Kpi calculation for reliability laboratory in excel. Examples of KPIs: study, evaluate, apply

The KPI indicator (Key Performance Indicator) came to us along with American and Western European companies, where it has been successfully used for several decades. KPI is a tool that helps to analyze the effectiveness of certain activities, as well as the level of achievement of goals.

Studies show that about 80% of Russian top managers are dissatisfied with the performance assessment systems that exist in their companies. Using existing algorithms, they don't see links between plans, execution, results and motivation. Implementing KPIs helps to completely change the picture. KPIs allow you to monitor the business activity of employees, departments and the company as a whole and take the enterprise to a new level.

In Russia, KPI is usually translated as a key performance indicator. Actually, this is not entirely true. It would be more correct to call it "key performance indicator", since the English word performance includes not only the concept of efficiency, but also the concept of effectiveness. Despite the apparent similarity of these terms, they have a significant difference:

Efficiency expresses the ratio between the results achieved and the resources expended and determines the company's ability to implement its goals and plans with a given quality level, expressed by certain requirements: time, costs, degree of achievement of the goal.
Efficiency is the ability of an enterprise focus on results(degree of achievement of planned results).

Thus, KPI in the meaning of “key performance indicator” is more voluminous and contains both the degree of achievement of the result and the costs of obtaining it.

You can use performance indicators in various areas of activity, for example, if you want, you can apply metrics such as the number of customers and the average check amount.
The same indicators are suitable for evaluating the activities of a hairdresser. You can read more about opening a barbershop.

Why do you need KPI

As for the practical application of KPI, this indicator is introduced at enterprises in order to make it convenient to measure the results of the work of the company as a whole, individual departments and employees directly, as well as motivate staff to achieve the required results.

Using these indicators, you can create, if not perfect, then very effective motivation and incentive system company employees.

Of course, their use makes sense mainly for those employees whose work most affects the financial and economic performance of the enterprise. In insurance companies, these are primarily agents, in trading companies - sales managers, and in recruiting offices - recruitment consultants. KPIs are also used to determine the performance of administrative and managerial personnel.

Key performance indicators can be divided into:

lagging- reflect the results of activities at the end of the period. These include financial indicators that show potential, but do not convey the current performance of departments and the company as a whole;
operational (leading)- make it possible to manage the situation within the reporting period in order to achieve the desired results after its expiration. They talk about the current situation in the company, at the same time showing what cash flows can be in the future, and also demonstrate the quality of processes and products and the degree of customer satisfaction.

By type, key indicators can be as follows:

KPI result- show the quantity and quality of the result.
Cost KPIs- show spent resources.
KPI of functioning- relate to performance indicators of business processes and allow you to assess how the process corresponds to the required algorithm for its implementation.
Performance KPIs- derived indicators characterizing the ratio of the result obtained and the time spent to obtain it.
Efficiency KPIs(performance indicators) are also derived indicators that characterize the ratio of the result obtained to the cost of resources.

Key indicators are needed not only by the company's management - it is more convenient for the employees themselves to work on them, especially for those whose income directly depends on the results of their work. KPI makes it easy for employees to calculate the steps needed to achieve the desired result.

For example, in the field of insurance, especially in European and American companies, where such a system has long justified itself and is used everywhere, KPIs allow you to increase the number of sales due to transparency and a clear understanding of the necessary actions. that the employee must take.

KPIs can be used in any business related to sales. For example, when selling flowers. Read on and start your own flower business.

The KPI system can be used to motivate salespeople in a clothing store using performance metrics such as the number of sales. Read about how to open a clothing store from scratch and how much it costs.

Performance appraisal also finds application in the service sector. Follow this link to find information about opening a real estate agency and learn how to start a real estate business.

Examples of using KPI in business

In direct sales companies, KPIs are mainly used, which show the ratio of cold calls, meetings with clients to the number of sales.

An insurance consultant (or sales manager), using the key indicators adopted in the company, sees a clear picture of his activity. He understands that in order to reach the planned income, he needs to sell a certain number of policies (goods), having made a certain number of meetings and calls before that. The standard KPI for life insurance newbies is considered to be 1/10, that is, to make one sale, you need to hold 10 meetings, and each meeting has an average of 10 calls.

As an example of key indicators for a sales manager, one can also cite such options: “the number of new customers is not less than ...”, “sales volume is not less than ...”, “the size of the average contract per client is within ...”, and so on. This is another type of indicators - KPI result.

Such KPIs are personal, and there should not be too many of them for each employee. Three to five is enough; the main thing is that they are clearly articulated and easily measurable. An example for a sales department or company as a whole would be the “average revenue per customer” key performance indicator included in the strategic goal “Increase average revenue per customer from 25 rubles to 30 rubles in 2014”.

In addition to stimulating and motivating employees, KPIs are used by the manager as a tool for analyzing the activities of subordinates, helping to clearly see at what stage of work his employee fails.

Taking the sales manager again as an example, key metrics allow the head of sales to identify problem areas: does the manager make enough calls and meetings, does he have a large customer base, etc. If the indicators are met, but the required number of sales no - it means that the quality of work suffers for this employee: there are not enough skills, knowledge, perseverance, etc.

All these moments easily tracked by KPI, therefore, all the activities of the selling departments in successful companies engaged in active sales are mainly based on the use of this indicator.

The types of indicators and their quantitative values depend both on the direction of the enterprise and on its strategy, therefore, in different companies they can take on different values.

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-fulfilled, 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, a special condition was introduced for this case: 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 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, not knowing the professional means of solving it, they do what they saw 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 `s naturally. 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!

KPIs are key performance indicators with which you can evaluate the results of the work of employees of various departments of the company. Based on them, employees are promoted up the career ladder or they are paid bonuses.

Relatively recently, company leaders began to actively introduce such a concept as KPI into their work. Now the most valuable thing for which employees work is tied to it - wages. Moreover, the KPI indicator becomes important not only for administration, managers or office employees - line managers, but also for representatives of working specialties.

The main idea of KPI (Key Performance Indicator - commonly translated as “key performance indicator”) is that it can be used to unambiguously and objectively evaluate the work and performance of any employee, group of people, department, project and company as a whole. The indicator will reflect the whole picture of the processes taking place in the company, using numbers.

The most important thing is to develop the right KPI for each position and enter real indicators. It is very important for an employee who encounters this concept, having received a job in a company, to immediately understand and understand what exactly is included in his personal set of KPIs (criteria for evaluating his work). The list of indicators will allow the beginner to quickly understand what exactly the employer wants to receive, what results he expects from the employee. The KPI range will immediately show how much effort needs to be put in to achieve the desired salary level, whether this work will be up to the applicant, or, conversely, his abilities will significantly increase the requirements and, accordingly, wages.

Scorecard

The KPI system gives specialists clear work goals and transparent bonuses. But the indicators may turn out to be unattainable, and the transition to such a system can be painful.

In large foreign companies, where everything is spelled out and detailed to the maximum, work on the KPI system is a great option for an employee. He understands how much, for what and when he will receive in excess of the salary. He has personal tasks and deadlines for their implementation, and the company can regularly monitor his work with the help of evaluation.

In many organizations, in addition to the monthly report, it is the KPI results of all employees that serve as the basis for the annual assessment of the performance of the company's personnel. After the annual assessment, the HR Directorate draws up lists of the most promising specialists for enrollment in the company's personnel reserve and promotion.

But if in foreign companies the head office helps in developing goals and indicators, then Russian employers act in a slightly different way. Some invite consultants, others do it on their own: KPI is prescribed by the HR Directorate. Since neither one nor the other thoroughly knows the specifics of the work of each particular specialist, it happens that the indicators are formulated inaccurately. It even happens with us that the most advanced, in quotation marks, organizations for the development of KPI involve managers and employees of the units being evaluated.

Types of indicators

There are some key performance indicators in the KPI assessment system: financial, client, process and development criteria.

Financial indicators include, for example, market value, return on investment - ROI, turnover, cash flow, internal rate of return - IRR, share price, total assets and many others. These indicators reflect the external economic condition of the company as a whole.

Customer indicators characterize individual employees who deal with customers and create the external image of the company in the market. These criteria include market share, number of new markets, customer satisfaction, quality, image indicators, and more.

Process indicators include indicators that grow along with the speed of various processes in the company: time to develop and launch new products on the market, processing a client's request; time spent on logistics and delivery of goods, etc.

Development criteria - KPI indicators that characterize the degree and level of development of the company itself (external processes of the company's development in the market and internal processes for the development of human resources): staff productivity, profit or administrative costs per employee, staff satisfaction level and its "fluidity".

The employee works as a consultant in the sales department, answering questions from potential buyers by phone. The following key performance indicators (KPIs) are defined for it: customer satisfaction and the number of purchases that people made after consulting an employee over the phone.

Pros and cons

The KPI system is good for employees whose work results affect the financial and economic performance of the enterprise. In trading firms, these are, first of all, top managers and sales managers, in recruiting companies - recruitment consultants.

In some companies, the performance of an employee's KPI also affects the individual size of the annual salary review: the higher the score, the higher the percentage of salary growth. For example, the annual bonus for managers may consist of two variables that depend on the results of meeting individual goals and on the performance of the company. This approach encourages better performance of functional duties.

For employees from different departments, the size of the bonus, which is affected by KPI, can range from 20 to 100 percent of salary. At the same time, the formula for accruing the bonus itself is quite complicated: it takes into account the number of KPIs, the coefficient of completion of each of them, as well as its “weight”, called the coefficient of influence.

If the KPI scale is compiled incorrectly, there will be little benefit from it. If there are too many KPIs, the impact of each on the amount of the total bonus will be small. For example, initially there were about 20 percent of KPIs, but a year later they were reduced to five. Most of the indicators accounted for a small share of the bonus, and the loss of 5 percent in it is not particularly significant. A 20% KPI weight motivates much more effectively.

One of the main disadvantages of the KPI system is the dependence of the quality of work of an individual employee and the performance of the entire department. If the unit did the work poorly or not quite qualitatively, without fulfilling the general plan, then all employees of the department can lose their salary at once. After all, personal KPIs are associated with key indicators of the entire department. In case of systematic non-fulfillment of planned indicators, an employee may be demoted or dismissed. Therefore, KPI forces you to always "be in shape and tone." Who can not stand this rhythm, leaves himself.

Another disadvantage is that not all employees can directly influence the company's strategic KPIs. When the bonus depends on net income and sales, the secretary or economist will not be able to influence it.

From experience, we can say that very often in Russian companies the KPI motivation system is one-sided: everything that an employee over-fulfills is just a job well done, for which he receives a salary, and for under-fulfillment he is deprived of some part of the salary.

Many managers of international companies believe that it is easier to describe the work of technical specialists (accountants, engineers, programmers) with a job description than to prescribe KPIs for them. We must not forget that the planning and calculations of this system take time. Heads of areas or departments at the end of each month spend time setting and calculating KPIs for all their subordinates. The indicators have to be coordinated with the HR department, and the main work of managers goes by the wayside, and after all, bosses have their own KPI.

As a rule, the transition to a KPI system is usually accompanied by unrest in the team: some quietly sabotage it, others completely do not accept it and leave the company. It is difficult to immediately change your habits, the order in which functions are performed, and get used to the new conditions of remuneration. It is easier for new employees if the HR manager explains to them in an accessible way what the company pays bonuses for, and newcomers, most likely, will normally perceive work according to such rules.

Opinion 1:

Ludmila Shusterova, Deputy General Director of the outsourcing division of BDO

Original KPIs

KPIs are usually associated with either an increase in the profitability of the company and its turnover, or with an increase in productivity and efficiency in the use of capital assets. Based on these conditions, it is unlikely that it will be possible to draw up some fundamentally new and original KPIs. Unless, of course, the work is connected with something very non-standard. For example, you can put an increase in the number of koalas by n percent in the KPI for the head of a biological station. But for a typical manager, it is unlikely that it will be possible to invent something better than increasing revenue, margins, increasing customer satisfaction, or reducing staff turnover. It is desirable that there are several KPIs, but not too many. Indeed, in the pursuit of business and profit growth, it is important that both customers and staff do not suffer - and this is not a trivial task at all.

But the main task of indicators is not to be original, but effective.

Opinion 2:

Dmitry Pelah, Director of the Financial Consulting Agency

Regulation on KPI

In order to start applying the KPI system in your company, you need to fix it in internal documents. A regulation on KPI should be developed, which will be approved by the head of the company. In this position, it is desirable to provide formulas and calculations on the basis of which the system of indicators is built. It is also important to link indicators to accounting data or to IFRS indicators if the company uses international standards.

The regulation on the KPI system should establish a causal relationship of indicators with the main goals of the company and determine the level of responsibility for the values of the indicators of employees to whom this system will be applied.

There is no standard form for a KPI statement, so a company can develop it on its own or seek help from specialized consulting firms.

Opinion 3:

Ivan Shklovets, Deputy Head of the Federal Service for Labor and Employment

Dismissal for low performance

The labor legislation does not contain such grounds for dismissal as a low indicator of efficiency. Therefore, the employer has no right to dismiss an employee with such a wording.

It is possible to dismiss an employee due to inconsistency with the position held only on the basis of the results of the employee's attestation, which must be carried out in the manner established by the employer himself in the form of a local regulatory act. In this case, there must be a protocol of the attestation commission. However, even in this case, before dismissal, the employer will be obliged to offer the employee other available vacancies or work that he can perform taking into account his state of health.

Non-compliance by an employee with established labor standards or quantitative (qualitative) indicators may affect the amount of remuneration. For example, incentive payments may be reduced or canceled. However, when working out the established norm of working hours, the employee in any case will have a guaranteed right to receive the salary (tariff rate) established for him. If the employer nevertheless dismissed the employee on the above grounds, he has the right to appeal such dismissal in court.

Pros and cons of using KPI to evaluate employee performance

pros	Minuses
The amount of an employee's bonus directly depends on the fulfillment of his personal KPI	Due to too many KPIs in the total bonus, the share of each of them is small
Each employee is assigned responsibility for a specific area of work.	Too much weight of one of the indicators leads to distortions in work (the employee does not pay enough attention to the functionality that has the least weight in the KPI system)
The employee sees his contribution to the achievement of the overall goal of the company	Really unattainable KPIs demotivate employees

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How to motivate staff in a crisis
The crisis situation threatens the company not only with financial problems and the loss of its positions in the market, but also with the loss of qualified personnel, without which it is impossible to overcome the crisis. Retention of key employees is one of the main tasks of management at the crisis stage, and this goal can be achieved if the staff is informed in a timely manner and an adequate motivation system is implemented. Let's talk about this in more detail.

The KPI-based motivation system is a unique and convenient option for improving work efficiency. If your company is striving to increase or at least maintain key indicators (sales volume, number of customers), as well as to minimize errors on the part of employees, then everything must be done to eliminate the formal approach of employees to the performance of duties. To do this, you need to find such a tool for motivating staff so that the effectiveness of the work is directly related to the amount of remuneration.

Developing key performance indicators (KPIs) is a difficult but absolutely worthwhile job that will lead the company to achieve its goals. Of course, this will only happen if the calculation is correct. It is important to focus on those indicators that will really affect the development of the company, and not waste additional resources in vain.

Motivation is a fairly simple concept. Figuratively speaking, this is a “locomotive” that pulls a person in one direction or another. Each of us can have a certain reaction to a stimulus. The stimulus does not have to be sudden, with a short duration. It can be absolutely anything, the main thing is that its presence causes a conscious desire to act in the necessary way. By offering an employee a reward for a certain type of behavior, the employer will be able to achieve specific results. Motivation is different. Cash can be considered universal. Of course, there is also non-monetary motivation. But it acts only as an addition to the main one.

Goals of motivational systems

In general, we have already determined what exactly motivation is needed for. Consider an example with KPIs. A properly designed system of such motivation will allow:

Encourage employees to work for a specific result (predetermined).
Make sure that the company functions as a single organism and the work of all departments is aimed at obtaining specific indicators, in total giving an increase in the efficiency of the organization as a whole.
Reward those employees who are hardworking and efficient.
Make performance evaluation transparent - if each employee is aware of how his bonus is calculated, this will reduce his level of anxiety about his future and allow the employee to motivate himself on his own (internal, conscious motivation to receive remuneration, in order to improve the standard of living, acquire the necessary etc.).

As a result, by spending some time developing the right motivation system, you can achieve excellent results in a short time.

Stages of developing a motivational system

It is conditionally possible to distinguish 4 stages of development of motivation. This process is not so simple and requires great intellectual efforts on the part of the developer and a competent analysis of the current situation in the company.

1st stage. Analysis of the current situation.

As you know, in order to achieve a certain result, you need to determine what exactly we are striving for. Only in this case it makes sense to predict a "happy future". So, at the first stage, it is necessary to analyze the current state of affairs: the situation on the market, the position of the company, its profit, sales volume and other indicators that will affect the success and efficiency of its functioning. After the analysis, it is necessary to determine the immediate goals. It is desirable to express them in specific terms. Only in this case you will be able to determine which indicators should grow and to what level.

2nd stage. Calculations.

At the second stage, it is necessary to take into account all the finances that you plan to spend on staff in the coming year (you can make calculations for the next six months). These expenses will include all expected payments: wages, sick leave, vacation pay, as well as the funds that will be withheld from the company's budget to ensure the efficiency (ability to perform their functions) of each employee. In order to properly build a motivation system in the future, it is necessary to divide the staff into effective and auxiliary. Effective we call the staff on which the profit of the company depends; support staff - people who affect the operation of the company, but are not directly related to profits. It is also important to make a second division: into management and subordinates.

3rd stage. Development of a motivational system and its implementation.

The motivation system is developed for each department / subdivision, in accordance with the goals of a particular branch in the structure of the organization. Once you have developed a trial motivation system, it must be formally implemented and communicated to employees. Changes should be made to employment contracts and supplementary agreements. It is important to understand that a timely modernization system will help overcome any crisis. It will save the company from bankruptcy and allow it to reach its intended goal. It all depends on professionalism and understanding that at the moment the company needs changes.

4th stage. Work analysis.

This stage is perhaps one of the most important, since it allows you to analyze how efficiently the system works. It should allow you to control not only short-term, but also long-term performance indicators of the organization, increase the enthusiasm of employees and their personal effectiveness (relatively speaking, the professionalism and loyalty of employees to this company should grow), manage the budget effectively and not waste additional time on calculating payments.

Three levels of performance indicators

What are the performance indicators? What can you rely on when developing KPIs? Let's start with the objective indicators that each company or branch has. These include: production volume, sales volume, profitability and net profit, which is formed in connection with the functioning of production or the company.

As a rule, using these indicators in the motivational system, there is a comparison of real data with those planned for a certain reporting period (as a rule, it is a month, in some cases a quarter). Such indicators are used in the system of motivation of administrative and managerial personnel, which influences the course of affairs in the company. This level can be called the first (high). It is these indicators that are of interest to management, and they are the result of the work of the entire company. But it is necessary to stimulate not only those who supervise the activities of employees, but also the personnel themselves, who participate in specific auxiliary operations and work directly in production.

Consider the second level of performance indicators. These are, first of all, indicators of production efficiency, on which the total volume of production ultimately depends. Here we look at the work of specific workshops, laboratories, and technical services. KPI evaluates the volume of production, the timing of the work and its quality. The second level of motivation also applies to the departments that are responsible for the sale of manufactured products: warehouse department, marketing department, sales department. In this case, the volume of sales will be estimated and accounts receivable will be taken into account. In general, these two levels could be limited if it were not for the work of auxiliary departments, without which the functioning of the entire system of the company is impossible.

The third level of indicators is assessed in relation to departments that help to ensure the functioning of the company: accounting and legal departments, the work of system administrators, personnel services, the security department and the office. Motivation depends on what exactly is required from employees. As a rule, in this case, they take into account the quality and timely performance of duties and tasks.

Calculation formula

As you know, wages = fixed part of the salary + bonus part.

Bonus part (KPI) = KPI1 + KPI2 + KPI3.

This formula is conditional. The weight of each of the three (or other number) indicators is equal to its significance. You can set any relationship between these indicators. Let's take the service industry as an example.

Suppose you are the owner of an online store and, in particular, you are developing a motivation system for contact center employees who advise customers by phone and help place an order. What indicators can be included in their non-fixed part of wages? Depends on the result to which we are going.

For example, it is most important for you to retain all existing customers and it is desirable to find new ones. If preservation is a priority, then it is necessary to focus on high-quality customer service and information. What is it made up of? For a call center operator, these are: no errors when placing an order + polite communication with customers + correct advice on an existing product (its cost, characteristics, promotions). Therefore, all these indicators can become components of the operator's KPI. The fourth indicator could be the sale of a product to a new customer (the more new customers, the higher the premium).

What will influence the premium more significantly? You decide. For example, you can make a customer's legitimate complaint about impolite communication nullify all other metrics. Thus, the operator who sold the product to new customers, correctly told about its characteristics, correctly placed the order, but was rude to the client, for which he received a negative review (and as a result, this client was lost), may lose the entire bonus or part of it. In this case, you need to find the right balance and choose the main vector for each division. There may be many options. The main thing is to correct and amend them in a timely manner.

KPIs are key performance indicators that evaluate the work of each employee. They also help to analyze the work of the entire company, achievements over a certain period and are an excellent motivator for quality work. The main thing is the correct development of a KPI system for a specific position, taking into account all the nuances of an employee's activities in the company.

Universal performance indicators cannot be applied to all positions, because they just can't meet expectations. Let's say it's almost impossible to make a KPI for an accountant. The development of a motivation system based on KPI is an analytical work that includes both the preparation of KPI and the analysis of the result.

It is important to consider the following:

There should be few performance indicators, otherwise the calculations will be confusing and, as a result, the goal of the assessment will not be achieved.
Each KPI must match the final goal.
The established KPI indicators must be guaranteed to be achievable and clearly correspond to the sphere of influence and responsibility of the employee (position).
It is possible and necessary to prescribe employee motivation only on the basis of key performance indicators, then the employee will understand what is expected of him and will move towards a clear goal.

What indicators are

Often in companies and enterprises, KPI indicators are classified as operational and those that are late with the result.

Long-term indicators show the result after a certain period of time, in turn, operational (leading) indicators allow you to evaluate the effectiveness of work very quickly.

Varieties of indicators in business processes:

Result performance indicators are KPIs of profit, revenue and sales for a specific period.
Cost KPIs - help evaluate the achievement, taking into account financial and time costs.
Performance indicators reflect the correctness of the employee's activities, his system of work in accordance with the regulations and algorithms of his position.
Efficiency KPIs show the level of the ratio of the result to the cost of it in different options.
The productivity efficiency ratio gives an understanding of the result achieved in a certain ratio with the time spent.

When calculating KPI, you should immediately form the goal and priorities for the selected position. In each case, they are calculated separately, depending on the scope of the company. The assessment methods and the specific calculation formula for a competent assessment of the results depend on this.

We calculate KPI indicators

To understand the picture of developing KPI indicators, we will give an example that indicates the algorithm of actions.

Stages of developing KPI indicators:

Formation of the team, selection of members of the working group and research for each position.
Drawing up a methodology of actions. Based on the analysis, models of the system of performance indicators for positions are created, regulations are prescribed, indicators are developed and tested.
Implementation of the KPI system: established performance indicators are integrated into the software, and employees are informed about the conditions and requirements under the signature.
The final stage of development: monitoring the implementation of KPI, adjusting indicators during the test period.

In practice, 2 methods of developing KPIs are most often used: process and functional methods.

The process approach is based on performance indicators based on the internal business processes of the enterprise.

The functional approach is based on the very structure of production or management of the organization, the functional responsibilities of the position, department, branches.

We give in the table an example of calculating two methods for developing performance indicators.

process method	functional method
Business process goal (sales)
The dynamics of the emergence of new customers (specific number)	Profit Profitability Growth of assets in the company
Business process goal (performance)
Dynamics of increase in the turnover of cash reserves in relation to the previous period	Number of loyal customers Sales volumes for the period in monetary terms
Business Process Goal for Customer Satisfaction
Minimizing the number of product returns Reducing the time of the order (ordering and bringing to purchase)	Number of new clients Reduced time to serve one customer
The purpose of the HR business process
Quick selection of new managers	The percentage of closed and open vacancies for a specific period

For example

An example of calculating KPI for one employee is given in the table of the sales manager, where there is an indicator index.

https://yadi.sk/i/jomsvYOq3Kyb2z

From this example and the KPI index, we can see that this sales manager exceeded the plan by 6% and, accordingly, he is entitled to the reward agreed upon in his motivation.

To calculate the KPI of a position, you can use several performance indicators and calculate the motivation using the formula:

Salary + K1 + K2 + K3. Where K1, K2, K3 are KPI indicators (manager's salary + fixed % of sales + % of the number of attracted customers for the period (month) + agreed bonus for quality customer service).

In such a simple way, you can enter any KPI indicators into the formula, which can be calculated as a result.

Eventually

To calculate the effectiveness of an employee's work, it is necessary to carefully approach the assessment and objectives of the position, and for this it will be necessary to analyze the level of performance and sphere of influence of the employee in a particular organization. Having determined the KPI indicators, it is possible to prescribe a motivation system, on which the employee's salary will depend.