Hello! In this article, we will talk about the KPI system.

Today you will learn:

1. What is KPI.
2. How to calculate this indicator.
3. How to implement a KPI system in an enterprise.
4. About the pros and cons of this system.

What is KPI in simple words

KPI - this is a coefficient that determines the effectiveness of a particular enterprise: how well it functions, whether it achieves its goals.

The decoding of this abbreviation is as follows - Key Performance Indicators, which is usually translated into Russian as "key performance indicators".

If translated literally, the word “key” means “key”, “essential”, “indicators” - “indicators”, “indicators”, but with the word “performance” there are difficulties in translating, since it is difficult to interpret it unambiguously here. There is a standard that gives the most correct translation of this word, dividing it into two terms: efficiency and effectiveness. Efficiency shows how the funds spent and the results achieved are related, and performance - to what extent the company managed to achieve the result that was planned.

Therefore, it is more correct to translate KPI as “a key performance indicator”. Speaking in simple terms, so to speak, for dummies, you can see that this system helps to figure out what measures need to be taken to improve efficiency. Efficiency covers all the actions performed for a set time period, as well as the benefits received by the enterprise from each individual employee.

KPI indicators are as follows:

• Performance KPIs- shows the ratio of the spent money and time resources with the achieved result;
• Cost KPIs- shows how many resources are involved;
• KPI result- illustrates the result obtained during the execution of tasks.

Because this system is not easy to implement, you should adhere to certain rules and principles that can become indispensable assistants when switching to KPI:

1. The 10/80/10 rule. It states that a company must define 10 key performance indicators, 80 performance indicators, and 10 performance indicators. It is not recommended to use many more KPIs, because this is fraught with overloading managers with unnecessary unnecessary work, and managers will certainly attend to finding out the reasons for not meeting indicators that have little effect on performance at all.
2. Coordination production indicators and strategic plan. Indicators production activities have no meaning unless they are correlated with the current Critical Success Factors (CSFs) combined in balanced system indicators (BSC), and .
3. Manageability and controllability. Each division of the company responsible for its indicator must be provided with resources to manage it. The result must be controlled.
4. Integrate performance measurement, reporting, and performance improvement processes. It is necessary to introduce a procedure for evaluating indicators and reporting that will push employees to the required specific actions. For this purpose, reporting meetings should be held to consider the issue being resolved.
5. Partnership. In order to increase productivity successfully, it is worth building partnerships between all involved employees. Therefore, the way to implement a new system needs to be developed together. This will allow everyone to understand what the advantages of innovation are, as well as to be convinced of the need for change.
6. Transferring efforts to the main directions. In order to increase productivity, it is necessary to expand the powers of specialists: help in, offer to develop their own KPIs, provide training.

How to calculate KPI

Paragraph 1. To calculate KPI, you need to select from three to five performance indicators, which will be the criteria for evaluating a specialist. For example, for an Internet marketer, they might be as follows:

1. The number of visitors to the site attracted by the specialist.
2. A figure that shows how many purchases were made by customers who have previously contacted the company.
3. The number of commendable recommendations, customer responses in social networks or on the organization's website after purchasing a product or service.

1. new customers - 0.5;
2. buyers who made a second order - 0.25;
3. positive recommendations - 0.25.

Point 3. Now you need to analyze the data for all selected indicators for the last six months and draw up a plan:

KPI	Initial value (average monthlyindicators)	Planned value
Growth of new customers	160	20% increase or 192 new customers
Percentage of repeat customers	30	20% increase, or 36 repeat purchases
The share of customers who wrote a positive feedback, recommendation	35	20% increase, or 42 reviews

Item 4. The next step is to calculate KPI indicators in Excell. It is necessary to use the KPI calculation formula: KPI index = KPI Weight * Fact / Goal.

Key indicators (KPI weight)	Target	Fact	KPI index
KPI 1 (0.5)	20%	22%	0,550
KPI 2 (0.25)	20%	17%	0,212
KPI 3 (0.25)	20%	30%	0,375
Performance ratio			1,137
113,70%

Here, the goal is the indicator that the employee must achieve according to the plan, and the fact is what he has worked out in reality. The final indicator is 113.70%, this is a good result, however, if we look at the table in more detail, we can see that the marketer did not fully comply with the planned standards.

Item 5. We calculate wages. We will be based on the fact that the total earnings of a marketer are $800, of which the fixed part (salary) is $560, and the variable (bonus) is $240. For a 100% index, the employee is entitled to a salary and a full bonus, but due to the fact that the plan is overfulfilled, the marketer will receive additional bonuses in the amount of 13.7% of the bonus part, that is, $ 32.88. As a result, the employee's salary will be $560 + $240 + $32.88 = $832.88.

But when an employee does not fulfill the plan, and his performance indicator is below 99%, then the size of the bonus is proportionally reduced.

With the help of such calculations and drawing up a table, you can see the problems and difficulties that an Internet marketer faces.

Poor performance may be due to the fact that the plan is drawn up incorrectly or the loyalty strategy itself is incorrect. The problem area needs to be controlled, and if things do not improve over time, then the right way out of the situation is to change the performance indicators.

Thanks to this approach, an understanding of the principle of operation of KPI is formed. Focusing on the goals, the calculation can be supplemented with new values. This can be a system of penalties, the number of solved and unsolved problems, and much more. For example, if the work according to the plan is less than 70% done, the employee will not receive a bonus at all.

There is also an alternative way to calculate salaries in relation to the percentage of the plan completed:

KPI index	Premium coefficient
Below 70%	0
70 — 80%	0,6
80 — 89%	0,7
90 — 95%	0,8
96 — 98%	0,9
99 — 101%	1
102 — 105%	1,3
106 — 109%	1,4
Over 110%	1,5

KPI in practice

KPI-performance indicator is used by almost all companies that are engaged in direct sales. Consider some examples for a sales manager. Having adopted the approved key indicators, he will see a clear picture of his activities: it will become clear to him how much goods need to be sold in order to reach a certain income, which ones.

For an insurance consultant who is new to his profession, the optimal performance indicator would be 1/10: to sell one insurance policy, you need to meet with 10 potential buyers.

There is also a result KPI, for example, “the number of new customers is not less than n”, “sales volume is not less than n”, etc. These indicators are personal, and it is better when their number is less than 5, and most importantly, they should be easily measurable and clearly articulated.

In addition to motivating employees, company leaders use KPI as a tool to analyze the work of their subordinates.

This system allows you to clearly see the gaps in activities and at what stage they arose. For example, the boss keeps track of the manager's client base, how many calls and meetings the employee makes. If these indicators are met in sufficient volume, but there are few sales, it can be concluded that the employee lacks certain knowledge, skills or personal qualities for successful work.

KPI and enterprise planning

KPI indicators can be used in planning and monitoring activities. After the work has been done, the actual indicators are measured, and if they seriously deviate from the planned ones, better side, then the analysis and adjustment of further activities is carried out. Since all indicators are "dictated" by the real process, and not invented independently, such planning will contribute to the achievement of the necessary goals of the organization.

How to motivate staff to achieve KPIs

Thanks to the use of the KPI system, planned and actual indicators are fixed during remuneration. This gives the manager a clear understanding of how to motivate an employee and for what. At the same time, the employee also clearly sees the pros and cons of his work and is aware of what actions can bring him a reward, and for what a penalty is due.

For example, an insurance consultant sold more insurance policies than planned and expanded the client base with many new clients. Thus, he exceeded the plan and, in addition to his salary, he will receive a bonus in the form of a bonus. On the other hand, if the same manager sold much less policies than planned, he may lose the bonus altogether and receive a "bare" salary, because his personal performance will be low.

However, you can motivate employees not only with money.

You can be rewarded for meeting milestones interesting trainings, paid by the company, unscheduled days off, gifts and other "carrots" that will inspire the employee no worse than money. But in this case, the employee's salary is always fixed, and according to the KPI system, points are calculated that the employee can exchange for the desired bonuses.

To create a KPI for employees, you need to focus on a common goal for all employees and strong motivation. Working in a team of interested specialists, like clockwork, can lead the company to achieve all its goals in a short time.

When is KPI not needed?

In a young company that has just begun its existence, it is not advisable to introduce a KPI system. The management system has not yet been formed here, and successful development driven by work CEO. Most often, he also performs the functions of specialists in finance and personnel.

And also, you should not implement KPIs in those departments that, because of this, may adversely affect other departments of the company. For example, an IT service, whose representatives must solve the problems posed to them (repair of office equipment) as soon as possible. After all, it happens that one of the employees' computer failed, and the work stopped, and the entire department depends on the work of this employee.

If the salary of an IT specialist is calculated according to the KPI system, then he will not immediately go to work. First you need to make a request for the elimination of damage. This application must be approved by a senior specialist of the IT department, after which the task is queued for implementation and awaits consideration.

As a result, a task that takes 5 minutes to complete takes much longer, during which the work of the entire department, where one computer has broken, does not move at all.

That is why it is useful to implement a KPI system wisely, otherwise it can do much harm.

Mistakes when implementing KPIs

The most common mistake is introducing KPIs for statistics alone.

Ultimately, it turns out that the indicators of one division have no connection with the indicators of another.

For example, the supply service of one enterprise needed to cut costs. Therefore, in order to receive raw materials at a discount, employees purchased them in large volumes, and also purchased defective goods. This led to the overcrowding of warehouses, the freezing of finances in raw materials, which blocked all the advantages.

Meanwhile Production Department had its own priority indicator - load factor production equipment. For effective use time employees churned out certain products to save valuable minutes on machine tool conversions. But this inevitably affected the implementation of the sales plan by the commercial department, because there was no necessary assortment, and in a specific period of time the client could purchase only one type of product.

As a result, a situation has developed where everyone pulls the blanket over themselves, and no one reaches the goal. The result was reduced to zero, and all the work was done in vain.

Another common mistake is focusing solely on material indicators that are the result: sales, income, and so on. However, only when key indicators are not financial, but proactive in nature, it is possible to achieve goals much more effectively.

For example, how many calls should a sales manager make, how many meetings should be held, how many contracts should be concluded in order to achieve the same resulting KPI? It is on the basis of such non-financial factors that the system of employee motivation should be built, and the heads of departments should be guided directly by financial ones.

And also a serious mistake will be the situation when the persons responsible for this or that indicator are not indicated. For example, the order of incentives does not imply bonus payments or their reduction by the head for the performance or non-performance of the plan. In this case, the boss cannot be responsible for the actions of subordinates, because he has no way to influence them.

Pros and cons of implementing a KPI system

Working on a KPI system has many advantages:

• It has been established that in companies with such a system, employees work 20-30% more efficiently.
• Specialists will clearly understand what tasks are priorities and how to accomplish them.
• With a well-implemented system of indicators, the control of the company's activities is greatly facilitated, due to which problems are detected already at the stage of their occurrence and are solved without having time to cause harm.
• When calculating wages, the principle of justice applies: those who work diligently get more. This allows the organization to retain valuable staff.
• The wage fund becomes a means of motivating staff, and not the main source of expenses.

There is a KPI system and disadvantages. First of all, the disadvantage is that a lot of time and effort is spent on implementation, because all indicators need to be worked out in detail. Most likely, it will be necessary to retrain employees, explain to them information about changing working conditions and new tasks.

However, the main drawback is that the effectiveness in the end is not always evaluated correctly. This can be avoided if, at the stage of system development, the criteria by which the qipiai will be assessed are flawlessly formulated.

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:

1. Formation of the team, selection of members working group and research for each position.
2. 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.
3. Implementation of the KPI system: established performance indicators are integrated into software, and employees are informed about the conditions and requirements under the signature.
4. The final stage of development: monitoring the implementation of KPI, adjusting indicators during the test period.

In practice, 2 methods are most often used KPI development: process and functional method.

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

The functional approach relies on the very structure of production or management of the organization, functional responsibilities positions, departments, 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 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).

So in 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 wage worker.

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

This is where the first important rule comes in:

Every KPI except the plan should be critical

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

critical value for simple direct indicators (the more, the better) - this is the minimum below which the fact according to KPI should in no case fall. For example, the plan is to process 97% of customer requests on time, the critical value is 92% of requests. Below this threshold, contract penalties begin and clients change service providers. For reciprocal indicators, the critical value is the allowable maximum. For example, the plan for the level of marriage is no more than 1.5% of the output, the critical value is 5% (in this case, we stop the line).

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

2. Tables of values

Many managers intuitively understand this problem, but, 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:

1. 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.
2. 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.
3. An additional calculation step is added, which also complicates the procedure for calculating the premium. After all, you first need to calculate your indicator in its physical terms (in rubles, pieces, tons, hours or even in %), then calculate the degree of its implementation by dividing the fact 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.

All in all, effective system You can't create bonuses 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:

1. You don't pay for actual value KPIs above/below tolerances.
2. The premium becomes as sensitive as possible to any changes fact KPI within the tolerance.
3. 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 a tolerance for the 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!

KPI - Key Performance Indicator. KPIs are the key performance indicators of a company.

Why are they key? Because the management of the company has determined that these indicators are vital to achieving the specific goals of the company.

For each specific company, key indicators will be different. If, for example, a company is just entering the market, then one of the main KPIs can be sales volume, market share, or the number of new customers.

At the same time, margin indicators at this stage of the company's development may not be as important as at the later stages of the company's development. Consider KPI on examples of the work of a sales manager.

What is kpi in simple words

Let's look at what KPI is on the example of the work of a sales manager. Suppose that in the sales manager's motivation system there is only one item on which his income depends. Let this item be sales volume. What will the manager do in order to fulfill the sales plan? He will do it based on the following points:

1. Sell ​​what sells itself.
2. Sell ​​what is available.
3. Sell ​​what you can sell quickly and a lot.
4. Sell ​​to the largest customers.
5. Filter out incoming requests those whose customers are ready to buy right now.

In other words, the manager will not think about tomorrow. His task is to sell now. He won't think about:

1. That the company has a plan to sell the entire range of products for which it will receive a discount or other preferences.
2. That the company becomes potentially unstable because 90% of all sales go through 1-2 customers.
3. That the company pays money for incoming calls, of which the manager works only on hot calls, and merges others.
4. That goods under the order can bring more profit.

In other words, the manager fulfills the sales plan, but in the long run this can lead to disastrous consequences for the company.

KPI for sales manager

Observing this, management comes to the conclusion that it is wrong to pay only for sales volume. The management understands that it is necessary for the manager not only to fulfill the sales plan, but to do it in the way that is necessary for the company.

That is, the strategy is born first. For example, to become number 1 in sales of product A. Then goals are born that need to be achieved in order to become number 1, for example:

1. Maintain stock levels for a specific vendor.
2. Maintain a certain range of stock.
3. Attract certain partners who will be able to sell all this.
4. Attract a certain amount of funding.
5. Hire managers to sell these products or distribute this work among existing managers.

Points 1-5 will be the same KPIs.

KPI for sales manager calculation example

For example, if the manager's income formula used to look like:

Revenue = (% *sales), now:

Revenue = (% *sales)*0.8 + (KPI 1 actual/KPI 1 plan)*((% *sales)*0.2.

In the new formula, 20% of the manager's income will depend on the fulfillment of KPI 1, which, for example, can be formulated as attracting 10 new partners for a certain type of product.

At the same time, if the manager sells in the old fashioned way, he will lose 20% of his usual income. To get the same amount as before, he will need to make additional efforts in finding new partners.

The ratios and KPIs themselves can be calculated depending on the situation.

Typically, in such a motivation system, 1-3 KPIs are used with their own coefficients.

Next comes the process of monitoring how these KPIs work towards the goal. If the goal is approaching, then you can leave these KPIs as they are. If the goal is not approaching, then you need to change the KPIs themselves.

KPI for sales manager examples

KPIs for sales.

Sales volumes, shipments, sales, turnover, sales are synonyms for various kinds business. Sales volumes are set to managers as a specific figure of the plan for a certain period of time. Usually it is month, quarter, year.

Examples of KPIs by sales volume.

You need to reach the level of sales to your partners for the quarter in the amount of 1,000,000 rubles.

Sales can be expressed as a percentage of the previous period or the same period last year. Either as a percentage or in kind.

Examples of sales volume KPIs relative to other periods.

You need to achieve an increase in sales in the 3rd quarter current year by 15% compared to the level of sales in the 3rd quarter of last year.

KPI for profit (margin).

Profit KPI examples.

You need to achieve a profit of 100,000 rubles in November of the current year.

KPI by market share.

Here we already measure the work of a sales manager relative to competitors. This indicator implies sufficient independence of the sales manager in choosing more specific KPIs, such as, for example, margin (profit), the number of customers.

KPI for attracting new customers.

If you see that your sales are falling, then one of the methods to increase sales is to attract new customers. This is especially true during a crisis, when existing customers reduce purchase volumes, and some simply go out of business. KPI can be set not just for quantity, but for sales volumes or for attracting new customers, of a certain type or customers of a certain market. Or, for example, KPI by the number of meetings with clients.

KPI for customer loss.

Unfortunately, customer losses happen and you need to be able to manage this process. It could be a KPI for returning lost customers. Managers often forget to keep track of those customers who stop buying.

Alternatively, it could be a KPI - the ratio of lost customers to new ones.

KPI for the promotion of certain products or groups of products.

You set sales plans for certain products or groups of products. It is possible to establish plans for stock balances at the end of the reporting period. Usually such plans for the remains are set for product managers.

KPI - accounts receivable.

You can set a maximum level of receivables and/or amounts due by day of delay.

KPIs are Key Performance Indicators. The indicators are different. The key ones are those that affect the profit. The indicator itself can change quite a bit, but the profit can be noticeable.

For example, the owner of a barbershop calculated that if he increased the average bill of a barber by 100 rubles, the annual revenue would increase by 300,000 rubles. If costs remain the same, profits will also increase. The average check of a barber for a barbershop is a key indicator.

Why KPIs are needed

The task of KPI is to make life easier for the head of the enterprise, the owner of the business and ordinary employees. I introduced the KPI system when our team grew from two people to 22. Too much time began to be spent on solving operational tasks, it was not enough for direct directorial duties. Thanks to KPI, I delegated authority and responsibility to the level of department heads and ordinary employees, but nevertheless I control everything.

When KPIs are not useful, the point is that the company is not working with them correctly. This is exactly what happened to the co-owners of the cosmetology clinic. They worked with the sales funnel, collected indicators, but did not know what to do with them next. And when we figured out which indicators affect and who should be responsible for each, in three months they made the business profitable from unprofitable.

How to work with KPIs

We implement KPI

The authors of management books portray the implementation of KPI as a multi-step procedure: write organizational structure companies, financial structure, business processes. With this approach, the process threatens to drag on for at least six months. Big business this is possibly feasible. But small businesses cannot afford to stagnate for so long.

But there is a simpler fast way. You will need to determine which metrics have the biggest impact on profits and who in the company influences those metrics. There is no universal set of indicators. For each business they are individual. For sales via the Internet, the key indicators are the cost per click and the conversion of the site. For a call center - the duration of the agent's conversations.

We singled out an indicator that affects profit, understood who it depends on, and appointed a responsible person.

We motivate staff

The next step is to create a personnel motivation system. A popular option, when an employee's bonus is tied to the overall result of a company or division, does not work well. The employee is responsible for his own result. But how will it affect the results of colleagues? Therefore, you need to know what a particular subordinate influences and is responsible for, and tie the bonuses of each to his individual result.

It must be taken into account whether the employee directly or indirectly affects financial results. Our team includes an editorial team that produces content for the site. Content works to increase demand, but indirectly. Revision is the cost center. Therefore, it makes no sense to tie the motivation of the editor-in-chief to profit. But the sales department has a plan for the number of calls and the conversion of applications into sales. They directly affect revenue.

A sign of a good KPI motivation system is when an employee sees in the middle of the month how much has already been done and what needs to be done to get as much as he wants.

Drawing conclusions based on KPI

Employees don't always reach their targets. And not always their own fault. When you see that something is going wrong, do not rush to shoot the staff in the corridor. First, figure out what is the reason. If the employee is not guilty, then it is necessary to help him and create conditions under which he can achieve the target indicators.

If an employee does not fulfill the plan from month to month and the point is precisely in him, all that remains is to replace him with someone who will cope. Neither charm nor good relationship guides. Against indicators, these factors are powerless.

We audit the KPI system

Implementing and setting up a KPI system is not all. You need to understand: the system that you have implemented is not once and for all. In business, things are constantly changing. With each change, the KPI system may need to be adjusted. You have to be ready for this.

When you need to adjust the KPI system, figure out which indicators are no longer relevant, which ones need to be replaced, and who should be responsible for the new indicators. Correcting a system is easier than building one from scratch.

The motivation system also needs to be adjusted. It is best to do this with the involvement of employees. Each employee has personal goals. And the motivation system works best when both you and the employee understand what he wants and what he must do for the company in order to realize his personal goals. If an employee wants to earn 150 thousand a month, let his salary be 75, and the rest - bonuses. So he will understand that he is worth 75 thousand, but he can earn 150 if he is a successful professional.

Remember

• Understand what indicators affect profits and who in the company influences them.
• Select key indicators that have the strongest impact on profit, and assign responsibility for them. Set 2-3 clear KPIs for each department.
• Motivate employees by their key performance indicators.
• Monitor whether employees are meeting targets.
• When the indicators are not achieved, figure out what is the reason. If an employee needs help, help. If that's the case, replace it with another one.
• Constantly audit the KPI system and motivation. Make adjustments when you realize the system needs them.