Kpi analysis. System of key performance indicators

Calculating the degree of KPI fulfillment is the heart of the payment system. The mechanism for calculating and calculating bonuses, and, therefore, the effect of the entire motivation system depends on it. However, from what I see in most organizations, modern managers still have no idea how to do this simply and effectively. As a result, cumbersome, complex and mostly unworkable schemes are invented to pay staff. Or even worse, they create a commission scheme for salespeople, and for everyone else “based on the results of the company’s work.” We will talk about the dangers of these approaches separately.

In fact, the secret to calculating KPI is quite simple and consists of one single and rather trivial formula. But instead, in practice, for some reason, several extremely ineffective schemes have become widespread, which usually greatly hinder the implementation of KPIs in organizations. And the worst thing is that even in the specialized literature nothing sensible has been written about this.

So, let's try to figure out how the degree of KPI fulfillment is usually calculated, why this should not be done, and how it should be done in order to get the result you need.

1. Plan-fact

This is the simplest and most obvious way, because... any key performance indicator (KPI, KPI) reflects a goal, and the goal must have a measurable expression - a plan. Without a plan, KPIs cannot exist. Accordingly, the first thing that comes to mind is to divide the fact into a plan. For example, the sales plan is 1.5 million rubles, and the actual is 1.35 million. Accordingly, the degree of implementation will be 1.35/1.5 = 90%. For plan-fact analysis, such a formula is absolutely justified, however, we are talking about calculating the fulfillment of KPIs for further calculation of bonuses. In this case, we do not take the commission scheme into account.

So what to do in the example given? Pay an employee 90% of the planned bonus amount? It seems logical if the plan is 90% completed. What to do if the plan is 50% fulfilled - pay half the premium? But if the sales plan is only half fulfilled, then the company is most likely already in a very difficult situation. The product has a cost price, the organization has indirect costs that must be covered from the markup. Today is no longer the 90s, and if the sales plan is half fulfilled, the organization will most likely incur losses, which means it will have to optimize costs, reduce staff, or even worse. Paying a premium (even half) in such a situation is tantamount to suicide.

One organization introduced a special condition for this case: if the degree of KPI fulfillment (calculated using the fact/plan formula) is less than 50%, no bonus is awarded. Well done, we have insured ourselves against paying bonuses in the event of bankruptcy, but in such a situation half of the bonus fund is not used for the intended purpose. In fact, in that organization all plans were guaranteed to be fulfilled by 70-80% - the business has a certain inertia. The struggle was just for the last 20-30%. To obtain them, you really had to make some effort. But with the actual/plan execution formula, the target use of the bonus fund is only 20-30%; the remaining payments are guaranteed to all employees. Why bother for a 20% bonus, which is about 30% of the total salary, because it is only about 6% of the total earnings (0.2 x 0.3 = 0.06). This type of bonus system simply doesn't work.

This leads to the first most important rule:

Every KPI other than the plan must be critical

This truth has long been obvious in Western companies, which over the past decades have been imbued with quality management systems, performance management technologies, etc.

Critical value for simple direct indicators (the more, the better) - this is the minimum below which the KPI fact should in no case fall. For example, the plan is to process 97% of customer applications within the scheduled time frame, the critical value is 92% of applications. Below this threshold, contract penalties begin and clients change service providers. For inverse indicators, the critical value is the permissible maximum. For example, the plan for the level of defects is no more than 1.5% of production volumes, the critical value is 5% (in this case we stop the line).

Tolerance is the difference between the planned and critical value. In the first example it is 5% (97-92), in the second – -3.5% (1.5-5). In real life, the struggle for actual KPI values ​​is waged precisely within the limits of acceptable deviations. And it is within this framework that the degree of fulfillment should be considered and the bonus calculated. But the simplest fact/plan formula does not take this into account.

2. Tables of values

Many managers intuitively understand this problem, but, not knowing professional means of solving it, they do what they saw somewhere. Thus, in practice, substitution tables have become widespread, in which certain intervals of indicator values ​​and an index of the degree of implementation corresponding to each of the intervals are indicated. Surely each of you has encountered similar things at least once in your life:

No.	Intervals of deviations of KPI implementation from planned values	Percentages for adjusting the planned amount of remuneration
1	from 97% and above	100%
2	from 90% to 96.9%	75%
3	from 85% to 89.9%	50%
4	from 80% to 84.9%	25%
5	below 80%	0%

At first glance, it seems that the problem has been solved: the degree of completion now takes into account the critical value for the indicator, the degree of completion is more sensitive to changes in the indicator, which is what we wanted to achieve. Apparently, because of the apparent simplicity of the solution, value tables have become so widespread. In practice, they have a number of very significant disadvantages:

1. When using this kind of tables the premium becomes discrete, insensitive to small changes in the indicator. For example, in the example above, the premium will be the same for 91 and 96% of the indicator. And for a company, such fluctuations can cost half or a quarter of profits. But the difference between 89.9% and 90% is a quarter of the premium, and the company may not notice such a fluctuation or it may be caused by measurement error. This is not fair and makes the bonus calculation random.
2. This kind of table is relatively convenient to use when all indicators in the company are direct (the more, the better) and have the same permissible deviation. For example, 20% of the plan, as in our example. What if some of the indicators are inverse (budget savings, reduction in defects), and the permissible deviations for them differ? For example, the permissible deviation for the level of defects is 5%, for revenue - 20%, and for overdue receivables - 50% of the plan. In this case, it is necessary to develop a separate table for each indicator. What if the permissible deviations vary depending on the season? For example, in our peak season the permissible deviation in revenue is 25%, and in the low season – 50%. As a result, a separate substitution table will have to be compiled for each indicator for each calendar period, which greatly complicates the calculation of premiums. Or you need to remove from the list of KPIs everything that does not fit into the “simple direct indicator with a permissible deviation of 20%” scheme. But then the payment system will again become flat and will not reflect the real results of the employee’s work.
3. An additional calculation step is added, which also complicates the procedure for calculating the premium. After all, you first need to calculate your indicator in its physical terms (in rubles, pieces, tons, hours or even in %), then calculate the degree of its implementation by dividing the fact into the plan, and only then get the adjusted degree of implementation by substituting the resulting plan-fact to the table of values. There are situations where tables of values ​​are used immediately in physical terms. For example, 2 violations of the regulations - 0% premium, one violation - 50%, zero - 100%. But for indicators with changing plans and acceptable deviations, this scheme is not suitable.

In general, you cannot create an effective bonus system using such an engine.

3. Formula with standard

In fact, the solution is quite simple and has long been known. To calculate the degree of fulfillment of an indicator, you can and should use a formula that correlates the fact not only with the plan, but also with the critical value of the indicator. It looks like this:
The meaning of the formula is that the numerator is the difference between the fact and the critical value, because You only have to pay for exceeding it. This difference is then correlated with the permissible deviation. That is, a fact equal to the plan is taken as 100%. It `s naturally. If the fact is compared with the critical value, the degree of completion will be equal to 0% - there is no need to pay a premium for such a result. Intermediate values ​​are calculated linearly and continuously. The calculation logic is shown schematically in the picture:

A comparison of the formula with the standard and the classical methods of calculating KPI described above is shown in the following picture:

As a result of using the formula with the standard, all the main problems are solved:

1. You do not pay for actual KPI values ​​above/below tolerances.
2. The premium becomes maximally sensitive to any changes in the KPI fact within the permissible deviation.
3. The formula is absolutely universal and is suitable for any type of indicators - direct, inverse and even corridor, for each KPI for each period you can set the required permissible deviation, the formula does not care.

Simple, convenient, versatile and effective. One difficulty remains - for each indicator, in addition to the plan, it is now necessary to develop a permissible deviation. But this is already inevitable if you want to create a working KPI system in your company. We will discuss separately how to correctly determine this permissible deviation.

It is noteworthy that most automation tools for KPI calculations are not familiar with this formula (and automation for KPI management is useful, we wrote about this earlier). Of course, this formula is “hardwired” into HighPer, because we developed it with the understanding that it is impossible without it. KPI-Drive from A. Lityagin has

a universal mechanism for setting the degree of performance of an indicator, where you can set up a formula with a standard, but only if the KPI standard does not change from month to month as a percentage of the plan. If the permissible deviation “jumps”, the desired adjustment can no longer be made. The rest simply stupidly divide the fact into a plan or offer tables of values. Imagine, you buy a program that should make your life easier for several hundred or even millions of rubles, but it doesn’t even allow you to enter a permissible deviation for an indicator - the corresponding field is not provided in the program. This clearly shows the degree of understanding of the KPI methodology by the developers of the relevant software products.

To be fair, we can add that in theory there are also other ways to calculate the degree of KPI fulfillment:

• Nonlinear (parabolic), when the degree of execution function is given by a power equation.
• Progressive / regressive, when the degree of completion function changes its slope depending on the interval in which the actual value falls.
• Competitive, when the best/worst employees receive/do not receive a bonus.

[Povarich B.G. Work motivation: managerial aspect. Novosibirsk, 2008, pp. 90-92].

However, in practice we have not encountered such remuneration schemes - they are too complex.

Good luck with motivating your employees!

Key performance indicators are a term used in modern management to designate performance indicators of a team (or an individual department) used to achieve certain business goals. To understand what KPI is, it is enough to imagine such a structure in the form of a model that allows you to comprehensively monitor the business activity of staff and the entire company as a whole. In other words, we can say that we are talking about a certain set of tools that allow us to measure business goals, as well as control measures to achieve them.

KPI: key performance indicators

The most common Russian version of the term KPI is key performance indicators (the corresponding abbreviation is usually used). Proper use of such indices allows the management of a company or enterprise to objectively assess the situation and develop further internal development policies. In turn, all existing KPIs can be divided into two groups:

• anticipatory – opening up wide opportunities for management during a specific reporting period;
• lagging - demonstrating the real results of activities after the end of the reporting period (in particular, this can include financial results of activities).

Personnel KPIs

In enterprise management, there is such a thing as personnel KPI. As the name implies, it denotes a KPI, with the help of which the work and business activity of an organization’s employees is measured and controlled. Other concepts are closely related to this term, including employee motivation, as well as assessment of their effectiveness. Typically, implementing such a mechanism in a business is of great value for business development, as it helps to better understand what needs to be done to improve the overall effectiveness of the team.

Company KPIs

In turn, the company’s KPI reflects the objective coefficient of the entire enterprise (including key indices of individual divisions included in its structure). Moreover, such a system in most cases is not something innovative, unfamiliar or unusual for the company: its components are included in many other management tools and technologies and are actively used by managers in practice. It is believed that using KPIs it is most convenient to analyze business processes using the example of organizations operating in the trade sector (in particular, retail sales in large chains).

KPI: motivation

As already mentioned, the concepts of KPI and motivation are inextricably linked. Motivating personnel based on KPIs involves setting strategic and practical goals that will ultimately lead to an increase in the overall efficiency of the company. At the same time, it is very important that the requirements are set in a limited number, clearly explained and tied to the amount of wages and bonuses. In other words, the amount of employee income should be tied to and directly proportional to the degree of achievement of set goals (financial motivation). Today, there are several different approaches to monetary motivation: BalancedScorecard, EVA, functional KPIs, etc.

KPI goals

The main goal of an enterprise's KPI is to ensure that the KPI of each individual employee is correlated with the overall results of the division and the entire company (the latter, among others, include capitalization and profitability). The actions of workers should not contradict each other or slow down the work process. Typically, the program involves setting several goals at once - for example, this may include fulfilling the financial plan, optimizing the hiring of personnel, increasing customer satisfaction, increasing the effectiveness of training, and increasing staff loyalty.

Implementation of KPIs

Experts point out that the implementation of KPIs in an enterprise should in no case be a one-time process. The procedure is carried out over a fairly long period of time and includes several stages. As for specific implementation mechanisms, their choice will depend primarily on the field of activity in which such an organization operates (or plans to operate in the future). Among the primary tasks are defining goals, collecting factual data and building optimal strategies in accordance with which the KPI system will be implemented in the future.

Pros and cons of working in the KPI system

Analyzing the main pros and cons of working in the KPI system, we can highlight the following points. Among the key advantages of the methodology are the distribution of personal responsibility between employees, linking the amount of cash bonuses to the level of achievement of individual indicators, as well as a clear demonstration of what each person contributes to achieving common goals. There are also some controversial points. Thus, among the disadvantages we can mention the sometimes unattainable coefficients included in the strategy, which can seriously demotivate participants and reduce interest in working in this format. In addition, shortcomings in one department can lead to reduced cash bonuses for all employees.

Stages of creating a KPI system

There are several stages in the development and implementation of a KPI program. The main stages of creating a KPI system are as follows.

1. Preparatory (preliminary) stage, including planning work and conducting the necessary research.
2. Development of a methodology (including the creation of a methodological model and a management model based on KPIs).
3. Work on an information system (development of technical specifications, programming, training, experimental use).
4. The final stage, which includes the final construction and refinement of the structure, as well as coordination of the actions of all participants.

KPI requirements

The main requirements for KPIs include simplicity and accessibility for each participant, realistic achievability of indicators (they should not be achieved too easily), and the presence of additional motivation. Index coefficients should be easy to calculate and calculate. Each group has its own individual indicators - for example, for the sales department they will be the same, while for HR, accounting or the production department they will be completely different. Each coefficient must be determined with maximum clarity, transparency and accuracy.

KPI automation

To implement KPI systems in business practice, specialized software is used that makes it easy to calculate indicators. Automation of KPIs using special software makes it possible to automatically accumulate all the necessary data, distribute it among individual employees/departments, and also quickly calculate the degree of implementation, the amount of bonuses and other cash bonuses. As a result, labor costs for administering payment systems are reduced, and the process itself takes up much less resources (including financial and time).

Andrey

Preamble: “Listen, I found out about such a cool thing here! We'll launch it!" said our founder, returning from another trip abroad to the distribution forum.

Thus began a two-year epic with the transition to a new wage system. In 2010, what is KPI No one in our company knew. I had to read a lot of different literature, of course, Internet resources were studied and noted down.

For some reason, many sources initially incorrectly interpreted the essence of the system of key indicators. Even now on the Internet you can often see articles where, from the very beginning, the system is described as a personnel evaluation system.

I remember these debates at planning meetings - department heads argued about how to correctly understand and count these same KPI. The most complex formulas were built in Excel, where the indicators of employees were linked in proportion to the indicators of managers, etc. As a result, it was decided to undergo management training.

We were lucky. Since the company we found was adequate and well versed in its business, after the training everything fell into place.

KPI (Key Performance Indicator)— Key indicators of the enterprise. This is an indicator of the situation in achieving certain goals. It can be said that KPI is a quantitatively measurable indicator of the results actually achieved. This is a figure showing the actual profile (at the moment) of the selected indicators. The system of indicators itself has nothing to do with motivation and salary. To Russian KPI often translated as “key performance indicator”, which is also not true. Efficiency is the ratio of results to costs, and with the help KPI You can also display other parameters. “Key performance indicator” of an enterprise is a more convenient translation for me.

So what is it KPI, if you figure it out?

Every enterprise has many indicators, each of which someone must constantly monitor, or which are simply of interest to someone. For example, the founder of a company is most likely interested in profit and growth in the value of the enterprise. Directors - turnover, margins, costs. Head of Sales Department - Accounts Receivable. Chief accountant - correctly executed documents. Head of the supply department - illiquid assets, turnover. And so on.

All these are the key indicators of the enterprise. Each company has its own. Everyone has probably seen foreign films where a top manager sits, smoking a cigar, staring at a big screen on which graphs are floating? Usually these are brokers on the stock exchange. But in my imagination I can see the image of a director who also monitors all indicators, like the results of the work of the business processes of his enterprise, and when the graphs “red”, he appoints someone responsible, getting involved in correcting the situation.

Also, they are often confused KPI and BSC (Balanced Scorecard). KPI and BSC are of course related in some way, but they are far from the same thing. BSC is a cross-section of “business processes” where the goals are located. Indicators of these business processes are often used as measures of the achievement of these goals - KPI. A little chaotic, but the article is not about DSC and I wrote this so that you would not believe everything that they write.

Let's return to our KPI. For example, we have now implemented monitoring of indicators, based on 1C Volgasoft (a separate conversation about this buggy thing as of 2012, but we haven’t found a better one) What happens next?

Let’s say we have a “warehouse re-sorting” rate of 1% and this is a problem (by the way, there are good methods for identifying company problems), since customers complain that the warehouse is not working well. How can we improve the situation? This is where it comes to mind that the indicator system can be taken as the basis for a motivation system. And thanks to this, you will be able to manage the values ​​of indicators. Many people here make the mistake of setting a plan according to KPI for re-grading warehouse =0. In 2012, one company, a large paint manufacturer, in my opinion, was too clever with KPI in the motivation system, making it difficult to understand and impossible to implement, as a result the sales team was destroyed, since employees did not receive bonuses for the entire year. And, having used the mechanism in building a system of retro bonuses (motivation built on KPI for the buyer 🙂) has still lost the loyalty of many of its large clients.

So, configured monitoring based on indicators makes it possible to influence these indicators. Gradually move them, allowing the staff to get used to them, from the existing fact to the maximum possible result. It is important to understand that this is not a panacea that guarantees 100% service. This is a tool with which employees begin to pay attention to the results of their activities, since their wages depend on it. And when the plan approaches the physically possible value, the same personnel begins to look for problems that prevent them from improving the situation, which ultimately also gives a plus.

Where to begin?

First, we need to describe all the main business processes in the enterprise that we want to control. Find control points (time, quantity) for each process.

Typically, the following types of key indicators are distinguished:
Result KPI - how many and what results were produced;
Cost KPI - what resources were needed;
KPI of functioning - execution of BP (allows you to ensure that all algorithms are executed without failures);
Productivity KPI - usually time spent on processes;
Efficiency KPI is the ratio of results to costs.

When developing process indicators, you must adhere to the following rules:

• The set of indicators must contain the minimum required number to ensure full management of the business process;
• Each indicator must be measurable;
• The cost of measuring an indicator should not exceed the managerial effect of using this indicator.

KPI can be used to monitor activities, draw up enterprise plans, and motivate staff. Also, motivation built on this system gives awareness of the responsibility of each employee performing his or her area of ​​work.

Actually, everything is clear with monitoring and plans; I will dwell in more detail on the motivation system.

Standard motivation systems usually include 1 indicator + a system of penalties. For example, the manager has % profit + fines\bonuses. And often, many positions have no motivation for results at all. For example, a storekeeper’s bonus = 10,000 + fines - shortage.

Motivation based on KPIs is radically different from old schemes. Nothing may change fundamentally. That is, the manager’s percentage of profit remains the same. But then the resulting amount is divided into several parts, each of which forms the basis for assessing the established standards. So, the entire bonus is 100%. The premium can be fixed or floating. Let me give you an example of motivation

Storekeeper:

1% Deviations in shipments reaching the consumer 30%
2 Knowledge of goods by storekeeper 15%
3 Use of barcoding or terminal 25%
4 Re-sorting in warehouse 15%
5 Goods acceptance rate 15%

Senior storekeeper:

1 Carrying out inventories 15%
2 Product losses during storage 20%
3 Marking of storage areas for goods 15%
4 payroll warehouse 40%
5 Processing speed of detected shortages 10%

Manager:

1 Sales volume
2 Accounts receivable10%
3 Gross profit 10%
4 Successful clients 20%
5 Sales by product groups B2B 50%

The percentage is how much of the premium will be assessed. By setting it, we either reduce the importance of the indicator in the salary or, on the contrary, make it significant. That’s what it’s called – “WEIGHT”. As you noticed, different positions have different indicators divided by responsibility. When developing a system, it is necessary to take into account a number of factors in order to achieve the following indicators:

• were calculated automatically and were not subjective.
• were easy for employees to understand so that they could realistically evaluate their work.
• Indicators should be achievable, but at the same time, employees need to make some efforts in order to achieve the planned result. If the plan is too high, then employees, seeing the unreality of the plans, will not even try to achieve it. If we set an inflated plan, then we must provide tools for its implementation - promotions, discounts, etc.
• Each indicator must carry a meaningful load and be important for the company. For example, the indicator “number of calls” or “number of sales” is often found. How will they help? How can KPIs take place, for example, to calculate the load on resources, but in motivation!? I, as a manager, could easily negotiate with clients and make 10 invoices instead of 1, while the shipping amount and profit would not change.

When introducing such a system, we must be aware that employees will primarily perform those tasks and direct their efforts in those areas on which their salary depends. And if you overdo it, the rest simply won’t be done. Some particularly important indicators may be duplicated for different positions, but I would not get carried away with this since this reduces the total number of indicators tied to salary.

It would also be a good idea to motivate employees to exceed the plan. By the way, let's talk about how the plan is set?

To begin with, standards are established. Before forming them, you need to collect statistics of the existing level.

What have we asked here? The fact is that if an employee fulfills the plan by 84%, he will not receive anything for this indicator. if 90% then 60% premium. If he exceeds this, he may be awarded an additional 20% bonus.

Next, the manager inserts plans for each indicator. The subordinate should see the % completed at any time. At the end of the period, wages are calculated based on the weight, % of the plan and the established standard.

At the end you should get a picture like this:

It really works, I say this as a person who has tested the system in practice.

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 fact
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 fact

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) in 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 limitation 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 moment 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 has been 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:

1. KPI1 - percentage of sales plan fulfillment;
2. 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 (Weight KPI1 x Coefficient KPI1 + Weight KPI2 x Coefficient KPI2)

Table 6. Checking all possible salary options for all possible KPI values
(with a 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 how much wages will be accrued if the sales plan is fulfilled at 101%, and the work plan is fulfilled at 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”

• Motivation, Incentives and Remuneration

Keywords:

1 -1

In this article we will look at examples of KPIs, the specifics of calculating a key identifier for various specialists, as well as the best examples of 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 a marketer's KPI.
• What could be the KPIs of the chief accountant?
• What KPIs can be applied to senior managers.
• How KPIs can be calculated in Excel.
• Which companies have successfully implemented KPIs?

Instructions for calculating KPIs for different employees

The methodology for developing a KPI identifier includes several sequential steps:

1. Preparatory activities: creation of a working group, analysis.
2. Formation of assessment methods and methodology: 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.
3. Implementation: combining the KPI accounting system with existing software, familiarizing employees with the methodology for calculating performance indicators.
4. Stage of using the KPI calculation system: monitoring implementation, adjusting indicators.

To develop KPIs, two main methods are used: process and functional. How to calculate the premium for each of them can be found in the table below.

The process method is based on building identifiers taking into account the main business processes of the enterprise. The functional method is based on an analysis of the structure of the company and the service goals of its divisions.

An example of a KPI for managers that will force them to give their all.

If the salesperson fulfills his KPIs reluctantly, then these performance indicators need to be abandoned. The editors of “Commercial Director” propose to set KPIs that motivate managers to sell and make a profit.

Table. KPI - examples of calculation using process and functional methods

Process	Functional
The Sales Process. Goals: increase in the number of buyers (KPI - number of attracted buyers); increase in repeat purchases among existing customers (KPI - number of repeat purchases).	Enterprise level - plan, strategic development model. Examples of KPIs: income, profitability; increase in net assets.
Process "Inventory". Goal: increase in inventory turnover (KPI - increase in inventory turnover of raw materials and finished products compared to the previous period).	Department level - regulations on the structural unit, regulations. Examples of KPIs: customer satisfaction level; sales volumes.
The Customer Satisfaction Process. Goals: reduction in the number of returns (KPI - percentage reduction in the number of returns of purchases); reduction of the time interval for customer service (KPI - time spent on service).	Professionalism of specialists - job descriptions. Examples of KPIs: number of newly attracted buyers; time to complete a transaction with one buyer.
Process "Personnel". Goal: increasing the quality level of personnel selection (KPI - percentage indicator for closed vacancies).

Table. KPIs for a sales specialist: examples (KPI matrix)

Index		Base	Norm	Target	Fact	Execution level	KPI Index
Sales volume (cu)
Average income per customer (cu)
Number of marks “I liked the service” (pcs.)
Share of overdue accounts receivable (%)
Final KPI

Based on the data presented in the table, we can conclude that the sales specialist exceeded the target indicators by 6.1%, and therefore he should receive a bonus.

The table provides an example of the methodology for calculating “Average income 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 income per customer for a sales specialist

Calculating performance indicators for supporting departments is a rather complex procedure. Let's look at examples below 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 KPI indicators:

• the number of users attracted to the Internet portal;
• the number of repeat purchases from existing consumers;
• the number of recommendations and positive reviews that were published after the transaction on the company’s website or social media pages.

Stage 2. Calculation of the weight of each identifier (the total weight is 1, the calculation of the shares of indicators is carried out depending on their priority). In this example we get:

• number of new buyers - 0.5;
• number of repeat purchases - 0.25;
• consumer reviews - 0.25.

Stage 3. Analysis of statistics for each key indicator for the past six months and formation of a plan:

		Initial indicator (monthly average)	Planned indicator
	Increase in new buyers	160 new clients	An increase of 20%, i.e. 192 new customers
	Percentage of repeat purchasers	30 repeat purchases	Increase by 20%, i.e. 42 repeat purchases
	Percentage of customers who left a positive review or recommendation on the site		Increase by 20%, 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. A fact is actual data obtained.

In the above example, it is clear 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. Salary calculation.

The marketer’s salary in this example is $800. In this amount, $560 is the fixed part, and $240 is the variable part. Full salary is paid if a result with an index of 1 or 100% is achieved. Since in our example the KPI was achieved at 113.7%, which is exceeding 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 bonus size is reduced.

The table with an example of KPI demonstrates the problematic aspects 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 monitor the work of a specialist. If the situation does not change in the following periods, then it is necessary to reconsider the system of KPI requirements.

By constantly following such a policy, you can get a complete picture of KPIs for sales, production process, etc. This will allow you to understand the procedure for calculating and implementing key performance indicators.

KPI calculations may vary depending on the planned indicators. It is permissible to supplement the regulations 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 salary for an employee who has fulfilled the sales plan:

KPI calculation for a marketer: example

Before you begin calculating the 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. The KPI formula can only be used in cases where it is acceptable to express numerically the results for which the marketer is specifically responsible.

For example, let’s present 5 KPI indicators for a specialist:

• increasing the target consumer group;
• attracting new customers, increasing the number of clients;
• increasing the level of customer loyalty (the number of reviews, recommendations, etc. is taken into account);
• increase in the number of repeat purchases;
• increasing company awareness and increasing customer loyalty.

To achieve target indicators, the marketer uses the company’s material and labor resources (interacts with program and design developers, analysts and copywriters). A mandatory procedure in this process is budget control. Accurate cost accounting will help establish the relationship between the results obtained by a specialist and the material resources he used.

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 within 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 a specialist’s work;
• formulate a plan and determine optimal KPI indicators (we will look at how to do this using examples in the next part of the article).

If necessary, you can use the functionality of the Excel office program or implement a CMS, which will ensure competent organization of the procedure for setting goals, quick data entry and effective monitoring of KPI implementation.

A practitioner tells

Examples of KPIs that forced ordinary staff to look for a better way to do their jobs

Maria Ponomarenko,

Director of the Moscow company Smart Personal

For some time I worked in a team that managed an enterprise in the field of ferrous metal rolling. Our company's clients were construction and manufacturing companies that needed timely delivery of goods. To satisfy customer requests, 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 hired cars from third-party contractors. We needed to solve two problems: ensure fast delivery of products at a time convenient for the customer and achieve maximum load on each vehicle.

What was done. To motivate dispatchers, we have developed a system of bonuses depending on two KPI indicators (for each of the specified logistics tasks).

1. Indicator of postponing delivery to other days. If our capabilities did not allow delivery to be completed on time, with the customer’s consent, it was postponed to another time approved by the customer. The maximum number of delivery transfers per dispatcher should not exceed 3%. As this indicator increased, the size of the employee's bonus decreased. Conversely, if the dispatcher could avoid transfers, the amount of his bonuses increased (see data in Table 1).
2. Average number of deliveries per vehicle(the total number of deliveries that were made in 1 day was divided by the number of vehicles 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).

Premiums were calculated using 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.

The KPI indicators turned out to be mutually exclusive. For example, it was possible to increase the number of deliveries by one vehicle, 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, region of delivery, carrying capacity of vehicles, compatibility of delivery of various types of rentals on one vehicle).

In parallel with the implementation of the KPI system for dispatchers, it was necessary to ensure more efficient operation of related departments (for example, a warehouse complex).

Result. The KPI system started in March, and already in October the average daily delivery efficiency identifier rose from 1.8 to 2.3. Thus, in just 7 months of work using the KPI system, the efficiency of operating the transport fleet increased by 28%. At the same time, we managed to reduce the permissible number of delivery postponements by 6 (!) times - from 3% to 0.5%.

In the general part of the KPI regulation it follows:

• clarify the target orientation of the regulations (example wording: “the KPI regulation determines the procedure for the formation of performance indicators, their monitoring during the implementation of activities and control based on the results of reporting periods”);
• identify employees for whom KPI regulations are mandatory;
• set the goals of the KPI matrix (example: bringing the long-term plans of the enterprise and the annual tasks of its specialists to the same denominator);
• provide a list of basic terms with their definitions;
• present the principles on which the KPI system is based (example: decomposition, balance, compliance with SMART rules).

The main part of the KPI regulation must also describe the procedure for generating and agreeing on performance indicators. It is necessary to disclose the criteria that they must meet (example: measurability, achievability, specificity, etc.). Our example, available for download below, will help you draw up such a document for your company.

It is better to document the KPIs of individual specialists in a special document called a scorecard. It is agreed upon with the general director, senior managers of the personnel and financial departments and signed by a specific employee.

In the KPI provision, it is also necessary to determine the validity period of the card (example: calendar year) and attach the agreed form to it.

Table. KPI map for finance specialists

№ p/p	KPI type	KPI performance levels			KPI weight, %	KPI performance level
		Lower level	Target level	Top level
	Turnover speed of receivables and payables	Increase in turnover ratio from 0 to 1% compared to the base year	Increase in turnover ratio from 1 to 3% compared to the base year	Increase in 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, %
	Reduction in operating expenses per function in the industry relative to the previous year, %
	Free financial flow, million rubles.

The KPI Regulations must contain requirements for the procedure for developing and approving key identifier cards. 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 card. For example, it should include identifiers for calculating the performance of indicators (continuous, discrete, cut-off) and recommendations for measurement methods (quantitative and qualitative). In the position for each KPI identifier, it is important to indicate its target value, weight, type, as well as the upper and lower level. In addition, you need to take into account that the total weight of all indicators in the KPI map should be 100%.

The KPI cut-off indicator is indicated only as a last resort, since it resets the rest of the data. For example, the cut-off indicator for the chief engineer may indicate any industrial accident that occurred during the reporting period.

The KPI regulations should describe the procedure for monitoring the performance of indicators, which will facilitate the rapid identification and elimination of the causes of significant deviations of KPI identifiers from target values.

The regulation on key performance indicators should also note the frequency of control activities (for example, once a quarter) and the employees responsible for their implementation.

For possible (internal or external) changes in the conditions for carrying out business activities, the regulations for adjustments to KPIs should be described. The reason for their use, for example, may be changes in the employee’s job responsibilities. Here you also need to specify a list of persons who can initiate the use of adjustments, as well as the parameters by which such corrections can be carried out (for example, changing the number and composition of identifiers, target indicators, the level of their achievement, etc.).

The KPI regulations also include stages by which the achievement of key indicators will be assessed (for example, self-assessment by the KPI card owner, the data of which must be agreed upon with management, the human resources department and the financial service).

The provision on key indicators should also describe the methodology for their calculation. The level of the specialist’s bonus and his motivation to achieve target standards depend on her choice. For example, in the KPI regulations, you can specify that the weighted card execution identifier is obtained by multiplying the indicator value by its weight.

KPI of the chief accountant: example of assessing department workload

Enterprise management often considers accounting to be a costly department. Chief accountants regularly complain that the workload of the department is too high and ask for more staff. How can a manager find out whether accountants are really overloaded with their current work or whether the problem lies in the low efficiency of work organization? How to determine KPIs for accounting employees?

A qualified chief accountant must have the tools to objectively assess the workload level 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 ensure a more even distribution of the workload among 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 maintaining, but also to increasing 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 completion of declarations;
• timely payment of company bills by clients;
• no errors in accounting;
• the amount of financial savings (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 department salary expenses;
• presence/absence of complaints from external and internal clients of the enterprise regarding the work of accountants.

If we consider KPIs for an accountant, various examples can be given, but it is necessary to take into account that this particular department is capable of influencing the efficiency of all the main business processes of the enterprise by increasing profits and optimizing costs.

In business and economic processes, the key performance indicators of the accounting department are:

• interchangeability of employees;
• number of accounting specialists;
• minimum volume of overdue documents during the work process;
• number of company employees per accountant.

In addition, one should take into account the level of qualifications of accountants and their motivation to work to obtain the required result. The manager must monitor the workload of employees, the comfort of work in the field and, if necessary, provide accountants with timely advanced training in specialized courses.

Depending on the assigned tasks and the deadlines for their completion, the manager evaluates the work of a particular 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. Let's give an example of this for the accounting department, where the work includes such components as:

• primary documentation (incoming);
• accounting standards and Tax Code;
• work results (reporting).

To calculate the required number of employees in the accounting department, you need to know the approximate amount of primary documentation received over a certain period of time (day, month), and have an understanding of how many employees and in what time will be able to process such a volume of materials.

To, for example, determine the KPI of an accounting employee responsible for payroll, the following criteria are used:

• the number of employees of the enterprise served by him;
• payroll calculation based on the number of employees (payslips);
• withholding tax and other mandatory payments based on the number of employees;
• number of intersettlements.

Based on such criteria, the standard for an accounting employee is determined, based on which the number of accountants required by the enterprise is calculated. For example, if we take 1,600 monthly payroll sheets as the KPI norm for a payroll specialist, then for an organization with more than 5,000 employees, 3 payroll accountants will be needed.

Each company has unique KPI identifiers. They are formed on the basis of the goals and objectives of the enterprise.

KPI identifiers are set by management (chief accountant or director of the company) and may contain more or fewer indicators than in the examples presented in this review. The main motivation of employees is 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 senior managers

In the process of building a KPI system, managers of structural units of an enterprise must adhere to the following principles presented in the table.

The company's main guidelines are always determined based on the strategic goal. For example: “What results does management want to achieve in a given time period?” A key indicator may be a leading position in the market or a promising 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 enterprise’s capital to obtain the highest selling price.

To do this, first define the main goal and justify it in detail in writing. Then they break it down into several small goals, which are specific tasks that will help achieve the main goal. Visually, this can be displayed in the form of a “tree of goals” drawn on paper with reference to the organizational structure of the enterprise.

Human psychology is such that many, out of fear of showing their incompetence on some issues, agree to carry out a task at random, without even understanding its essence. Based on the results of observing the setting of tasks in one well-known holding company, it turned out that at a meeting with the main management, many employees agreed with what was said, but after leaving the office, they asked their colleagues what the boss had in mind.

Each point of the KPI system must be clearly stated. For this purpose, the company’s management (CEO, board of directors and management) draw up and approve the KPI regulations. It would be nice if the document provides examples and calculations with formulas, and all the terminology is tied 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 reporting documentation systems, it is necessary to indicate by what method each indicator should be calculated.

To better understand the provisions of the KPI, several general meetings are held. Each manager must independently calculate his 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 identified.

The final approval of the document is carried out with the maximum number of indicators established for all managers. Each manager is able to simultaneously monitor no more than five to seven indicators.

You should not be guided by the principle of achieving maximum results, since many top managers, when given a task of high complexity, simply stop making great efforts to complete it.

The key performance indicator is calculated once a year. This is the most optimal time to evaluate a specialist’s achievements. What to do if the lead manager was hired during the current year? As an example, consider the capital's Insol group of companies. 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 manager’s previous achievements on similar indicators with an increase of 20%. This is the target interest rate set by the head of the company;
• if the leading manager was hired recently, the performance of his predecessors is considered (20% must be added to the average performance).

The amount of bonuses depends on the achieved level of planned indicators. Let's consider this situation using an example:

• 50% bonus if the actual indicator 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 if an unacceptably low result is obtained.

When calculating KPI, it is better to take into account general and personal indicators. The first includes the results of the department’s activities, which are managed by the company’s top manager. Overall results motivate employees to work as a team and serve as a manifestation of the specialist’s interest in the end. The specifics of the enterprise's activities and the position of the manager are the main factors that determine the ratio of general and personal results for the formation of KPI. A high official position implies a reduction in the weight of personal results. For a leading manager, the percentage of personal indicators may range from 10 to 20% (or they may not be taken into account at all). For the head of the company, personal KPI means obtaining qualification certificates as a specialist in the financial sector, which is mandatory for some companies, as well as preparing a successor.

KPI is expressed in specific numerical values. For example, for a personnel manager, such a criterion as “attracting highly qualified personnel” is unacceptable. In this case, there are no such indicators as timing, 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 “qualified” and “highly qualified specialist.”

It is important to establish how the indicator will be determined. It is not advisable to use expensive data, spend a large amount of personal time and involve other companies for this purpose. For example, if the head of a marketing department needs to determine the level of brand awareness, then quite expensive methods will have to be used to assess KPI.

For each indicator, it is necessary to form achievement levels:

• threshold (indicators below which bonuses are not awarded);
• target (a specially provided remuneration is paid for this indicator);
• maximum (increased bonuses are paid).

The influence on some general indicators may be indirect, but in personal indicators the connection 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 trade loans are made only by the general director.

If the percentage of the bonus is insignificant compared to the employee's overall income, then he will not spend his time setting strategic goals and 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 a company employee, indicators are considered fair if they differ by no more than 30% from the average figures in this industry. In this case, the experience of colleagues will be useful when developing key performance indicators.

A very important aspect is the fair procedure for calculating KPI. If a certain amount of profit was established for a top manager in relation to the KPI, but at the end of the reporting period the indicators barely reach 50%, then according to the provisions of the KPI the manager is not awarded a bonus. At first glance, everything seems fair, but if we take into account the crisis situation of the past year and the bankruptcy of more than 50% of the companies in the industry, where all the others broke even, then in the end it turns 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 the main indicators are linked to industry-wide indicators.

• Rules for managing sales managers: how to protect your base after dismissing employees

A practitioner tells

Manager's KPIs as an example

Tatiana Kostenkova,

Legal and Business Development Advisor at Finstar Financial Group, Moscow

Case Study 1. KPI for Store Manager

Let's consider an example from the practice of the Narodny Trade House (Bishkek, Kyrgyzstan). The following key performance indicators have been developed for store managers of this trading house:

KPI 1. Fulfillment of the sales plan. It is calculated based on the ratio of the actual sales volume to the planned volume. The store revenue plan for a certain period is approved by the general director in agreement with the financial and commercial directors. This KPI identifier is assessed by an analytics specialist (Table 2).

KPI 2. Compliance with reporting and performance discipline. This indicator demonstrates the timeliness of preparation of reporting documentation, transfer of utility bills for payment, sending documents to the archive, execution of orders of the general director, implementation of inventory regulations, as well as accuracy of adherence to corporate standards and compliance with reporting and performance discipline. The KPI is assessed by the company's commercial director. For each violation, 1 point is counted.

KPI 3. Performance of subordinate employees. The assessment 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 assessed as 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 level, difficulties with complying with corporate standards emerged.

The heads of departments were given 4 tasks:

• cost minimization;
• maintaining the indicators achieved in previous periods;
• compliance with the methodology for developing decisions according to the standards of the parent holding company;
• reduction of unprofitability.

To encourage the director to solve the assigned tasks, 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. The assessment of implementation is carried out by the board of directors based on the audit data compiled from the operating profit report. The weight of the indicator in the bonus is 0.3.

KPI 2. Failure to meet EBITDA indicator. The identifier is assessed by the board of directors or audit committee based on the 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 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 KPIs in Excel: examples and formulas

Financial bonuses in the KPI motivation system are stimulating in nature. The amount of payments depends on the personal results of the specialist’s work in the reporting period. The amount can be fixed or calculated as a percentage of salary.

Any company determines KPIs and the weight of each indicator individually (depending on the objectives of the enterprise). Eg:

1. 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.
2. The goal is to increase the amount shipped by 20%. KPI - average shipment volume. Measurement system: actual average shipment volume/plan for average shipment volume.
3. The goal is to increase the number of customers by 15%. KPI - the number of customers in the company's database. Measurement system: actual number of buyers/planned number of buyers.

The company determines the spread of KPIs (scales) independently. Eg:

1. Implementation of the plan by less than 80% is an unacceptable result.
2. Implementation of the plan 100% - coefficient 0.45.
3. Implementation of the plan in the range of 100-115% - coefficient 0.005 for every 5%.
4. No errors - coefficient 0.15.
5. There were no comments during the reporting period - coefficient 0.15.

This is just one possible example of defining 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 salary (fixed part) and bonuses (variable part). Motivational KPI influences the calculation of the variable part of the salary.

Let’s take the ratio of the constant/variable parts in wages to be 50:50. According to KPI, examples of indicators and weights of the variable and constant parts are as follows:

Let us accept the following coefficient values ​​(the same for indicator 1 and indicator 2):

KPI table in Excel:

Explanations:

1. Salary - (constant component of salary) is calculated based on the number of hours worked. In our example, the constant and variable parts have equal weight.
2. The percentage of completion of the implementation plan and work plan is calculated as the ratio of the obtained indicators to the planned ones.
3. To calculate bonus payments, coefficients are used. In our example, the influence of indicator 1 and indicator 2 on the premium amount is equal. The magnitude of the coefficients is also the same. Therefore, to calculate indicators 1 and 2, they use the same formulas (only the 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 an example summary (KPI Excel example). Each company creates its own table taking into account the characteristics of its activities and the bonus system used.

• How to find and motivate a salesperson with a high customer focus

KPI matrix example in Excel

To evaluate employees on key indicators, it is necessary to create a matrix or agreement on goals. Based on the general form used to calculate KPIs in Excel, the examples look like this:

1. Key identifiers are the criteria by which the company’s employees are assessed. Different criteria are used for different positions.
2. The weight of the indicator is indicated in numbers from 0 to 1 so that the sum of all indicators equals 1. The weight number indicates the priority of this KPI, taking into account the objectives of the enterprise in the reporting period.
3. The basic value of the KPI indicator is the acceptable minimum. A level whose value is less than the “base” is the absence of a result.
4. Norm (planned indicator figure) is a mandatory level to fulfill. If the “norm” is not implemented, it means that the employee is not coping with his job responsibilities.
5. A goal (an above-standard indicator that makes it possible to improve results) is a value to which one must strive.
6. Fact - actually achieved performance indicators.
7. The KPI index demonstrates the level of results in relation to the norm.

KPI calculation formula:

KPI index = ((Actual - Base) / (Norm - Base)) * 100%.

An example of filling out a matrix for an office manager:

The performance coefficient is calculated by summing the products of indices and weights. Employee performance evaluation is clearly demonstrated using conditional formatting.

Where was the successful implementation KPI: examples of companies

The KPI system is being actively implemented at domestic enterprises.

1. Sberbank: motivating employees through KPIs.

An example of an enterprise that has successfully implemented a KPI system is Sberbank. Just 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 occurred in the work of the enterprise. For ordinary personnel, group indicators were developed, called “5+”:

• personal effectiveness;
• improving your knowledge;
• customer focus;
• optimization of working time;
• teamwork.

The motivational system developed for Sberbank employees is not limited solely to financial incentives. As non-material motivating factors, such points as the provision of benefits, free schedule, discounts, tour packages, etc. are used.

2. "Tycoon" - a new management system.

The system of key indicators of the Magnat company is called KPI-Drive. Its creators set goals to solve the following problems:

• Increase level 1 key performance indicators by the second year after implementation.
• Improve the movement of variable costs by increasing the dynamics of the wage fund.
• Increase business transparency and manageability.
• Strengthen team interactions.
• Recoup the costs of implementing the system.

The results of implementing the KPI methodology can be an example of how quickly the intended 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 technologically advanced and understandable.
• The motivational system has become more technologically advanced and flexible.
• KPIs of the 1st level of the enterprise are constantly improving.
• Magnat Group of Companies is an example of the successful implementation and use of targeted 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 of the 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. Implementing KPIs is not an easy task that requires time resources and serious effort, but the effect of implementing the system is worth it.