In recent years, for most Russian leaders the task of increasing the efficiency of enterprise management is becoming more and more urgent. Technology effective management business is the focus. The reason for the emergence of new approaches to assessing business performance is the gradual increase in the value of intangible assets (new technologies, intellectual capital, innovation, reputation) in the total value of companies.
One of such international systems of effective management of developing business, which has gained recognition in the Russian environment of managers, is the Balanced Scorecard. The basic principle of this technology is “you can only manage what you can measure”.
The developers of the Balanced Scorecard proposed four perspectives for evaluating business performance:
History reference
Balanced Scorecard (BSC), or Balanced Scorecard (BSC) is a relatively new technology developed in the 1990s by Harvard School of Economics professor David Norton and CEO consulting company Balanced Scorecard Collarobative by Robert Kaplan. The Balanced Scorecard was created as a tool that allows you to coordinate the actions of departments and employees of the company to achieve the goals of strategic business development at the lowest cost and in the shortest possible time. The Balanced Scorecard, unlike other systems of that time, made it possible to take into account not only financial indicators of business development, but also non-financial ones, such as, for example, the innovative ability of an enterprise or the degree of customer satisfaction.
The BSC construction technology (BSC) for an individual company includes several necessary elements:
Key performance indicators (eng. Key Performance Indicators, KPI) - performance indicators of the enterprise that help the organization achieve strategic and tactical goals. KPIs allow you to control the business activity of individual employees, functional departments and the company as a whole. Key indicators (KPIs) have become part of the Balanced Scorecard system.
The system proposed by us was developed and adapted for enterprises, taking into account the Russian specifics, which lies in the fact that in our country the majority of managers have a weak strategic vision (the maximum horizon is 2–3 years), but at the same time they are “sharpened” for operational management . And so it was necessary to “combine” two vectors in one map - strategic and operational.
At the same time, motivational KPIs include not only indicators for strategic goals, but also critical operational indicators. This allows one motivation system to take into account the strategic and tactical goals facing management (see Figure 1).
Picture 1
Thus, with the help of BSC and KPI, the enterprise manages to control the implementation of the strategy online, transfer it to the mode of regular activity of all departments, managed by planning, accounting, control and analysis key indicators activities, as well as encouraging staff to achieve them.
Opinion
Deputy State Duma for Strategic Development Lyubov Penegina:
“At the time of the decision to develop a strategy in the BSC format, the company was already actively working on the implementation of process management. Business processes were defined and regulated, indicators were selected to measure activity (operational level). Based on the results of monitoring the achievement of goals by processes, corrective measures were developed, and goals were clarified. But at the same time, there was no feeling of the company as a single whole, the goals of the departments were inconsistent with each other, contradictory.
The development and implementation of the BSC system in the company made it possible to bring all the developments into a single system. There was an understanding of the role of each division in achieving common corporate goals.
The BSC methodology is also interesting because it allows you to translate strategic goals into concrete actions, to bring the company's strategy to each employee. A clear understanding of the goals set, an informed and engaged staff, continuous improvement work should increase the efficiency of our company.
We express our deep gratitude to the consultants who helped us build the system.”
Why did the enterprise need to implement BSC and KPI?
The company has been operating in the automotive components market since 2000, and today it is one of the largest enterprises on the territory of Russia for the production of suspension parts, steering for trucks of domestic and foreign production. In recent years, the enterprise has been actively developing, mastering new technologies, new types of products, a quality system has been introduced in production in accordance with the requirements international standards. In the course of such a dynamic development of the business and the organization itself, it became clear that it was necessary to improve the management system, which allows for constant monitoring of all aspects of the activity. Over the past year, new specialists have joined the top management team, therefore, it became necessary to form a joint vision of business development. To do this, it was necessary to update the mission of the organization, adjust strategic goals, “link” them with business processes and operational activities of departments and employees in order to respond as clearly and quickly as possible to emerging market changes and risks.
The initiator of the project to develop and implement an integrated management system based on the BSC and KPI was the head of the HR department, Lyubov Penegina. Prior to that, she participated in the training seminars of the MBA program, went through a number of trainings, studied the experience Russian organizations in various industries, and this helped her form her own approach to the implementation of such a project and the selection of consultants.
Technology for the development and implementation of a new management system based on the BSC and KPI
After the management of the enterprise decided on the need to develop and implement a new management system based on the BSC and KPI, a working group was formed, which included top managers and external consultants. The collaboration technology included several main stages (see Table 1).
Table 1
Collaboration Results
Strategic sessions optimally combined the theoretical base on strategic management and practical work in teams. An assessment of the current position of the company was carried out using a variety of methods and analysis tools. Thus, the gaps between the desired position of the company and the current situation are revealed. As a result of the sessions, a single vector of the direction of the company's development was formed, its mission and vision were revised and updated.
Figure 2
According to the BSC methodology, the goals are divided into 4 perspectives: "Finance", "Clients", "Internal processes", "Training and development". The result is a strategic map that shows the relationship between goals (see Figure 3 for a fragment of the map).
Figure 3
To measure each goal on the strategic map, it was necessary to select performance indicators and set target values for the period. And also determine the frequency of data collection for each indicator.
Thus, a corporate scorecard was compiled (table 2 shows a fragment using the example of indicators for the goal “Reduce management costs”).
table 2
In addition to the target values of indicators, it is also necessary to determine critical and permissible deviations - this information is required for the dashboard in the process of monitoring the achievement of goals.
After the goals are decomposed to the level structural divisions, it is necessary to identify activities (initiatives) to achieve the goals.
In addition, during the development of the strategy, the projects already existing in the company were reviewed, priorities for their implementation were built.
To monitor the achievement of goals, so-called "dashboards" are used, which are color indicators (see Figure 4). Dashboards can be configured in MS Excel or other specialized programs.
Figure 4
Indicators of the motivation system - KPI
KPI top managers consist of 5 indicators: one general - for the top-level goal and four individual - for the prospects of the BSC (a fragment of the table of indicators of top managers, see table 3).
Table 3
Next, an individual scorecard is formed for each manager or employee according to the following structure (for example, one indicator out of 5). The full version of the individual map includes from 3 to 5 indicators.
Building a bonus system
In the new bonus system, indicators are divided into quarterly and annual.
Those strategic indicators have become annual, for which it makes no sense to set quarterly goals and monitor their achievement. Quarterly indicators are more operational in nature, and it makes sense for them to both set goals for the quarter and encourage achievement of the goal based on quarterly results. Figure 5 shows the principle of distribution of the annual bonus fund of a top manager in terms of a month. For example, an abstract position with a current remuneration level of 100,000 rubles per month was taken.
Figure 5
Opinion
Quality Director Victoria Korovkina:
“I hope that the BSC developed by us with the help of consultants will become a convenient tool for the work of the chief executive of our company: the system will allow him to constantly “keep his finger on the pulse” by monitoring the status of achieving the company's goals.
For me, the benefits of the BSC are obvious: it is one thing when employees know the strategy and goals of the enterprise in the form of abstract slogans, such as “we will become the best in our market segment”, etc., and quite another when all this is concretized and digitized, when everyone understands what exactly he must do in order to achieve the fulfillment of a specific, clear and understandable goal to which he influences his activities.
To date, a simplified system for collecting indicators has been introduced - without integration with 1C.
Data collection is implemented through the auto-import mechanism in Business Studio from MS Excel tables.
Problems encountered in the development and implementation of the BSC
At the initial stage of the project, the consultants encountered some resistance from top managers, which was associated with their high business activity and lack of time to develop and implement innovations. Nevertheless, further joint work proceeded quite actively and constructively.
There were other problems too:
- The manifestation of hidden conflicts in the interaction of individual units.
- The imperfection or inaccuracy of a number of already accepted management decisions.
- The need for joint adjustment of production, marketing, accounting, financial, personnel and information policies, decisions on which were previously taken separately.
- Lack of trust among top managers and understanding of the real benefits of implementation new technology management at the level of their subordinate units.
- Lack or inconsistency of data required for monitoring indicators.
- Forced replacement of some strategic indicators with operational performance indicators.
Opinion
Expert consultants:
“The proposed system is essentially a compilation of strategic and operational management systems. The system is quite simple and not cumbersome, which is good for a certain level of development of the company. This level of development today corresponds to many Russian enterprises who do not yet need full-scale systems, but already need practical tools to translate strategy into action and maintain operational efficiency in doing so.”
Conclusion
In conclusion, it is important to note that the BSC and KPI system cannot exist separately in a company, it must be an integral part of an integrated enterprise management system and be logically combined with a process management system, quality systems, budgeting and information software.
The use of the BSC improves the interaction between shareholders, company management, a team of top managers, divisions and employees, makes joint activities“unidirectional”, aimed at joint achievement strategic guidelines. The company's management has a complete picture of the state of the business in real time, timely information allows you to quickly respond to crisis situations or anticipate possible risks, a large amount of data is structured and reflected in key business performance indicators. Employees can influence their production results by increasing the productivity and efficiency of their own work, and they can also evaluate their personal contribution to the common cause. Most of the employees consider the bonus system based on KPI to be fair and transparent, stimulating them to achieve their goals.
Bonus formula:
B \u003d OZP x 0.4 x (K1 x Weight KI + K2 x Weight K2 + K3 x Weight K3 + K4 x Weight K4 + K5 x Weight K5),
where B - bonus;
OZP - total staff costs for a given level of position or specific position;
D - the share of the bonus in the total costs;
K1, K2, K3, K4, K5 - the performance ratio of each KPI.
In this article you will learn
This article is about developing KPI in the organization and understanding of the necessary criteria that must be taken into account in order to increase the effectiveness of the implementation of the new system.
Any system of staff motivation should be aimed at finding the relationship between the goals of the enterprise and the employees themselves. The effectiveness of such a link between personal and corporate goals is possible in a situation where employees clearly understand the goals of the enterprise and understand the opportunity to influence their income (and not just receive a standard salary that does not depend on the employee's performance). Therefore, in the remuneration of employees from the level of department heads, a variable part should be provided - approximately 25% of the total income.
What is a KPI?
By itself, the KPI system cannot be considered a personnel motivation system. It is just a tool for the management system. Today, almost any indicator is called KPI. I can't understand why many businesses refer to the KPI as paying percentage of sales to managers. Or why KPI is commonly called a coefficient labor participation- probably just some fashion trends that are not entirely correct.
KPI - key performance indicators (performance indicators). Setting up a management system based on KPI is based on the ability to achieve the main goal of the enterprise through the implementation of performance indicators for employees from various departments.
It makes no sense to introduce KPI if the enterprise does not have a management system - when success depends solely on the efforts of the owner, who combines the functions of the chief financier, general director, chief personnel officer (mostly these are enterprises in the 1st phase of development).
The success of KPI integration is not affected by the number of employees. It is necessary to comply with another condition - the appropriate maturity of the business and an adequate accounting system. One of the classics of management emphasized that it is impossible to manage what cannot be counted. KPI - countable key indicators. They can be qualitative (in the form of a rating, points, etc.) or quantitative (time, money, volume of goods, people, etc.). However, in any key performance indicators should be countable for objectivity and comparison of data.
Not necessarily a mature accounting system includes, for example, a trendy CRM module or other popular applications. It is possible to fix and process the corresponding parameters in the Excel program. The main condition is the maintenance of not just formal accounting in the company, but also management accounting. Therefore, there will be a clear understanding of the trajectory of the movement of their money, the budget of income and expenses, there will always be an understanding of business trends, with the ability to calculate the balance.
When deciding on the relevance of KPI in your company, you need to take into account that the implementation of the system will require expenses of at least a million rubles. Therefore, when investing in such a project, it is necessary to understand the expected return and the period of its receipt. With the normal operation of your system, with the achievement of your goals and business development, but at the same time, old, already proven management tools are used, you need to switch to KPI settings only for a certain expressed reason, and not just to follow fashion trends. The KPI system will ensure the effectiveness of the result within the framework of product diversification projects, significant scaling of your business, increasing the market share by an order of magnitude, entering the regions, etc.
It is recommended to develop KPIs in a hierarchy from top to bottom - from the main goal of the enterprise to the goals of departments and functions. Sometimes the formation begins from the bottom - from the indicators and goals of a certain performer (as a rule, from a top manager to a middle manager), then the upward path begins to form towards a common goal. Indeed, at the level of everyday consciousness, one gets the impression that it is much easier to set a goal for an employee than to achieve an understanding of the overall goal of the organization. But under this condition, there can be no guarantee of achieving the desired results on the scale of the work of the entire enterprise, if the stake is on individual employees. Therefore, it will be necessary to verify the compliance of individual goals with the overall goal of the enterprise. In fact, you will need to do the same job twice.
First of all, when planning the creation of KPIs, a company needs to answer the question “why?”. What is the company's activity for, for what tasks did it come to the market, why do consumers need it?
From the answer to this question and will depend on the chosen direction of activity in the market - from its current position to the chosen final goal.
You need to define your goal, which is set for the long term - for example, after 3 years. When formulating an answer, it is not recommended to focus on financial aspects. After all, finances are quite a relative component, which is confirmed by the recent crisis.
It is better to formulate the goal in such a way that financial desire follows from it, but is not clearly spelled out. This increases the stability of the system, despite changes in market parameters. The goal should not be associated with a specific unit, but with the market - therefore, actions will be initially set up for market changes.
You can formulate your goals as follows - to be in the top three on Russian market yogurts, break into the TOP-10 companies in the furniture market, enter the market of terminal communications in Moscow and St. Petersburg, and become a leader in certain regions.
From the formulation of goals in the form of a desire to achieve high or leading positions in a particular market, all financial aspects will follow. Goals for profit, turnover, share of costs and growth dynamics of the enterprise will become clear.
After determining the overall goal of the company, it will need to be divided into sub-goals by asking the question “What needs to be done to achieve the main goal?”. Immediately you should pay attention - not what needs to be done, but what "to do". In the context of this formulation, “to do” means to move in a certain direction. And “do” implies the implementation of a specific action. If it appears the main objective organization as a specific action plan, then there is a risk of not achieving it if one of the planned activities is not possible. With a correctly set direction of your movement towards the target, there will be an opportunity to maneuver - therefore, it is possible to choose plan A, plan B, etc.
In most cases, there are no problems when compiling a list of possible KPIs. Since managers are well aware of the parameters by which it is possible to evaluate the performance of units. However, problems are accompanied by the selection of key, most significant KPIs.
The presence of many key performance indicators, like the choice of only one indicator, leads to a deterioration in the ability to manage. Since too many indicators complicate the calculation procedure. When choosing only one key indicator KPI performance There are 2 options - to confirm its achievement or non-achievement. But there is no room for maneuver, making changes to the work process in a situation where the results do not meet expectations.
Therefore, only a set of several top-level KPIs allows for the possibility of maneuvering - two or three are better. They can be selected based on an assessment of the significance of each of the KPIs, by analyzing their weight.
For each indicator, its own weight is assigned by expert means, so that the combined sum of the weights of all KPIs is one. You can not limit yourself in the number of KPIs. Weight must be determined taking into account the principle of necessity - what indicators need to be met to achieve the goal (which are not just desirable, but necessary, without which it is simply impossible to achieve the goal). These indicators are characterized by the greatest weight. Then we remove the indicators with a weight below 0.1, and again distribute the weights between those KPIs that remain. The output will be no more than 3-5 indicators. Indicators with a very small weight can then be taken into account for the motivation scheme as conditions for lowering or increasing the size of the bonus.
The balance is usually handled by the CEO with a team of top managers, taking into account the priority of the company's tasks. By the weight of the indicator, you can understand what actions the company should bet on in the foreseeable future (see Fig. tab. 4).
Leading indicators - allowing, in case of noticed deviations from the path to the goal, to intervene in a timely manner and make the necessary corrections to the situation. They support the management of movement towards the goal. An example of such an indicator is the level of inventory in a warehouse. This parameter can be controlled in the low or high season, making sure that there is enough raw material in the warehouse to produce a certain amount of products, or you need to purchase it additionally. Or there may be an excess of raw materials in the warehouse, it is old and must be sold to free up space for the placement of a new one. By taking into account the indicator "level of stock of raw materials", it is possible to make managerial decisions aimed at improving production efficiency.
There are not only leading, but also lagging KPI key performance indicators. According to these indicators, the achievement or non-achievement of one's task can be stated, however, without the possibility of making adjustments while moving towards one's goal. Therefore, if the goal is not achieved, lagging indicators simply indicate damage to the enterprise. Consequently, lagging indicators play the role of stop factors within the framework of bonus schemes. In fact, if this indicator is not reached, the bonus will not be paid in full or it will be significantly reduced. An example of such an indicator is staff turnover. After all, this indicator can be stated only by the fact - how many employees the company has lost over a certain period. Acceptance of managerial actions can only apply to the next period. But it will not be possible to influence the current losses - they can only be fixed for the future.
Therefore, when calculating the bonus scheme, the formula includes not only the weight and percentage of a certain KPI, but also the number of leading and lagging indicators.
In addition to calculations, it should be recalled that the seller's remuneration should not be tied solely to one indicator (for example, to revenue or turnover), without taking into account market features and seasonality. Since otherwise the business may face the trap of satiety - material factors lose their power of motivation. Consequently, the return for every ruble invested in employees gradually brings less and less return. And over time, the amount of investment in employees begins to exceed the return. A similar danger arises when an employee is provided with an income that exceeds the level he needs for his usual lifestyle (as a rule, it is achieved with 2 incomes of a specialist in his region in this specialty). The only way to treat the “satiation trap” is to dismiss an employee who has ceased to bring returns - it will no longer be possible to achieve the desired effect by changing the payment scheme.
KPI Based Bonus Calculation Formula for Head of Commercial Department
Bonus = (BF KPI 1 × A + BF KPI 2 × B + BF KPI 3 × C) × D, where:
BF KPI 1, 2, 3– max bonus fund, which is multiplied by the weight of KPI 1, 2, 3.
A- correction factor to KPI 1 with a threshold value of 70% (if the plan is less than 70%, no bonus will be accrued for this indicator (A = 0); if the sales plan is fulfilled by more than 70%, the corresponding bonus is accrued in proportion to the implementation).
B- correction factor to KPI 2, the threshold value of which is 85%. If this indicator is less than 85%, it is B = 0. If the level of 85% is reached or exceeded, the bonus will be accrued in proportion to the performance. The coefficient is blocking - if the threshold value of KPI 2 is not met, no bonus will be paid, regardless of the results of KPI 1 and KPI 3.
C- correction factor to KPI 3 (threshold value 60%). If the indicator is less than 60%, then C will be equal to 0, if it is performed by 61-100%, the accrual is proportional to the performance.
D– stop factor, which is a general blocking correction factor, with the bonus payment reset to zero if the minimum threshold values for any KPI were not reached.
Under the proposed scheme, the seller's attention is on the amount of receivables along with the cost of the sales process and the level of sales, and not limited to achieving growth in turnover at any cost. Thanks to this, the company manages to achieve timely receipt of money, refusing interest-free lending to staff or customers.
How to overcome staff resistance when implementing a KPI system
1. Employees need to be explained that what is being implemented is related to what they have already done the day before. Thanks to this, there will be no expectation and fear of cardinal changes every Monday with the cancellation of past results.
2. KPI is a fairly complex tool. Therefore, it is necessary to explain this technique to all users in advance - in order to receive feedback in test mode, discussion, discussion of questions that have arisen, etc.
3. critical factor success becomes participation in the project of setting motivation on KPI of the General Director and the team of top managers. If the management has doubts about the overall success of this project, such undertakings do not make much sense at all.
4. Top managers should also involve middle managers in the KPI development workflow - that is, employees who will be forced to evaluate and plan their own actions according to the new approved system. They must work together to create a phased implementation plan for a new project - usually the commercial departments are the first to test the system, and the back office at the very end.
5. It is necessary to encourage the activity of employees in the implementation of changes - you need to celebrate any, even the smallest victories.
6. Ensure that the workflow is consistent with the changes being made. Therefore, it is necessary to separately plan the transition from the current system of regulations to the new one - this will not happen instantly, therefore, it is necessary to separately take into account and control the time of this transition.
7. It is necessary to adhere to continuous changes in the company. However, in order to ensure continuity and consistency, the optimal situation is when all changes flow from the main goal of the organization.
Keywords:
1 -1
Preliminary task setting: takes place as an introductory meeting with the management of the company or the initiators of the project to form an updated technical task based on its results. The document will show:
Creation of a working group: the working group includes employees from the side of consultants and the necessary specialists from your side. Employees of the working group from your side are required to provide information about the company, participate in the discussion of the submitted documents and for the preliminary acceptance of the results of the work of consultants.
At this stage, primary information about the company is collected by studying the internal documents of the company and conducting interviews with employees:
At this stage, the consultants process the collected documents and materials, analyze the results of the survey and/or interviews, systematize, summarize and translate the information received into a formal language.
Thus, within the framework of this stage, the following works are expected to be performed:
As part of this stage, the following is carried out:
This stage does not always take place - depending on your wishes. In general development of KPI the stage of business process optimization should precede, however, sometimes this is not required, and all processes are considered to be correctly built and debugged.
After agreeing on the results of the analysis, the consultants proceed directly to the development of a motivation system based on KPI. As part of this stage, you need to:
After the development and approval of the developed motivation system, the company's consultants form the relevant regulatory documents, which describe in detail the principles of building the motivation system, the scheme for calculating remuneration, the frequency of payments, non-material incentives, etc. The format and content of the documents are agreed in advance with the Customer.
Before implementing the KPI system, it is necessary to test it to identify bottlenecks and unaccounted for points. To do this, an implementation and testing plan is drawn up, employees are trained, and the effect is monitored on a regular basis. As such, the implementation process begins from the moment the KPI system is developed by informing employees about the goals of implementing the system. It is necessary for employees to understand that the goal of implementing the system is not to reduce their wages but rather in obtaining a tool for a fair assessment of their performance.
As part of this stage, it is expected:
How, after all, to develop a really working KPI system in a company? There are many methods, there are separate examples, but it is practically impossible to find an algorithm for developing a real KPI system. I hope the reader will be interested in the proposed algorithm for developing a KPI system from scratch (when there is nothing yet), ending with the final result - a working system. About this in this article.
"God is not on the side of the big battalions, but on the side of the best shooters."
Voltaire
In the article “How to develop a motivation sheet for a salesperson? Strategy and Tactics”, which was published on December 27, 2016, showed specific KPIs for sellers taken from real practice author.
In this article I will try to give an algorithm for creating a KPI system in the company as a whole. On the example of a design company (IT company) implementing large and technically complex projects.
KPIs - Key Performance Indicators- key performance indicators of the unit, company or enterprise. The Russian abbreviation uses the abbreviation "KPI".
I'll start with the main one. The questions that usually come up are:
Lots of questions. Answers, as usual, many times less.
In the article “How to develop a “Headwheel” for managing a large company”, which was published on January 10, 2017, there is some material on this topic, since the basis of the “Headwheel” is the KPI system.
If the company has a business development strategy, strategic goals are the basis for strategic KPIs, which are easy to decompose into separate divisions of the company. In this article, we will not consider this case.
Consider the algorithm for creating a KPI system when there is no business development strategy in the company. Step by step.
Step 1. We choose the methodology for implementing the project to create a KPI system. For example, the Balanced Scorecard (BSC) methodology. I wrote about this in the article "How to develop a" Manager's Wheel "", but I repeat. These are the classic 4 "walls". See Fig.1. The gist in short:
A. Finance. Finance in the company is provided, after all, by sales of goods and services.
b. Sales. In order for everything to be normal with sales, technologies / products are needed - those that are in demand by the market and those that can be offered (sold) to the market.
C. Technologies/Products. In order for everything to be normal with technologies / products, specialists are needed - people who create them.
D. People. In order for people (able to do this) to create competitive products, they need to be paid, they need to be trained and developed, and so on. Then they will create products, products will be sold, and the company will have everything in order with finances. Then the company will be able to invest in people again and again to create new technologies / products. Technical specialists (production personnel) implement projects for which customers, in fact, pay money.
Rice. 1. Very simplified the essence of the Balanced Scorecard (BSC) methodology - Balanced Scorecard.
Step 2. We form the structure of the main areas of the company's activities. For example, for a project company, this is:
"Wall" A
A set of more complex macro parameters. Somehow: liquidity indicators, capital structure, business profitability, business activity and others will not be considered in this article.
"Wall" B
2. Sales.
3. Marketing.
"Wall" C
4. Key areas of development(their condition). Let's say this is the modernization and expansion of the product line.
5. Presale.
"Wall" D
6. Production(implementation of projects).
7. HR(personnel Management).
Comment: it is worth noting that many companies add their own “walls” (5th, 6th) to the classic 4th “walls”, which are the most important in the company's activities. For example, the logistics block.
Step 3. Determine the areas that we want to strengthen. Or areas in which we have clear “points of failure”. "Points of failure" are not complete failures in business. This is something that doesn't work, or doesn't work very well. The task is clear - to eliminate the "points of failure". There are such “points of failure” in every company.
Task example. Suppose, in general, everything is more or less normal with us, except for the fact that Industry Segment 1 ceased to be profitable, but we see that it is promising Industry segment 2(or new promising niche), with which you need to urgently start working.
An example of an action plan.
1. Prepare/adjust the product line for the new Industry Segment 2 (new industry for short - “NO”). This is the "wall"
2. Find a professional sales director for "BUT". This is the "wall" of B and D, since it is a task for the company's sales director and for HR.
a. Develop a customer profile "NO". This is the "wall" B.
b. Develop a profile for the NO director. This is the "wall" B.
c. To develop the main parameters of the motivation of the director of "NO". This is the "wall" B.
d. Develop a motivation sheet for the director of "NO" and agree on it. This is the “wall” D.
e. Carry out a search/hunting for the director of "NO". This is the “wall” D.
3. Form a new sectoral department - for short - "GCD" - (budget, responsibility centers, staffing, etc.). This is the "wall" B.
a. Assign tasks to the director of "NOD". This is wall "B".
b. Develop the main parameters of the motivation of sellers of "NOD". This is the "wall" B.
c. Develop motivational lists for NOD sellers and coordinate them. This is wall "D".
d. Search/hunt sellers in "NOD".
e. Transfer part of the sellers, hire part of the "NOD", part, perhaps, dismiss. This is the "wall" of B and D.
4. Set presale tasks to promote the company's solutions in "NO". This is the “wall” D.
5. Set tasks for marketing to promote the company's solutions in the "BUT". This is the "wall" B.
An example of a goal tree and KPIs.
"Wall" C
KPI (Technical Director):
"Wall" B
KPI (Company Sales Director):
KPI (Director of "NOD"):
"Wall" D
KPI (HR directors):
Comment: it is clear that there are tasks for "wall" A - to plan new expenses in the company's budget, etc.
So, we have formed a tree of goals and set goals and objectives that will ensure the creation of a new branch department (SOD).
1. The department will have to be headed by a professional sales director in this industry.
2. We have planned all the necessary actions related to closing or downsizing Industry direction 1 if it can't be closed yet.
3. The technical department, marketing, HR and pre-sales have been assigned the appropriate tasks, which must do their part of the work, according to their profile, and support the new direction “on all fronts”.
Dear reader, for sure, will think: “Easy to say: to hire a professional sales director for a new industry segment!”. Complicated! How did the author do? I formed several lists for HR.
1. List number 1. Large and medium-sized companies where it makes sense to look for a director or deputy director of a similar direction. It doesn't work, then:
2. List number 2. Smaller companies where it makes sense to look for a director. A person will be a little out of step, but he will be inside a more rebuilt company. And for him it will career. It doesn't work, then:
3. List number 1. Look for a strong seller in large and medium-sized companies, not a manager. Also for growth. It doesn't work, then:
4. List number 1. Look for a director who is close in terms of industry, taking into account his ability to master a new industry.
5. Etc. There were other options as well.
By the way, the HR service, having received such lists, could quickly figure out where and whom to look for. As a result, candidates usually found.
"For a man who does not know which harbor he is heading for, no wind will be favorable."
Lucius Annaeus Seneca the Younger
KPI details can be generated using, for example, the well-known S.M.A.R.T. goal setting methodology. So,
Step 4. Study the goal setting methodology to be used in goal setting.
For example, the goal setting methodology S.M.A.R.T.
Move on. We have identified areas that we want to strengthen. Or areas in which we definitely have “failure points”. What's next? Next, we develop an action plan (see example above) that will allow us to strengthen these areas and/or eliminate “points of failure”. Without a holistic action plan, it is not realistic to build a KPI system that will unite the work of various company services. Anyway, it's pretty difficult.
Step 5. Develop an action plan.
In Step 3, I showed an example of an action plan, not the most trivial, but which is quite possible to implement, and such action plans are quite often implemented by companies. What's important? - a meaningful approach to problem solving!
Step 6. Check the action plan for feasibility.
Experience shows that most often, it is immediately clear which points of the plan are precisely feasible. The main thing - you need to carefully look at those points that are clearly in doubt. And either, think a little (for example, arrange a “brainstorming”), or involve experts, or, perhaps, go another, simpler, way. But, one should not set clearly impracticable (unattainable) goals and objectives!
Step 7. Building a tree of goals (and tasks).
So, there is a plan of action. There are goals and objectives. It remains to build a tree of goals (and tasks) and appoint those responsible. If new Responsibility Centers appeared - well, these functions did not exist before - then it is necessary to modify according to the new Responsibility Centers organizational structure companies. So, in general, companies grow.
Step 8. Formation of a list of KPIs with the appointment of responsible employees for specific KPIs.
An example of a tree of goals and the formation of a list of KPIs based on an action plan is shown in the example above.
Step 9. Formation of motivational sheets.
Until similar (given above) qualitative goals appear in the motivation lists (and in the example above there is not a single financial goal!), the KPI system will not work! It will remain on paper. What is shown in the example above is what needs to be done urgently! Exactly in order not to "accumulate" a bunch of extra costs, and even worse - losses, and exactly in order to ensure the further growth of the company as quickly as possible. Of course, financial!
“It is impossible to solve the problem at the same level at which it arose.
You need to rise above this problem by rising to the next level.”
Albert Einstein
How to implement such a project?
I often hear "tried - it doesn't work!". There are quite a few reasons why such projects do not reach the stage of operation and the final result.
We often forget that man is not a machine. Therefore, based on my own experience, I would recommend the following:
1. Start with small pilot projects, limited by the scope of the company and the range of tasks. The goal is simple - to quickly develop a skill. It is not necessary to put developments into action immediately. You can simulate the situation (see item 3).
It is far from always effective to launch a large and complex project.
Example. Motivation systems in large companies, as a rule, are honed 2-3 years. In one of the companies in which I worked, we came to a balanced new motivation system only after 3 years. At the same time, a fairly good and correct system of motivation was developed already in the first year. In the second year we had to make it more aggressive. In the third year, the motivation system was already balanced, including by the market, and tested in practice for 2 years. Of course, subsequently the motivation system was adjusted every year.
2. Small pilot projects are best done in the simplest and most understandable means (for example, in Word or Excel). To start. The main thing is that this is the substantive part of such projects, “put on paper”. When implementing a very small task, the mistakes made (and they will be!) Can be quickly corrected.
3. Carry out a full cycle of modeling - from solving some small problem, to the formation of KPI with the conditional "appointment" of responsible persons and the formation of conditional motivational sheets.
Example. Suppose the company does not have motivational sheets (yet), there is no KPI system (yet), and the company has not implemented this project before. How to simulate a situation? Run steps 1-3. Do not assign KPIs (!), and “do not hand over” motivational sheets (!). Just entrust the responsible manager with what is written for him. And then compare what was planned and what really happened.
It is extremely important to try to avoid "classic" mistakes. To do this, do the following:
1. Be sure to form the final goals of the project to create a KPI system. The goal - "to set KPI" - is "understandable". But this is the same as “increasing the efficiency of the business”, “ensuring the further growth of the company”, etc.
I will give an example of a range of practical goals for creating a KPI system:
a. Objective 1.1: Competency testing of managers and key employees in order to identify “points of failure” (incompetent employees) and promising employees (able to grow). Still, key performance indicators should show (and show!) Efficiency and inefficiency.
b. Goal 1.2: checking the effectiveness of the company's business areas (sales, production, presale, marketing, etc.) with the same goal.
c. Goal 1.3: Checking the effectiveness of business processes and communications in the company. Most of the major goals and objectives are implemented by various departments. The growth of the company depends on the coherence of their work. No more and no less! This is the very efficiency that we often talk about.
2. The action plan must be checked for feasibility. So that it does not have unattainable goals (and tasks).
3. Be sure to appoint responsible for specific KPIs. At least simulate it (for starters). So that it does not turn out that no one is really responsible for specific KPIs.
"What is everyone's business is nobody's business» .
Isaac Walton
4. The project to create a KPI system must be completed with motivational sheets. So that the formed KPIs do not turn out to be “outlaws”. If this is a pilot project, let it be several KPIs for a period of 2-3-4 months. This is also correct.
A practical example based on the Balanced Scorecard (BSC) methodology.
I will give an example based on the above, taking into account the mentioned methodology and in the form of a sequence of practical actions. Let's say you start at the top "Finance" and you are concerned about the "marginality" indicator. It is clear that there are a lot of ways to increase the marginality of projects, so it makes no sense to list all these methods. You need to choose the methods inherent in your company, as well as identify the reasons for insufficient margins.
So, a very conditional plan - just for example.
1.KPI-1. Increase the marginality of projects by at least 7% over a period of time not exceeding 6 months.
Suppose the key reasons for insufficient marginality of projects are the following (conditionally):
- High project costs due to failure to complete projects on time.
- Most projects by themselves do not have sufficient marginality. Further - we often “fly out” of the deadlines and budget, and the marginality becomes even less.
- There is no possibility to choose more profitable projects from the existing portfolio of projects. There are so few projects, and there is almost no portfolio of potential projects.
- The high cost of purchasing equipment for projects, which does not add marginality.
- There are no unique (almost unique or high-quality) services due to which the company can "charge" extra money for projects.
- Etc.
From here, KPIs of the next level “grow” for a number of company services. Namely (again - conditionally):
2. KPI-1-1(for the Technical Directorate and Project Managers (RP)): the implementation of projects on time and within the budget of the project. The KPI for the project was fulfilled - the RP received a bonus. No - you need to figure out why, and, possibly, change the RP.
3. KPI-1-2(for the Marketing Block): identify industries, segments, and niches that are more solvent than those that the company currently operates in. Prepare a presentation and justify your proposals. During<такого-то срока>.
4. KPI-1-3(for the Sales Block): to form a portfolio of projects with a volume of at least<такого-то>, for at least<такого-то срока>(in close interaction with marketing, so as not to waste time). To be able to select projects for implementation.
5. KPI-1-4(for the Procurement Block) not yet. Initially, you can set the task - to work out and give suggestions on how to reduce the cost of purchased equipment for projects.
You will learn:
KPI is a special system of 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 of household appliances. 12 managers work for you. How effectively each of them works during the month is evaluated based on the following indicators:
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, then 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 states (Korea, Singapore, Hong Kong, Japan, Malaysia, Germany and the USA), the Key Performance Indicators system is a 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.
The editors of the magazine "General Director" considered 6 popular mistakes in the KPI system and gave advice on how to avoid them.
KPIs should be created from the top down, starting with the company's large-scale goals to the tasks facing the individual employee. 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. Better if financial indicator will follow 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 a leadership position in a certain territory. 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 salaries and career growth of specialists.
At the final stage of development, they create regulations, prepare KPI maps, prescribe by which method to calculate each key indicator, and coordinate the system 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:
Key KPIs are:
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.).
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:
Stage 1. The choice of three key indicators of the effective activity of a specialist:
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:
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. Payroll preparation.
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 this 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:
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 fixed and bonus components of remuneration 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 towards a common goal. 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.
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 performance indicators General Directors geographically remote from each other, it is required to develop a unified assessment system. 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.
