment of managerial competencies. Developer of educational and game programs. Project founder. 8-926-210-84-19. [email protected]
Typically, KPI-based motivation systems measure key performance indicators (KPIs of employees) because they are based on SMART criteria. Therefore, such motivation systems are convenient for applying to employees employed in profit centers, where there are objective, and most importantly, measurable criteria: sales volumes, financial key performance indicators (KPI employees), deadlines, etc., and work based on SMART -goals and objectives, has a specific result. However, not all types of work can have such goals and objectives. For example, how to evaluate process activities (which do not imply the achievement of a specific result), where there are no SMART tasks and those who are "remote" from the economic and operational processes of the company - "clerks": a secretary, a call center operator, a system administrator of a support service, inspector for personnel office work, accountant, personnel officer, etc.? These workers (back office) perform routine functions, and, unlike the work of managers, the work of "clerks" is difficult to evaluate. How to assess the quality side of the work of this category of personnel?
Key performance indicators (KPI employees) - what should I pay attention to?
AT this case performance needs to be assessed. AT to a large extent it's only qualitative assessment, and, as is known, a qualitative assessment is expert assessment. The method proposed in the article helps to evaluate the work from this side.
Each leader appreciates in his employees the ability to perform work quickly and efficiently. And laments when these requirements are not met. Often he has to put up with this and hope that he will someday find a better employee, but everything repeats with a new employee. Why is this happening? To answer this question, let's delve into the nature of the parameters under consideration and their relationship.
What is "working speed"? From physics, we know that speed is the ratio of the amount of work to the time it takes to complete it. This means that the manager evaluates his employee according to three parameters: the amount of work, the time it takes to complete it, and the quality of the work.
Thus, any activity can be evaluated by three key performance indicators (KPI employees), let's call them the "efficiency triad" (see Appendix):
- Number of work- production rate, share of excess production, additional assignments in excess of the job description, etc.
- Quality of work– technology compliance, error-free, no customer complaints, defects, etc.
- Work completion time- compliance with the set deadline, early implementation, exceeding deadlines, etc.
Moreover, each leader can decide for himself what kind of work he evaluates:
- the number of operations per job function (for example, the function of a lawyer is the preparation of contracts, and the number of contracts is the number of operations in this function);
- the scope of functions in excess of the standard, which is determined by the job description (for example, a lawyer according to the standard must process at least 100 contracts monthly);
- solution of additional tasks, instructions of the head in excess official functions(projects, one-time tasks, etc.).
However, it is not so easy to "reconcile" the speed of work and quality. Indeed, one can be convinced that it is easy to implement only any two parameters of the “triad” and it is difficult to make sure that all tasks are completed on time, efficiently and in the right amount. It is difficult to balance such a system - and this is the responsibility of the leader.
Most often, the work is done efficiently and on time, but perhaps this will not be the entire amount of work. Often an employee manages to complete all tasks, but either with a decrease in the quality of some of them, or with violation of deadlines.
And you can completely forget about the expectations of early completion of all tasks while maintaining excellent quality to the authorities. Not only that, managers are accustomed to seeing an employee's ability to complete an increased volume of tasks ahead of schedule and with superior quality as signs of underutilization rather than talent. Isn't this the reason for the modern personnel trend of "talent search"? The employers' dream of so-called talent is the dream of employees who are able to sustainably fulfill these three criteria to the fullest. Agree, there are not so many of them.
In itself, accounting for tasks and functions is a creative matter. They have different significance, which means they should be with different weights. In addition, all key performance indicators (KPIs of employees) can have their own weight in the system (see Table 1), which is determined by the manager based on current tasks, work characteristics, etc., thereby highlighting what is most important. For example, timing is important for the recruitment department, and quality is important for the accounting department.
The final grade is calculated as a weighted average of grades. This is the sum of the products of the assessment for each of the key performance indicators (KPI employees) and its weight:
35% x 3 + 40% x 4 + 25% x 1 = 1.05 +1.6 + 0.25 = 2.9 (with a maximum of 4 points)
or
35% x 75% + 40% x 100% + 25% x 25% = 26.25% + 40% + 6.25% = 72.5%
The second option for calculating the final score of this technique is given in the Appendix.
It is worth repeating: naturally, such assessments are subjective. If the amount of work can be determined, and the timing can be measured, then the quality (in the absence of specialized measurements, for example, the number of customer complaints or the results of a technology assessment " Mystery shopper”) is judged subjectively.
Key performance indicators (KPI employees) - what increases the objectivity of the methodology?
Firstly, evaluation criteria are formulated in a special way. This was not done by chance: after a month, the manager cannot always remember in detail which deadlines were violated and how many cases the employee completed with proper quality. However, he developed a general, holistic picture of the work of a subordinate, written in “large strokes”. With the same "large strokes" he is invited to draw a "portrait of efficiency" of the employee.
Secondly, the objectivity of the methodology increases the practice of its application. More than ten years of experience in using the methodology shows that the effectiveness is high when it is filled out by both the manager and the employee himself. They then discuss their results, and this makes a lot of sense:
- the employee remembers his tasks better, and the manager can forget something, confuse, because he has several subordinates;
- the manager has his own view on quality issues, while the employee tends to forgive himself for minor “sins”;
- the manager is often inclined to consider the violation of deadlines as low quality of work, confusing these concepts, and the employee may be proud of the quality of the work, while neglecting the value of meeting deadlines or volume.
Thirdly, by virtue of these effects, both sides strive to reach an agreement, which, as the satirists have formulated, is "the product of non-resistance of the parties." Since the main practical application of this method is the ability to regulate the monthly or quarterly bonus(see Table 2), it is precisely this circumstance that makes the technique valuable, since agreement leads to justice, and this is more important than the accuracy of measurements, and motivates more than mathematically accurate and sometimes impersonal scores.
Fourth, the objectivity of the methodology increases due to the “scale effect” if it is applied in all divisions of the company. This effect makes it possible to compare the result with objective data, and this is another powerful verification criterion and a source for correcting results. So, a senior manager, having received a complete picture of the assessments for the company (a set of performance assessments of managers employed in profit centers, and assessments of the effectiveness of employees of the company's cost centers), can compare it with financial and other objective key performance indicators of an employee (KPI of employees) of the organization's efficiency in in general. It may turn out that the overall assessment of all employees according to the Efficiency Triad methodology will be overestimated in comparison with the objective key performance indicators (KPIs of employees) of the organization. Then the employer has the right to introduce a correction in the payment of bonuses by his authority.
Table 2 shows that employee Danilin had a vacation in February, and in accordance with the company's policy, no bonus was accrued during this time. Shirokova has a tendency to increase efficiency. For other workers, efficiency has declined.
Please note: the implementation of even 50% of the plan can be rewarded, especially since at the same time three key performance indicators (KPIs of employees) of the “triad” are difficult to achieve, and two out of three can be high due to the resource of the third. In this regard, any number less than 50% is also a definite achievement.
Key performance indicators (KPI employees) - systematic application of the method
The method can be applied in a cascade (when higher-ranking employees evaluate downstream ones), across the entire organization and regardless of whether employees have “objective key performance indicators (KPIs))” or not. The cascading application of the method gives the assessment a systematic and additional objectivity, especially when it comes to awarding bonuses.
And if, moreover, the method is applied for a long time, then it acquires a number of useful properties. Let's consider them.
- The higher manager, evaluating the lower one, at the same time evaluates the activities of his unit: after all, the results of the work of the manager are made up of both his personal efforts and the efforts of his subordinates. The advantage of this method is that the superior gets the opportunity to compare data and draw conclusions about the effectiveness of the manager and his subordinates, the unit as a whole, and even the management style.
So, the figure shows that the subordinates of the head of department 1 have different skills (this is clearly shown by the “mini-diagrams”): the engineer works slowly, but with high quality, the specialist works quickly, but not with high quality. The superior manager evaluates the work of the chief, and hence the entire department 1 as follows: the department solves a large amount of tasks with average quality and with some violation of deadlines. BUT general analysis the work of the entire department shows that the manager has an additional amount of tasks - in addition to those that his subordinates solve, and this may indicate problems with delegation. In addition, the activities of the boss somehow "worsen" the quality of the engineer's work and "slow down" the work of the specialist. As a result, the terms and quality of the work of the department are not above average. The head of the head of department 1, perhaps, should think about his effectiveness as a manager.
The head of department 2 works quickly, but gives out fewer cases than his subordinate. Leading specialist slowly performs a large amount of work. This means that this boss takes on those tasks that can be solved quickly, while the quality of his work cannot be called low. Obviously, everything is in order here with delegation, quality of work and meeting deadlines, and hence with responsibility.
- Analysis of performance dynamics over time. You can see if the efficiency of the worker grows during probationary period or decrease over the years. The most illustrative picture is created by comparing the dynamics of efficiency assessments with other factors. So, in addition to the comparison of the level of efficiency with the vacation period shown in Table 2, one can see signs of an upcoming “burnout”, which are especially noticeable against the background of unchanged motivation, a drop or increase in efficiency associated with a change in leadership, the impact of corporate news on the productivity of employees or departments, and etc.
- Analysis of the work style of an individual employee: a comparison of different parameters of the "triad" will show the zones of its effectiveness and inefficiency. For example, one always works quickly, but not with sufficient quality, while the other solves only part of the tasks quickly and efficiently. From this, recommendations are born on the use of workers: the first one should be put in the area where speed is needed, and in relation to the second, one should also understand his motivation and interests in solving specific problems.
- Comparison of the ratings of employees allows you to judge their usefulness for the organization, and comparing the ratings of the heads of departments - to make a rating of departments and managers. So, at the end of the year, you can calculate the average or total annual estimates and determine who is more efficient and who is less and due to what factors: who is the “fastest” worker, who is the most “thorough”, who at the same time performs more tasks. At the same time, the content of labor and the employee's belonging to one or another unit do not play a role.
So, despite the obvious subjectivity of the Efficiency Triad method, its useful properties are obvious:
- the method is applicable to all positions, regardless of whether they are managerial or executive;
- employee performance evaluations can be accumulated and compared;
- accumulating estimates, you can track the dynamics of work individual employees and even units, monitor the onset of "burnout", draw conclusions about their strengths and weaknesses;
- comparing the assessments of subordinates with the assessments of the manager, one can draw conclusions about the management style, identify areas of inefficiency in departments;
- due to the standard approach, the methodology is easily implemented in document management systems (Lotus Notes, MS Outlook, etc.) and ERP (based on Oracle, SAP, Microsoft, etc.), which are widely used in the corporate world;
- the method can become an addition or a common format for existing systems for assessing the effectiveness and efficiency of MVO, key performance indicators (KPI employees), bring their data to a single view.
And most importantly, this is not just another “precise tool”, but a way to mediate a dialogue between a manager and a subordinate on the issue of remuneration. After all, nothing reduces employee motivation as much as the lack of recognition and understanding of development paths. In such a dialogue, the employee can understand what his boss is dissatisfied with and what he pays attention to. In other words, the method gives motivation a very important managerial effect - feedback subordinate about his work.
should be calculated to diagnose corporate problems. Key performance indicators of an employee allow you to take timely measures to improve the efficiency of his work.
Publication author
In the article, we will look at examples of KPIs, the features of calculating a key identifier for various specialists, as well as best examples its implementation by domestic enterprises.
You will learn:
- How KPI is calculated for different employees.
- How to develop a KPI statement.
- How to calculate KPI step by step.
- How to calculate marketing KPI.
- What can be the KPI of the chief accountant.
- What KPIs can be applied to senior managers.
- How KPI can be calculated in Excel.
- Which companies have successfully implemented KPIs.
Instructions for calculating KPI for different employees
The methodology for developing a KPI ID includes several sequential steps:
- Preparatory activities: creation working group, analysis.
- Formation of assessment methods and methods: development of a model of a system of performance indicators, the sequence of its construction, creation and testing of KPI identifiers, preparation of modernized management methods.
- Implementation: merging the KPI accounting system with the existing one software familiarization of employees with the methodology for calculating performance indicators.
- The stage of using the KPI calculation system: monitoring performance, adjusting indicators.
Two main methods are used to develop KPIs: process and functional. How to calculate the premium for each of them, you will learn from the table published below.
The process method is based on the alignment of identifiers, taking into account the main business processes of the enterprise. The functional method is based on the analysis of the structure of the company and the service goals of its divisions.
An example of KPI for managers that will make them go all out
If a salesperson is reluctant to meet their KPIs, then those performance metrics should be abandoned. The editors of the "Commercial Director" proposes to set KPIs that motivate managers to sell and make a profit.
Table. KPI - calculation examples using process and functional methods
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process |
Functional |
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Sales process. Goals: increase in the number of buyers (KPI - the number of attracted buyers); increase in repeat purchases among existing customers (KPI - the number of repeat purchases). |
The enterprise level is a plan, a strategic development model. Examples of KPIs:
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Inventory process. Purpose: increase in inventory turnover (KPI - increase in inventory turnover of raw materials and finished products compared to the previous period). |
Department level - provisions on the structural unit, regulations. Examples of KPIs:
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Customer Satisfaction Process. Goals: decrease in the number of returns (KPI - the percentage of the decrease in the number of purchase returns); reduction of the time interval for customer service (KPI - time spent on service). |
Professionalism of specialists - job descriptions. Examples of KPIs:
|
|
Personnel process. Purpose: to increase the quality level of recruitment (KPI - percentage of closed vacancies). |
Table. KPI for sales specialist: examples (KPI matrix)
|
Index |
Base |
Norm |
Target |
Fact |
Runlevel |
KPI index |
|
|
Sales volume (c.u.) |
|||||||
|
Average income from one buyer (c.u.) |
|||||||
|
Number of marks "I liked the service" (pcs.) |
|||||||
|
Share of overdue receivables (%) |
|||||||
|
Final KPI |
Based on the data presented in the table, we can conclude that the sales specialist exceeded the target by 6.1%, and therefore, he should receive a bonus.
The table below provides an example of a methodology for calculating "Average Revenue Per Customer". In the summary from the previous example, this indicator is also included in the KPI calculation form for the sales specialist.
Table. Average revenue per customer for a sales professional
The calculation of performance indicators for supporting departments is a rather complicated procedure. Consider below examples for some supporting positions.
Table. Examples of KPIs for other positions
How to calculate KPI: step by step instructions
Stage 1. Definition of three employee KPIs:
- the number of users attracted to the Internet portal;
- the number of repeat purchases from existing customers;
- the number of recommendations and positive reviews that were published after the transaction on the site or on the pages social networks companies.
Stage 2. Calculation of the weight of each identifier (the total weight is 1, the calculation of the proportions of indicators is carried out depending on their priority). AT this example we get:
- the number of new buyers - 0.5;
- the number of repeated purchases - 0.25;
- consumer reviews - 0.25.
Stage 3. Analysis of statistics for each key indicator for the past six months and the formation of a plan:
|
Baseline (monthly average) |
Planned indicator |
||
|
Increase in new customers |
160 new clients |
20% increase, i.e. 192 new customers |
|
|
Percentage of buyers who made a repeat purchase |
30 repeat purchases |
20% increase, i.e. 42 repeat purchases |
|
|
Percentage of buyers who left a positive review or recommendation on the site |
20% increase or 42 positive reviews |
Stage 4. An example of KPI calculation is presented in the table:
Formula for calculating key indicators:
KPI Index = KPI Weight * Fact / Goal
The goal is the KPI value planned by the marketing specialist. Fact is actual data.
In the above example, it can be seen that the employee did not achieve his goals. At the same time, based on the overall KPI value (113.7%), we can talk about a high result achieved.
Stage 5. Payroll.
The salary fund of the marketer in this example is $800. In this amount, $560 is the fixed part and $240 is the variable part. Full salary is paid in case of achievement of a result with an index of 1 or 100%. Since in our example a KPI of 113.7% was scored, which is an overfulfillment of the plan, the marketing specialist will receive a salary with a bonus.
Result:
560 $ + 240 $ + 32,88 $ = 832,88 $.
At the same time, if the KPI value is less than 1 or 99%, then the size of the bonus is reduced.
A table with an example of KPI demonstrates the problematic points in the work of a marketing specialist. Insufficiently high indicators may be the result of an incorrectly chosen strategy to increase customer loyalty to the company. Such data allows you to control the work of a specialist. If the state of affairs does not change in the following periods, then it is necessary to revise the system of requirements for KPI.
By constantly following such a policy, you can get a complete picture of KPI for sales, production process etc. This will allow you to understand the procedure for calculating and implementing key performance indicators.
KPI calculation may vary depending on the planned indicators. It is permissible to supplement the regulation with new identifiers: data on the number of solved / unsolved tasks, a system of penalties for low performance on key points in the plan.
For example, if the plan is fulfilled by less than 70%, the employee may be deprived of bonuses.
Here is an example of calculating the bonus component of the salary for an employee who has fulfilled the sales plan:
KPI calculation for a marketer: an example
Before you start calculating a key performance identifier for an Internet marketing specialist, you need to clearly define the scope of his responsibilities, and then set the employee's KPI. KPI formula can only be used when it is appropriate to quantify the outcome measures that the marketer is specifically responsible for.
For example, let's imagine 5 KPI indicators of a specialist:
- increase in the target consumer group;
- attracting new customers, increasing the number of customers;
- increasing the level of customer loyalty (taking into account the number of reviews, recommendations, etc.);
- increase in the number of repeat purchases;
- increasing company awareness and increasing customer loyalty.
To achieve targets, the marketer uses material and labor resources companies (interacts with software and design developers, analysts and copywriters). A mandatory procedure in this process is budget control. Accurate cost accounting will help to establish the ratio of the results obtained by the specialist and the material resources used by him.
Actions required to implement a system of key performance indicators:
- determine the main goal of the company and the indicators that need to be obtained for a given period of time;
- assign tasks to marketing specialists;
- divide the marketer's salary into fixed and variable components (for example, 75% is a fixed component, and 25% is a bonus for achieving certain targets in the KPI map);
- identify key performance identifiers to evaluate the work of a specialist;
- form a plan and determine the optimal KPI indicators (we will analyze how to do this using examples in the next part of the article).
If necessary, you can use the functionality of the office Excel programs or implement a CMS that will ensure the competent organization of the procedure for setting goals, fast data entry and effective control over the implementation of KPIs.
Practitioner tells
Examples of KPIs that made ordinary staff look for the best way to get the job done
Maria Ponomarenko,
director of the Moscow firm Smart Personal
For some time I worked in a team that managed an enterprise in the field of black metal rolling. The clients of our company were construction and manufacturing companies that needed timely delivery of goods. To meet the needs of customers, we formed a fleet of vehicles that could transport rolled products up to 12 meters long. If a large number of applications were received and our cars were not enough, we attracted cars from third-party contractors. We had to solve two problems: to ensure fast delivery of products at a convenient time for the customer and to achieve maximum loading of each vehicle.
What was done. To motivate dispatchers, we have developed a system of bonuses depending on two KPIs (for each of the indicated logistics tasks).
- The indicator of the transfer of delivery to other days. If our capabilities did not allow delivery on time, with the consent of the customer, it was postponed to another time approved by the customer. The maximum number of transfers of deliveries per dispatcher should not exceed 3%. With an increase in this indicator, the size of the employee's bonus decreased. And vice versa, if the dispatcher could avoid transfers, the amount of his bonus increased (see data in Table 1).
- Average number of deliveries per vehicle (total number of deliveries that were made in 1 day divided by the number of cars used). On average, one car made 1.8 trips per day. It was decided to increase this figure to 2 flights. It also provided for an increase and decrease in the indicator (see table 2).
Bonuses were calculated according to the formula: S x K1 x K2, where S is a fixed amount (for example, 10,000 rubles), K1 is the delivery transfer coefficient, K2 is an indicator of the efficiency of using vehicles. Depending on the figures achieved, the dispatcher could earn from 12 to 180% of bonuses, which ranged from 1,200 to 18,000 rubles.
KPI indicators turned out to be mutually exclusive. For example, it was possible to increase the number of deliveries by one car, but as a result it would be inconvenient for the buyer to accept the products. In order to achieve an increase in both indicators, the dispatcher had to take into account a number of factors (customer requests for delivery time, delivery region, vehicle load capacity, compatibility of delivery of various types of rolled products on one vehicle).
In parallel with the introduction of the KPI system for dispatchers, it was necessary to provide more efficient work adjacent departments (for example, a warehouse complex).
Result. The KPI system was launched in March, and already in October, the average daily delivery efficiency ID rose from 1.8 to 2.3. Thus, in just 7 months of work using the KPI system, the efficiency indicator for the operation of the fleet increased by 28%. At the same time, we managed to reduce the allowable number of delivery transfers by 6 (!) times - from 3% to 0.5%.
In the general part of the provision on KPI follows:
- clarify the target orientation of the regulation (example wording: “the KPI regulation determines the procedure for the formation of performance indicators, their monitoring in the course of activities and control based on the results of reporting periods”);
- identify employees for whom the KPI regulation is mandatory;
- set the goals of the KPI matrix (example: reducing the long-term plans of the enterprise and the annual tasks of its specialists to one denominator);
- provide a list of key terms with their definitions;
- present the principles on which the KPI system is based (example: decomposition, balance, compliance with SMART rules).
In the main part of the provision on KPI, it is also necessary to describe the procedure for the formation and coordination of performance indicators. It is necessary to disclose the criteria that they must meet (example: measurable, achievable, specific, etc.). Our example, available for download below, will help you create such a document for your company.
KPI of individual specialists is better to issue a special document called a scorecard. It is coordinated with the CEO, senior managers of the personnel and financial department and signed by a specific employee.
In the regulation on KPI, it is also necessary to determine the validity period of the card (example: calendar year) and attach an agreed form to it.
Table. KPI map for financial service specialists
|
№ |
Type of KPI |
KPI performance levels |
KPI weight, % |
KPI performance level |
||
|
Lower level |
Target level |
Upper level |
||||
|
Speed of turnover of receivables and payables |
Growth in the turnover ratio from 0 to 1% compared to the base year |
Growth in the turnover ratio from 1 to 3% compared to the base year |
Growth of the turnover ratio over 3% compared to the base year |
|||
|
Percentage deviation of actual indicators from planned ones that were not warned using the data monitoring system, % |
||||||
|
Decrease in operating expenses per function by industry relative to the previous year, % |
||||||
|
Free cash flow, million rubles |
||||||
The regulation on KPI should contain requirements for the procedure for developing and approving maps of key identifiers. It is necessary to indicate those responsible for the formation of KPI maps, their approval and acceptance. It is necessary to describe the unified requirements for the coefficients and format of such a map. For example, it should include identifiers for calculating the performance of indicators (continuous, discrete, cutoff) and recommendations on the measurement methodology (quantitative and qualitative). In the provision for each KPI identifier, it is important to indicate its target value, weight, type, as well as the upper and lower levels. In addition, you need to take into account that the total weight of all indicators in the KPI map should be 100%.
The cut-off KPI is indicated only as a last resort, as it resets the rest of the data. For example, the cut-off indicator for the chief engineer could be any case of an accident at work that took place in reporting period.
The KPI regulation should describe the procedure for monitoring the performance of indicators, which will help to quickly identify and eliminate the causes of significant deviations of KPI identifiers from target values.
In the provision on key performance indicators, the frequency of implementation of control measures (for example, once a quarter) and the employees responsible for their implementation should also be noted.
For possible (internal or external) changes in the conditions for the implementation of economic and economic activities, the procedure for adjusting KPIs should be described. The reason for their use, for example, may be changes in official duties worker. Here you also need to write down a list of persons who can initiate the use of adjustments, as well as the parameters by which such adjustments can be made (for example, changing the number and composition of identifiers, targets, the level of their achievement, etc.).
The KPI regulation also includes the stages by which the achievement of key indicators will be assessed (for example, self-assessment by the owner of the KPI card, the data of which must be agreed with the management, the personnel department and the financial service).
The provision on key indicators should also describe the methodology for their calculation. The level of the premium specialist and his motivation to achieve the target standards depend on her choice. For example, in a KPI schedule, you can specify that the weighted map execution ID is obtained by multiplying the indicator value by its weight.
KPI of the chief accountant: an example of assessing the workload of the department
The management of the enterprise often considers accounting to be a costly unit. Chief accountants regularly complain about the high workload of the department and ask to increase its staff. How can a manager find out if the accountants are really overwhelmed by the current work or if the problem lies in the low efficiency of the work organization? How to define KPI for accountants?
A qualified chief accountant must have the tools to objectively assess the level of workload of specialists in his department. There may be situations when some employees need to increase the range of responsibilities, while others, on the contrary, need to narrow the scope of tasks. Such measures will help to ensure a more even distribution of the workload on specialists and increase labor productivity. Despite the fact that the accounting department is considered as an auxiliary one, its specialists often contribute not only to the preservation, but also to the increase in the volume of financial resources.
KPI identifiers are used to evaluate the work of one accountant or an entire department. They include a number of indicators:
- timely submission of reports to regulatory authorities and error-free filling of declarations;
- timely payment of company invoices by customers;
- absence of errors in accounting;
- the amount of financial resources saved (for example, on contracts with suppliers or contractors, etc.);
- the total amount of fines paid to the tax authorities (due to the fault of accountants);
- accounting salary costs;
- presence/absence of complaints from external and internal clients of the enterprise about the work of accountants.
If we consider KPI for an accountant, there are various examples, but it must be taken into account that it is this department that is able to influence the efficiency of all the main business processes of an enterprise by increasing profits and optimizing costs.
In economic processes, the key performance indicators of the accounting department are:
- interchangeability of employees;
- the number of accounting specialists;
- the minimum amount of overdue documents in the process of work;
- the number of company employees per accountant.
In addition, one should take into account the level of qualification of accountants and their motivation to work to obtain the desired result. The manager must control the workload of employees, the comfort of working in the field and, if necessary, provide accountants with timely advanced training at specialized courses.
Depending on the tasks set and the deadlines for their implementation, the manager evaluates the work of an employee. Depending on the results obtained, a decision is made to expand / reduce staff.
The most effective tool for determining the optimal number of company employees is rationing. Here is an example of such for the accounting department, where the work includes such components as:
- primary documentation (incoming);
- norms accounting and the Tax Code;
- results of work (reporting).
To calculate the required number of employees of the accounting department, you need to know the approximate number primary documentation received for a certain period of time (day, month), and have an understanding of how many workers and for what time will be able to process such a volume of materials.
To, for example, determine the KPI of an accounting officer responsible for payroll, the following criteria are used:
- the number of employees of the enterprise served by him;
- payroll according to the number of employees (pay slips);
- withholding tax and other obligatory payments according to the number of employees;
- the number of intercalculations.
Based on such criteria, the norm for an accounting employee is determined, based on which the number of accountants is calculated, necessary for the enterprise. For example, if you take 1,600 payslips monthly for the KPI norm of a payroll specialist, then an organization with more than 5,000 employees will need 3 payroll accountants.
Each firm has unique KPI identifiers. They are formed on the basis of the goals and objectives of the enterprise.
KPI identifiers are set by management (the chief accountant or director of the company) and may contain more or less indicators than in the examples presented in this review. The main motivation of employees lies in the accurate and objective calculation of bonuses for achieving KPI indicators. Thanks to this, conscientious and responsible employees receive higher wages. Such incentives motivate employees to increase productivity.
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Key Performance Indicators: Examples for a Senior Manager
In the process of building the system KPI for managers structural units of the enterprise must comply with the following principles presented in the table.
The main guidelines of the company are always determined based on strategic goal. For example: “What results does management want to achieve in a given time period?”. A key indicator can be considered a leading position in the market or a prospective sale of the company. In the first option, attention is paid to increasing sales volumes and increasing the customer base, in the second - to increasing the capital of the enterprise in order to obtain the highest sale value.
To do this, first determine the main goal and justify it in detail in writing. Then they break it down into several small goals, which are specific tasks with which it will be possible to achieve the main idea. Visually, this can be displayed in the form of a “tree of goals” drawn on paper with reference to organizational structure enterprises.
Human psychology is such that many, out of fear of showing their incompetence on some issues, agree to perform the task at random, without even understanding its essence. Based on the results of monitoring the setting of tasks in one well-known holding, it turned out that at a meeting with the top management, many employees agreed with what was said, but, leaving the office, asked their colleagues what the boss had in mind.
Each item of the KPI system should be clearly spelled out. To this end, the company's management (general director, board of directors and board) draw up and approve the regulation on KPI. It would be nice if the document gives examples and calculations with formulas, and ties all the terminology to accounting. If the regulations take into account the accounting rules of the Russian Federation, then in the future you need to rely on them. When using several systems of reporting documentation, it is necessary to indicate by which method each indicator should be calculated.
To better understand the provision on KPI, several general meetings. Each manager must independently calculate their bonuses, referring to the indicators of the previous reporting period. A certain number of working days are allocated to complete the task, after which everyone gathers to identify errors. At such meetings, the need to make adjustments to the KPI regulations is often revealed.
The final approval of the document is carried out with the maximum number of indicators set for all managers. Each manager is able to simultaneously control no more than five to seven indicators.
You should not be guided by the principle of achieving the maximum result, since many top managers, when given a task of high complexity, simply stop making great efforts to complete it.
The KPI is calculated once a year. This is the most optimal period for evaluating the achievements of a specialist. What if the lead manager was hired during the current year? As an example, consider the metropolitan group of companies Insol. Here, the bonus part of the salary is calculated as follows:
- the work plan includes data compiled on the basis of an analysis of the previous achievements of the manager in terms of similar indicators with an increase of 20%. This is the planned interest rate set by the head of the company;
- if the lead manager was recently hired, the performance of his predecessors is considered (20% should be added to the average).
The amount of bonuses depends on the level of planned indicators achieved. Consider this situation with an example:
- 50% bonus if the actual figure exceeded the planned one;
- 30% if the plan is fulfilled;
- 10% if the result is lower than planned;
- the variable component of the salary is not paid in the event of an unacceptably low result.
When calculating KPI, it is better to take into account general and personal indicators. The first includes the results of the activities of the department, which is managed by the top manager of the company. The overall results motivate employees to teamwork and serve as a manifestation of the specialist's interest in the end. The specifics of the enterprise and the position of the head are the main factors that determine the ratio of general and personal results for the formation of KPI. high official position involves reducing the weight of personal results. For a leading manager, the percentage of personal indicators can range from 10 to 20% (or they may not be taken into account at all). For the head of the company, a personal KPI is the receipt of qualification certificates for a specialist in the financial sector, which is mandatory for some firms, as well as the preparation of a successor.
KPI is expressed in specific numerical values. For example, for a head of personnel, such a criterion as “attracting highly qualified personnel” is unacceptable. In this case, there are no such indicators as terms, composition and number of personnel. In addition, the evaluation category "highly qualified personnel" cannot be used. The CEO of the company and the head of the HR department may not agree on the understanding of such evaluation criteria as “skilled” and “highly qualified specialist”.
It is important to establish how the indicator will be determined. It is not advisable to use expensive data for this, spend a lot of personal time and involve other companies. For example, if the head of the marketing department needs to determine the level of recognition trademark, then to evaluate KPI, you will have to use quite expensive methods.
For each indicator, it is necessary to form achievement levels:
- threshold (indicators below which bonuses are not accrued);
- target (according to this indicator, a specially provided remuneration is paid);
- maximum (increased bonuses are paid).
On some general indicators, the influence may be indirect, but in personal indicators, the relationship between work efficiency and the result obtained should be direct. For example, for the director of the financial department, it is impossible to apply the KPI “presence of cash gaps”, if all decisions regarding the timing of payments to counterparties and the provision of commodity loans are made only by the general director.
If the percentage of the bonus is insignificant compared to the employee's total income, then he will not spend his time setting strategic goals, but will instead focus on more important current issues. The share of the bonus for a senior manager must be at least 100% of his fixed rate, and for an ordinary employee - up to 20%.
For an employee of the company, the indicators are considered fair if they differ by no more than 30% from the average figures in this industry. In this case, when developing key performance indicators, the experience of colleagues will be useful.
Highly important aspect- a fair procedure for calculating KPI. If a certain amount of profit was set for a top manager in relation to KPI, but according to the results of the reporting period, the indicators barely reach 50%, then according to the KPI provision, the manager is not rewarded. At first glance, everything seems fair, but given the crisis situation last year and the bankruptcy of more than 50% of companies in the industry, where all the rest went to zero, then according to the results it will turn out that this company received 50% of the main indicator. In this case, the manager deserves a bonus. This suggests that it is possible to avoid such a situation if we link the main indicators to industry-wide ones.
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Practitioner tells
KPI leader by example
Tatyana Kostenkova,
legal and business development advisor, Finstar Financial Group, Moscow
Case study 1. KPI for a store manager
Let's consider an example from the practice of Trade House "Narodny" (Bishkek, Kyrgyzstan). For store managers trading house the following key performance indicators have been developed:
KPI 1. Implementation of the sales plan. It is calculated based on the ratio of the actual volume of sales to the planned one. The store revenue plan for a certain period is approved by the CEO in agreement with the financial and commercial directors. This KPI identifier is evaluated by an analytics specialist (Table 2).
KPI 2. Compliance with reporting and performance discipline. This indicator demonstrates the timeliness of the preparation of reporting documentation, transfer of utility bills for payment, sending documents to the archive, execution of orders CEO, implementation of the inventory regulations, as well as the accuracy of following corporate standards and compliance with reporting and performance discipline. KPI is assessed by the commercial director of the company. For each violation 1 point is counted.
KPI 3. Work of subordinate employees. Evaluation of employees in accordance with the approved parameters is carried out by the curator. Violations are converted into points. For example, parking near a store and its entrance must comply with engineering and sanitary standards. Violation of these requirements is worth two points.
Case study 2. KPI for the head of the Russian branch of a large holding company
Initially, key performance indicators at the enterprise were tied to the analytical indicator EBITDA. When the business moved to a new stage, it became difficult to comply with corporate standards.
Four tasks were set for the heads of departments:
- cost minimization;
- preservation of indicators achieved in previous periods;
- compliance with the methodology for developing decisions according to the standards of the parent holding company;
- loss reduction.
To stimulate the director to solve the tasks set, 4 key performance indicators were developed. If the plan was fulfilled, the remuneration was 150% of the annual salary.
KPI 1. At least one of the stores opened more than a year ago has been operating at a loss for more than three months. Compliance is assessed by the board of directors based on audit data prepared on the basis of the operating income statement. The weight of the indicator in the bonus is 0.3.
KPI 2. Failure to meet EBITDA. The identifier is evaluated by the board of directors or an audit committee based on income statement data. The weight of key indicator 2 is 0.3.
KPI 3. Violation of internal regulations on the rules for making decisions. The presence/absence of failures is determined by the board of directors. The weight of key indicator 3 is 0.2.
KPI 4. Failure to comply with the decisions of the board of directors. The presence of such facts is determined by the board of directors. The weight of indicator 4 in the bonus is 0.2.
How to calculate KPI in Excel: examples and formulas
Financial bonuses in the KPI motivational system are stimulating. The amount of payments depends on the personal results of the work of a specialist in the reporting period. The amount can be fixed or calculated as a percentage of salary.
Any company determines KPI and the weight of each indicator individually (depending on the objectives of the enterprise). For example:
- The goal is to fulfill the implementation plan in the amount of 500 thousand rubles. monthly. The key identifier is the sales plan. Measurement system: actual sales amount/planned sales amount.
- The goal is to increase the shipping amount by 20%. KPI - average shipment volume. Measuring system: actual average shipment volume / average shipment plan.
- The goal is to increase the number of customers by 15%. KPI - the number of customers in the company's database. Measuring system: actual number of buyers / planned number of buyers.
The spread of KPI (scales) is determined by the company independently. For example:
- Implementation of the plan by less than 80% is an unacceptable result.
- Implementation of the plan 100% - coefficient 0.45.
- Implementation of the plan in the range of 100-115% - a coefficient of 0.005 for every 5%.
- No errors - coefficient 0.15.
- There were no comments in the reporting period - coefficient 0.15.
This is just one of possible examples determination of motivational KPI indicators.
The main point in determining key indicators is the calculation of the ratio of the actual result to the planned one. Almost always, an employee's salary includes a salary (fixed part) and bonuses (variable part). Motivational KPI affects the calculation of the variable part of the salary.
Take the ratio of the constant/variable parts in wages 50: 50. According to KPI, examples of indicators and weights of the variable and constant parts are as follows:
Accept the following values coefficients (the same for indicator 1 and indicator 2):
KPI table in Excel:
Explanations:
- Salary - (constant component of salary) is calculated based on the number of hours worked. In our example, the constant and variable parts have the same weight.
- The percentage indicator of the implementation of the implementation plan and the work plan is calculated as the ratio of the indicators obtained to the targets.
- To calculate bonus payments, coefficients are used. In our example, the impact of indicator 1 and indicator 2 on the amount of the premium is equivalent. The coefficients are also the same. Therefore, the same formulas are used to calculate measures 1 and 2 (only cell references change).
4. Formula for calculating bonuses: =C3*(F3+G3). We multiply the planned bonus by the sum of indicators 1 and 2 for each employee.
5. Salary: salary + bonuses.
This is a sample summary (Excel KPI example). Each company forms its own table, taking into account the characteristics of its activities and the bonus system used.
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KPI Matrix Example in Excel
In order to evaluate employees on key indicators, it is necessary to form a matrix or agreement on goals. According to the general form by which KPI is calculated in Excel, the examples are as follows:
- Key identifiers are the criteria by which the company's employees are evaluated. Different positions use different criteria.
- The weight of the indicator is indicated in numbers from 0 to 1 so that the sum of all indicators is equal to 1. The weight number indicates the priority of this KPI, taking into account the tasks of the enterprise in the reporting period.
- base value KPI indicator- acceptable minimum. The level, the value of which is less than the “base”, is the absence of a result.
- Norm (planned figure of the indicator) - a mandatory level. If the "norm" is not implemented, it means that the employee is not coping with his job responsibilities.
- Goal (above the norm, which makes it possible to improve results) - the value to which it is necessary to strive.
- Fact - actually achieved performance indicators.
- The key performance indicator index shows the level of the result in relation to the norm.
KPI calculation formula:
KPI index = ((Fact - Base) / (Norm - Base)) * 100%.
An example of filling out a matrix for an office manager:
The performance ratio is calculated by summing the products of indices and weights. Employee performance evaluation is visually demonstrated using conditional formatting.
Where was the successful implementation KPI: company examples
The KPI system is being actively implemented at domestic enterprises.
1. Sberbank: employee motivation through KPI.
An example of an enterprise that has successfully implemented a KPI system is Sberbank. A few years ago, the branches of this bank were filled with long queues and were remembered for not very polite service. After the KPI system was introduced for Sberbank employees in 2010, noticeable changes took place in the work of the enterprise. For ordinary personnel, group indicators were developed, called "5+":
- personal efficiency;
- improving your knowledge;
- customer focus;
- optimization of working time;
- teamwork.
The motivation system developed for Sberbank employees is not limited solely to financial incentives. As non-material motivating factors, such moments as the provision of benefits, free schedule, discounts, tour packages, etc. are used.
2. "Magnat" - a new control system.
The system of key indicators of the company "Magnat" was called KPI-Drive. Its creators set goals to solve the following problems:
- Improve Tier 1 Key Performance Indicators by the second year after implementation.
- improve movement variable costs by increasing the dynamics of the wage fund.
- Increase business transparency and manageability.
- Strengthen team interactions.
- Recoup the cost of implementing the system.
The results of the implementation of the KPI methodology can be an example of how quickly the set goals were achieved. Of course, as a result, the system of key performance indicators has become an integral part of the company's business processes.
Implementation results:
- The management model has become more technological and understandable.
- The motivational system has become more technologically advanced and flexible.
- Level 1 KPIs of the enterprise are constantly improving.
- GC "Magnat" is an example of successful implementation and use of target management technology.
- Since the introduction of the KPI system, the Magnat group of companies has increased its business volume by more than 5 times.
Examples of how effective the implementation of a KPI system is can be found in many largest companies operating in the domestic market.
The system of key performance indicators has been used for many years for the management of large, small and medium-sized companies around the world. This is a large-scale and multi-level management system that allows you to make an accurate assessment of the efficiency and effectiveness of the enterprise. The implementation of KPI is not an easy task that requires temporary resources and serious efforts, but the effect of the implementation of the system is worth it.