Payroll calculation by kpi example. We evaluate the performance of the department. How to overcome staff resistance when implementing a KPI system

Now we list a number of rules that must be taken into account when creating your system for evaluating the performance of KPI work.

Firstly, it is worth noting that the calculation of KPI indicators cannot be overly complex and lengthy, so that any manager is not distracted from his direct duties, and is not forced to do all his work time dedicate to this work.
Secondly, the indicators should be transparent and as measurable as possible so that they can be understood by all employees in the enterprise in the same way.
Thirdly, and most importantly, these indicators should not just be received and ignored, but on their basis a picture of the work of each employee was drawn up. On the implementation of the plan - a bonus or encouragement is paid, if the plan is not fulfilled, on the contrary, a fine is imposed.

Positive and negative sides of KPI

The positives include:

Motivation for employees to implement the plan.
Honesty, transparency and adequacy in wages. You can see which of the employees works best and how much he receives.
Making adjustments to the work of a lagging employee.
The staff is involved in achieving the goals of the company.
Monitoring the quality of work and the fulfillment of their duties.

The disadvantages of the indicator include the fact that it is not ideal. Not in all areas KPI can be effectively and rationally applied, since it is not always possible to measure in quantification one job or another. This means that in order to find it or bring the system to the desired indicators, the manager will have to spend a significant amount of time, nerves and budget.

Motivation by KPI

It sounds ominous, but it's actually very simple. There are 3 main levels in the system: minimum (at which the employee is not fired), normal (when the employee shows a satisfactory result) and maximum (where the staff should strive). If each employee of the enterprise clearly assesses what indicators he has and where he needs to grow in order to receive a salary increase, bonus or new position, he begins to work with redoubled energy.

Example of KPI calculation

There is no formula for calculating this indicator, because each enterprise is unique and has its own specifications, but we will take a fictitious company, let it be the “Your Milkman” store and our employee-manager:

The rate is 10 thousand rubles.
He receives 5% from each of his sales (the turnover is 500 thousand rubles).
He receives a bonus of 2 thousand rubles if he finds the right number of new customers.
It is not difficult to calculate that he will earn 37 thousand rubles.

As you can see, the calculation is transparent and understandable for any employee, which means that this increases the motivation of company managers to sell and attract new customers.

How to implement KPIs

To implement the system in an enterprise where none of the employees have ever encountered such a system can become a real problem, it can even go as far as refusing to enter the workplace.

That is why, first of all, you need to carefully analyze all the moments, find key indicators and submit for temporary testing. This moment will help to reveal all weak sides your system and improve it, bringing it to a good result.

The most important factor in a successfully implemented KPI system, is its automaticity of all processes.

Summarizing

From the article, we learned that KPI is a key performance indicator, analyzed its positive and negative sides, learned how to calculate this indicator, analyzed how it can affect employees and how to properly implement the system in production.

You will learn:

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

What is a KPI system

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

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

It is believed that KPIs are directly related to BSC (Balanced Scorecard - Balanced Scorecard), but this is not so. The creators of BSC did not use the term KPI. They used the concept of "measure", "meter", or measure.

KPI and BSC are indirectly related. BSC is endowed with the perspective of business processes, where the associated goals are present. To measure how these goals are achieved, specialists use business process KPI indicators.

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So what is KPI in simple words? These are certain indicators, thanks to which it becomes much easier to understand what actions should be taken to increase efficiency. At the same time, efficiency is not only the number of manipulations carried out over a certain time period, but also the benefit that the company received from the work of a single specialist.

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

Here are some examples of KPIs . Possible KPIs for a sales manager are as follows: “Sales volume not less than…”, “Number of new clients not less than…”, “Average contract amount per client is approximately…”, “English proficiency not lower…”.

Another example of KPIs. You are the owner of a large point of sale household appliances. 12 managers work for you. How effectively each of them works during the month is evaluated based on the following indicators:

how many people the manager talked to bought the equipment (percentage);
the amount of the average check;
to what extent the sales plan has been fulfilled (for example, the amount of the minimum bar is 350 thousand rubles a month; the level of overfulfillment of the plan as a percentage will affect the manager’s salary).

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

3 interesting facts about KPI

The Key Performance Indicators system has been used in the West for over 40 years. In the CIS countries and Russia, it has been used for about 15 years.

In a number of countries (Korea, Singapore, Hong Kong, Japan, Malaysia, Germany and the USA), the Key Performance Indicators system is national idea. KPI is not just a concept there, but the basis of the work of all companies.

Russian President Vladimir Putin proposed creating a Key Performance Indicators system to evaluate how officials work.

How to avoid mistakes when implementing KPIs

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

Where does KPI development begin?

KPIs should be created from the top down, starting with the company's large-scale goals to the tasks facing individual worker. To fully solve problems, it is necessary that all personnel be involved in the preparation of the KPI system. We are talking about employees working in the planning, economic, financial, organization management specialists labor activity, a team of personnel departments, sales, technology department.

To get started, the organization needs to figure out which KPIs to prioritize. To do this, the enterprise specifies and checks the goals of a strategic and operational nature. The formulation of the goal should ideally be such that it does not have a clear designation of the financial component as the main indicator. It is better if the financial indicator follows from the main task. With this approach, the company will be able to feel confident in the crisis period.

Requires connection of the goal with the market environment, changes in the market. For example, a company may set itself the goal of becoming one of the TOP-3 in the market for its products or take leadership positions in a certain area. After the main goal is formulated, subgoals are highlighted.

After setting goals, you should analyze how effectively the company is now working and how it solves current problems. At the same time, it is necessary to determine how the wages of employees will be calculated.

When creating KPIs in an enterprise, it is important to budget for personnel costs. In this case, it is divided by types of payments. In addition, it is required to take into account the indexation of wages and career specialists.

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

The regulation on KPI should include information about the goals and objectives pursued by the system:

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

Key performance indicators and their types

Key KPIs are:

lagging, reflecting the results of the work at the end of the term. We are talking about financial KPIs that testify to the potential of the company. However, such coefficients cannot show how efficiently the departments and the organization as a whole work;
operational (leading), which allow you to manage the state of affairs during the reporting period in order to achieve the goals at its end. Operational performance indicators help to understand how things are now at the enterprise, and, at the same time, demonstrate financial results further. On the basis of operational KPIs, one can also judge how well the processes are running, whether the products are good, how satisfied customers (consumers) are with them.

The main conditions are that indicators should contribute to the implementation of intermediate and final goals, and all indicators can be quickly and easily calculated. The coefficients are different - qualitative (in the form of a rating or points) and quantitative (in the form of time, money, production volume, number of people, etc.).

Examples of KPIs

KPI for an employee technical support. A specialist of this profile should advise those who are real buyers and help potential customers. The set of KPIs in this case is small. The work of an employee is evaluated on the basis of how well he conducts consultations, in what quantity, whether customers are satisfied with the service.

Key performance indicators for a sales manager. The number of new buyers must not be below a certain mark, the volume of sales must not be less than the established limit, the size of the average contract for a client is within the indicated boundaries, the ownership English language on one level or another.

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

Process, indicating what result the process has brought, how requests from consumers are processed, how new products are created and brought to the market environment.
Client: how satisfied are the customers, how is the interaction with the sales markets, how many buyers were attracted.
Financial allow you to judge the external economic situation of the enterprise. Here we are talking about the level of profitability, turnover, market value products, financial flow.
The development criteria show how dynamically the company is developing. This is the degree of productivity of specialists, the level of staff turnover, the cost per employee, employee motivation.
Indicators external environment: how the price fluctuates, what is the level of competition, what is the pricing policy in the market. These indicators should certainly be taken into account when creating KPIs.

How to calculate KPI

Stage 1. The choice of three key indicators of the effective activity of a specialist:

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

Stage 2. Determining the weight of each indicator. The weight in the total is equal to 1. At the same time, the largest share belongs to the priority indicator. As a result:

the number of new customers is given 0.5;
the number of repeat orders - 0.25;
reviews - 0.25.

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

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

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

In this case, the goal is the planned indicator of the marketer. The fact is the real result.

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

Stage 5. Payment wages.

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

Result:

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

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

Such a table allows you to see the problems in the work of a marketer, the difficulties that he cannot cope with. Possibly, not enough good results of activity can be caused by the wrong strategy of increasing the level of customer loyalty. However, it is possible that initially the plan itself was drawn up illiterately. In any case, the situation must be controlled. If things don't improve in the future, reconsider the requirements for performance indicators.

If you stick to such a policy, you will learn what KPIs are in the process of production, sales, etc. You will better understand how the calculation of indicators and the process of their implementation should be.

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

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

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

Implementation of KPI in the company

Both employees and third-party consultants can be responsible for the process of implementing the KPI system created in the company. At the same time, one should take into account the specifics of the enterprise, how business processes flow in it, what goals and objectives the company sets for itself. It is necessary that the rank-and-file staff be aware of how the payroll system will change. Communicate to employees that the main indicator will be the level of their effectiveness. When introducing a KPI system, specialists should be trained. Personnel must understand that changes are beneficial mainly to them. Implementation of the system involves the development of special documentation: employment contracts, staffing, collective agreement and other papers related to payment for the activities of employees.

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

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

In the process of introducing KPIs in the company, make sure that the indicators can be adjusted if necessary. Thanks to the constant monitoring of indicators, it will be possible to adapt in time to changes in the market environment and edit the working strategy. In addition, every year it is necessary to improve the model for the formation of premiums, that is, to optimize it. As part of the optimization, the evaluated indicators are changed to others that are more relevant for certain employees and departments.

What KPIs to set for the manager

KPI personnel and management should be related to the main objectives of the enterprise. You need to know exactly what you want to achieve after a certain period of time. You can strive to get ahead of the competition and become a leader in your industry. Another option - the head of the company wants to sell the business for favorable price. KPI for the first case is an increase in the customer base and sales volumes, for the second - an increase in the capital of the company and the achievement of the maximum sale value.

The main goal must be written down and formalized, and then divided into sub-goals. When specialists successfully fulfill subgoals, they approach the solution of the main task of the enterprise.

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

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

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

If the KPI system is created well, the ratios show how each of the managers works, and this information is useful for the company.

Calculating KPI progress is the heart of the pay system. The mechanism for calculating and accruing bonuses depends on it, and, therefore, the effect of the entire motivation system. However, from what I see in most organizations, today's managers still don't see how to do this simply and effectively. As a result, cumbersome, complex, and mostly unworkable schemes are devised to pay staff. Or even worse - they make a commission scheme for salespeople, and for everyone else "according to 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 in one single and rather trivial formula. But instead of it, in practice, for some reason, several extremely inefficient schemes have become widespread, which usually greatly interfere with the implementation of KPI 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 easiest and most obvious way, because. any key performance indicator (KPI, KPI) reflects the goal, and the goal must have a measurable expression - a plan. There can be no KPI without a plan. 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 a plan-fact analysis, such a formula is absolutely justified, however, we are talking about the calculation of KPI fulfillment for further bonus accrual. In this case, we do not take into account the commission scheme.

So what to do in the given example? Pay an employee 90% of the planned bonus? It seems logical if the plan is 90% fulfilled. And what if the plan is fulfilled by 50% - pay half the premium? But after all, if the sales plan is only half completed, then the company is most likely already in a very difficult situation. Products have a cost, 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 completed, then the organization will most likely incur losses, which means that it will have to optimize costs, reduce staff, or even worse. Paying a premium in such a situation (even half) is tantamount to suicide.

In one organization, for this case, they introduced special condition: if the degree of KPI fulfillment (calculated according to the fact / plan formula) is less than 50%, no bonus is accrued. Well done, they insured themselves against the payment of bonuses in case of bankruptcy, but in such a situation, half of the bonus fund is used inappropriately. In fact, in that organization, all plans were guaranteed to be fulfilled by 70-80% - the business has a certain inertia. The struggle was for the last 20-30%. It really takes some effort to get them. But with the fact / plan execution formula, this is the targeted use of the bonus fund by only 20-30%, the rest of the payments are guaranteed to all employees. And why strain for a 20% bonus, which is about 30% of the total salary, because it is only about 6% of the total salary (0.2 x 0.3 = 0.06). This reward system just doesn't work.

This is where the first important rule comes in:

Every KPI except the plan should be critical

This truth has long been evident in Western companies that have been saturated over the past decades with quality management systems, performance management technologies, and so on.

critical value for simple direct indicators (the more, the better) - this is the minimum below which the fact according to KPI should in no case fall. For example, the plan is to process 97% of customer requests on time, the critical value is 92% of requests. Below this threshold, contract penalties begin and clients change service providers. For reciprocal indicators, the critical value is the allowable maximum. For example, the plan for the level of marriage is no more than 1.5% of the output, 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, 5% (97-92), in the second - -3.5% (1.5-5). IN real life the struggle for the actual KPI values is carried out precisely within the limits of permissible deviations. And it is within this framework that the degree of fulfillment and the premium should be calculated. But the simplest fact / plan formula does not take this into account in any way.

2. Tables of values

Many managers intuitively understand this problem, but without knowing professional tools her decisions, do what was once seen somewhere. So, in practice, substitution tables have become widespread, in which certain intervals of indicator values \u200b\u200band the index of the degree of completion corresponding to each of the intervals are indicated. Surely each of you at least once in your life has come across such things:

No. p / p	Intervals of KPI fulfillment deviations from planned values	Percentage adjustment of 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 of the indicator, the degree of implementation is more sensitive to changes in the indicator, which is what we wanted to achieve. Apparently, because of the seeming simplicity of solving the table of values, they have become so widespread. In practice, they have a number of very significant drawbacks:

When using such tables the premium becomes discrete, insensitive to small changes in the indicator. For example, in the above example, the premium will be the same at 91% and 96% performance. And for a company, such a fluctuation can cost half or a quarter of the 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 unfair and makes the premium accrual random.
It is relatively convenient to use this kind of tables when all indicators in the company are straight lines (the more, the better) and have the same tolerance. For example, 20% of the plan, as in our example. But what if some of the indicators are inverse (budget savings, reduced scrap), and the permissible deviations differ for them? For example, the allowable deviation for the level of marriage 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 tolerances vary by season? For example, in our peak season, the allowable deviation in revenue is 25%, and in the low season - 50%. As a result, for each indicator for each calendar period, it will be necessary to compile a separate lookup table, which complicates the calculation of premium. Or you need to throw out everything from the list of KPIs that does not fit into the “simple direct indicator with a tolerance of 20%” scheme. But then the pay system will again become flat and will not reflect the real results of the employee's work.
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 by the plan, and only then get the corrected degree of implementation by substituting the resulting plan-fact to the table of values. There are situations of using tables of values immediately in physical terms. For example, 2 violations of the regulations - 0% bonus, one violation - 50%, zero - 100%. But for indicators with changing plans and tolerances, such a scheme is not suitable.

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

3. Formula with standard

In fact, the solution is quite simple and has long been known. To calculate the degree of performance of the indicator, it is possible and necessary to 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 difference between the fact and the critical value is considered in the numerator, because You only have to pay for the excess. Further, this difference is correlated with the permissible deviation. That is, a fact equal to the plan is taken as 100%. It is natural. If the fact is compared with a 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. Schematically, the calculation logic is shown in the picture:

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

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

You do not pay for actual KPIs above/below tolerances.
The premium becomes as sensitive as possible to any changes in the KPI fact within the tolerance.
The formula is absolutely universal and suitable for any type of indicators - for direct, reverse and even corridor indicators, for each KPI for each period you can set the required tolerance, 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 an allowable deviation. But this is inevitable if you want to create a working KPI system in the company. How to correctly determine this tolerance, we will talk separately.

It is noteworthy that most KPI automation tools are not familiar with this formula (and automation for managing KPI is useful, we wrote about this earlier). Of course, such a formula is "hardwired" in 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 achievement of the indicator, where you can set up a formula with a standard, but only if the KPI standard does not change from month to month in% of the plan. If the tolerance "jumps", the desired setting can no longer be carried out. The rest simply stupidly divide the fact into a plan or offer tables of values. Imagine, you are buying a program that should make your life easier for several hundred or even million rubles, and it does not even allow you to enter an allowable deviation in terms of 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 respective software products.

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

Nonlinear (parabolic), when the function of the degree of execution 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 fell.
Competitive, when the best / worst employees receive / do not receive the bonus.

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

However, in practice, we have not seen such payment schemes - they are too complicated.

Good luck with motivating employees!

Any company is interested in improving the efficiency of business and work of staff. The achievement of these goals is largely facilitated by the introduction of quantitatively measurable and reliable indicators in the assessment - KPI (Key performance indicators).

The main advantage of a system built on the basis of key indicators is its versatility. It is also aimed at increasing the interest of staff in the results of the company's activities. When developing KPIs, the specifics of the organization's activities are taken into account. KPI can be used both to evaluate the work of the entire company, its individual divisions, and specific workers. In addition, the KPI system allows you to compare homogeneous processes that occur in different conditions. It also makes it possible to compare performance across multiple departments over the same period.

The main advantage of KPI systems is that the decision-making process is reduced to the analysis of data that is available at any time and presented in a pre-approved format.

Calculations and application of KPI

The most effective way to apply KPIs in large companies retailers who have extensive network. In this business every a store generates the same business processes. This enables the top management of the head office, through the development of simple indicators, to see differences in the work of branches and predict difficulties. Moreover, on the basis of these indicators it is quite possible to build a system of staff motivation. In addition, constantly comparing and analyzing the results of each of the divisions, with a high degree of probability, it is possible to predict the development trends of the business as a whole.

Simplicity of calculations financial indicators provided by a transparent form of presentation of financial or management reporting. All the necessary data is contained in the balance sheet and income statement. Management can obtain information for any period as quickly as the accounting system in use allows. On practice given time ranges from three to five days to 20. Such a period is quite acceptable in order to timely implement managerial influence.

The development and comparison of indicators should be carried out by an internal business analyst, due to the need to provide accurate data. He should clearly present all the pros and cons of each of them. After all, indicators that are applicable to evaluate a top manager and a business as a whole often cannot be used to evaluate any department. This is due to the specifics of the work of each structural unit. For example, to evaluate the head of the responsibility center, the indicator of profit remaining at the disposal of the organization before taxes and interest (EBIT - earnings before interest and tax) is suitable. However, this indicator is completely inapplicable for evaluating the work of the account manager. The fact is that EBIT is a purely financial indicator. It characterizes the efficiency of doing business, that is, it directly depends on the income and expenses of the company. The account manager does not directly influence these figures. Another, non-financial indicator should serve as an assessment of his work. For example, the number of customer claims resolved, or the percentage of that number to the total number of claims.

Basic requirements for KPI

The value of a scorecard is not in monitoring data on a “count-compare-forget” basis. The main thing is that it allows you to identify patterns in the development of a business as a whole or individual business processes. In addition, KPIs are used in short-term and long-term budgeting. After all, the budget is essentially a set of financial indicators that lead the company to the fulfillment of predetermined strategic and tactical goals. Moreover, usually the main one is making a profit, the same EBIT, in accordance with which the work of a top manager is evaluated. This is the relationship between the KPI system and budgeting. But the system of key indicators is not limited to the binding function of budget support. In addition, KPIs perform other functions, for example:

allow you to evaluate the work of each employee or group;
contribute to motivating staff for results;
increase the responsibility of each employee for his area of work;
provide an opportunity to develop and improve the most promising areas of business;
provide a basis for management to find "weak" places in business
in an accessible and visual form show the impact of a particular process on the result;
give meaning to every management decision.

When developing a KPI system, certain requirements that apply to each of the coefficients should be taken into account:

Each coefficient must be clearly defined, then any user can measure it. Including the employee whose results are evaluated by this indicator. For example, the organization of the simplest accounting at the workplace of an account manager contributes to the fact that he can easily calculate "his" KPI using data that is always at hand.

Approved indicators and standards must be achievable. The goal should be realistic, but at the same time be an incentive.

Each of the indicators should be the responsibility of those people who are being evaluated.

Indicators should contribute to the motivation and growth of staff efficiency, and this is directly related to setting goals. So, when the sales department fulfills the plan to attract new customers (KPI - the number of new customers attracted over the period), the department can count on additional bonus. If the plan is not fulfilled, on the contrary, the bonus is not paid.

The indicators should also be comparable, that is, the same indicators can be compared in two similar situations. For example, the average check (KPI - the ratio of average daily revenue to the number of checks per day) cannot be compared in a store located in a regional-scale city and a store of the same format, but located in the outback.

The dynamics of the coefficient change should be able to be presented visually (graphically) so that conclusions and decisions can be made based on the results.

And, finally, each indicator should carry meaning and be the basis for analysis. At first glance, the principle is banal, but it is fundamental. For example, let's take such a KPI as the ratio of the amount of expenses for the maintenance of the administrative apparatus to the total mass of profit. Formally, oddly enough, such an indicator satisfies all of the above characteristics: it can be quantitatively measured, can be normalized, presented graphically, shows dynamics, and so on. But let's think for a second, what is its meaning and what does such a coefficient show? Of course, this example in a grotesque form shows the operation of the principle of conformity of form to content. However, in practice, when developing KPIs, such incidents can occur. Special attention it is necessary to pay attention to the introduction of new indicators, involving experts in the analysis process. They can be managers, as well as the most trained specialists in the financial and commercial structures of enterprises.

Examples of using indicators

In addition to generally accepted indicators (usually financial ones), each company will also have to develop its own. This is due to the fact that there are different specifics of the business and different goals that the owner determines. So, a growing business can be valued by the already mentioned EBIT ratio. But a company that has already passed the period of its formation can be assessed by the level of gross profit (Gross profit) or, alternatively, by the level of profitability (Gross Margin). At the same time, of course, other “accompanying” components of activity are also analyzed: administrative, general, marketing expenses etc.

In conclusion, it makes sense to give a few of the most common KPIs (see table). They can be used to evaluate a particular manager or department. By filling out a similar table for each of the indicators being developed, a manager of any level will be able to find an answer to the question of what he wants to improve in his work or how to use existing resources more efficiently.

Examples of performance measures

Indicator	What does	Who is assessed	Possible frequency of calculation	What can be used for
EBIT, profit remaining after taxes, interest and dividends	Profit remaining after taxes, which is affected by the levels of income, expenses, investments (depreciation)	CEO, branch directors responsible for the revenue and expenditure side of their budget		Calculation of bonuses, self-financing reserve, obtaining loans, evaluating the return on investment, etc.
Gross Margin , profitability level (usually as a percentage)	The ratio of gross profit to revenue (total sales)	Heads of departments, business lines developing a product or service	Annually, monthly, and also up to the product or technologically completed process	To assess the prospects for product development, the impact of demand for a product or service, the impact of competition
Turnover ratio, frame rotation	The ratio of the total number of people laid off for the period to average headcount employed in the same period	HR director, managers structural divisions companies with separate staffing	monthly, quarterly annually	To assess the impact of employee turnover on business results, forecasting periods of the most active search personnel, determining the loyalty of each category of employees, to identify hidden savings reserves, assessing the effectiveness of the personnel apparatus
Average sales	Sales volume (in pieces, monetary units) that each seller brings	Sales department, sales manager	Daily, weekly, monthly, quarterly, yearly	Planning the revenue side of the budget of the unit, measuring the performance of each person or department and, as a result, distribution bonus fund, detection of seasonality
The ratio of the periods of turnover of receivables and payables (as well as each of the periods separately)	The ratio of the average payment period for buyers to the average payment period for suppliers	Customer Service Department, Financial Department, sales department, sales department	Monthly, quarterly, yearly	Planning cash flows and cash gaps, obtaining loans, calculating deferrals of payments under contracts, setting discounts for early payment, identifying internal sources of financing

Motivation of employees based on the results of work

With the help of key indicators, you can evaluate the effectiveness of each employee - from a cleaner to a top manager - and calculate their bonus accordingly. This contributes to the development of motivation among employees, because they understand that the size of the bonus depends on their efforts. However, when implementing KPIs, or rather, when determining key performance indicators, you may encounter some difficulties. It is not easy to single out the parameter of success "in its purest form", and the higher the position of an employee, the more difficult it is to separate the factors that depend only on him. Then, each parameter must be valued in terms of money.

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