KPI (key performance indicators). How to implement a KPI system in a company

1.1. The Regulations on Key Performance Indicators of [name of the manager's position] (hereinafter referred to as the Regulations) were developed in accordance with the legislation of the Russian Federation and [name of the organization's constituent document].

1.2. Terms used in the Regulations:

Performance efficiency is an assessment of an employee’s achievement of set goals and objectives.

Motivation system - forms of material and non-material incentives carried out by the organization in relation to the manager based on the results of performance.

Key Performance Indicators (KPI - Key Performance Indicator) are quantitative indicators that allow you to evaluate the effectiveness of an employee.

Manager's remuneration is the manager's remuneration, consisting of a fixed and variable part.

The constant part of the manager's remuneration is remuneration that does not depend on the performance of the manager and the organization as a whole.

The variation part of a manager's remuneration is a remuneration that depends on the performance of the manager and the organization as a whole.

1.3. Key performance indicators are developed based on an analysis of the organization's strategic goals and objectives.

1.4. An employee's achievement of key performance indicators is assessed at the end of each reporting period. The reporting period is equal to [month, quarter, etc.].

1.5. Regular review and updating of the system of key performance indicators is carried out at least once every 2 years. Monitoring the timely updating of key performance indicators is carried out by [job title].

2. Goals and principles of the motivation system

2.1. The goal of the motivation system is to increase the efficiency of the manager, and as a result, the organization as a whole.

2.2. The set goal is achieved through the creation and implementation of motivation principles:

2.2.1. The principle of complexity

The motivation system is a set of forms and methods of stimulating an employee (material and non-material forms of reward and punishment).

2.2.2. Principle of correspondence

The motivation system applied in accordance with these Regulations directly depends on the performance of the head of the organization for the reporting period.

2.2.3. The principle of openness

The motivation system is open and understandable to the employee; there is a clearly visible relationship between the employee’s performance and the system of rewards and punishments.

2.2.4. Regularity principle

The performance of the head of the organization is assessed on a regular basis, at the end of each reporting period.

2.2.5. Principle of justice

When assessing the effectiveness of a manager’s activities, all circumstances and factors that occurred during the reporting period are taken into account.

2.2.6. The principle of balance

Maintaining a balance between material and non-material forms of encouragement.

3. Motivation system

3.1. The non-material incentive system includes:

Declaration of gratitude;

Awarding letters of gratitude, certificates of honor, insignia;

Congratulations on holidays and significant events on behalf of the organization;

Awarding the title of the best in the profession;

Presentation of valuable gifts;

Other forms of non-material incentives.

The decision on non-material incentives is made by [name of position or management body].

3.2. The material incentive system includes constant and variable parts of the manager's remuneration.

3.2.1. The fixed part of remuneration includes the official salary and additional payments and allowances:

The official salary is established by the employment contract and does not depend on the degree to which the manager achieves his goals and objectives;

Additional payments and bonuses are paid in accordance with the current legislation of the Russian Federation. In addition to those established by regulations, the manager is paid the following additional allowances: [enter as necessary, for example, for continuous work experience in the organization].

3.2.2. The additional allowances established by these Regulations are calculated: [enter what is needed, for example, as a percentage of the official salary. From 5 to 10 years of continuous work - 10%; from 10 to 20 years - 15%; over 20 years - 20% of the manager’s official salary].

3.3. The variable part of the manager's remuneration consists of a bonus.

3.3.1. The amount of the manager's bonus depends on the degree to which the actual KPI values ​​correspond to those planned for a specific billing period.

3.3.2. When calculating the bonus, the following indicators are taken into account: [enter the required one, for example, KPI1 - net profit of the organization, KPI2 - return on sales, KPI3 - labor productivity, KPI4 - sales revenue].

3.3.3. Manager KPI is calculated using the following formulas:

KPI1 = emergency situation - emergency plan / 100%, where

Emergency fact - the organization’s net profit for the billing period,

Emergency plan is the organization’s planned net profit for the billing period.

KPI2 = RPfact - RPplan / 100%, where

RPfact - profitability for the billing period,

RPplan is the profitability of sales planned for the billing period.

KPI3 = PTfact - PTplan / 100%, where

PTfact - labor productivity for the billing period,

PTplan - planned labor productivity in the organization for the billing period.

KPI4 = VP fact - VPplan / 100%, where

VP fact - sales revenue for the billing period,

VPplan - sales revenue planned for the billing period.

KPI = KPI1 + KPI2 + KPI3 + KPI4 / 4

3.3.4. The manager's bonus is calculated as a percentage of the KPI to the official salary:

4. Final provisions

4.1. This regulation comes into force from the moment of approval by [name of position or management body].

4.2. Amendments and additions to this agreement are accepted in cases of changes in the organizational and legal structure of the organization, development strategy or business plan of the organization and come into effect from the moment of approval by [name of position or management body].

Agreed:

[position, initials, surname, signature]

[day month Year]

I am familiar with the regulations: [initials, surname, signature]

[day month Year]

The head of sales is the hope and support of the team, the main role model. No matter how excellent a specialist he is, he still needs to control the work. For motivation, you can use the same method as for ordinary businessmen - the introduction of KPI indicators.

KPI of the head of the sales department - what is it?

The salary of the head of a commercial division, as well as his subordinates, consists of a salary (a smaller part, which may not be used) and a bonus based on the results of work. The amount that will be added to the salary depends on the implementation of the plan. The utility coefficient of a senior manager corresponds to a number of characteristics.

KPI for the head of the sales department is transparent and understandable

To calculate the value, do not invent cumbersome formulas. “Tie” it to the amount the boss received from clients per month, the number of meetings with the conclusion of a deal, or the number of new clients during the period. A percentage that is understandable in calculation is more convenient to use in management. And the head of the department is already busy working to unravel the meaning of the formulas composed by the manager. Everyone benefits from simplicity.

KPI for the head of the sales department - commensurate with the team

A leading employee does not force people to work hard, but sets an example with his own achievements. The implementing part of the company has common goals, and, therefore, the tools for achieving them are the same. A common evaluation system makes the boss closer to his subordinates.

By the way, how effective is your sales department? I suggest you check, for this I will leave you the self-diagnosis questionnaires of the sales department. Use it!

Get profiles

KPI of the head of the sales department (example) - the number of calls that resulted in a meeting with the client. In this case, the value applies to both managers and the leading merchant. But the number of calls per month for the latter will be higher. This is your best employee, isn't it? What distinguishes him from ordinary businessmen is his experience and professionalism, so the minimum results should be higher. The coefficient allows an ordinary employee to understand the difference in his results and his superior colleague. The manager sees what indicators to achieve in order to ensure an income similar to management. And the guru of the unit is trying not only to earn money, but also to confirm the status of a professional.

The leader's KPI corresponds to the company's strategy

The best people in an organization do not solve typical problems. Yes, the sales manager makes phone calls, but he assigns himself the most “difficult” tasks. If it is important for a company to attract new clients, an experienced employee will solve the problem. The development of the VIP division will also fall on the shoulders of the leading merchant. Taking into account the company's goals for the future, a performance measurement system is determined.

Achievability of the indicator

Even a manager with ten years of experience is not a superman. No matter how high your employee achieves, the numbers for motivation must be real. Determine motivation based on business experience. The simplest way: take the average result (for example, 10 meetings per month that resulted in a contract), increase it to the maximum achieved in the department (for example, 15 meetings). As a result, we get the number that each employee strives for. At the same time, for the boss the number increases again (for example, to 20). You can “draw” any number, but if you want 200 successful meetings a month, even the best businessman will not be able to fulfill your desire.

KPI of the head of the sales department (example for different departments)

Large companies create several sales divisions. One operates on the incoming flow, the other is engaged in active sales through the “cold” base, the third works with VIP clients. The head of each element of the company will have its own coefficient, depending on the functionality of the employees. The value will be the number of calls with an appointment, the number of personal meetings, the amount of funds paid, the number of questionnaires filled out by counterparties. It is possible to unify the motivation system for leading managers of all departments if all values ​​are converted into monetary values. But this measure is not suitable for every business. Motivation measures are developed individually for management tasks.

In the personnel management system, not a single efficiency coefficient is used, but their system. The more complex and varied the functionality of a merchant, the more indicators are created. But you shouldn't get carried away.

Motivation must also take into account complex work patterns. For example, an incoming call from a client results in a signed contract and payment six months after the first contact.

Link to Personnel Results

Personal profit is important for a guru, but team profit is even more important. The income of a leading businessman depends on the achievements of the team so much that his own achievements are perceived as a contribution to the common cause. KPIs are “linked” to the team’s performance. This helps motivate both the boss and his team.

Another important point is consistency. The first manager strives not only to achieve the key value with his team, but also to repeat it month after month. It's even better if actual sales levels increase over time. Stable growth is paid accordingly.

The income of a sales department manager might look like this:

Money received by executing your own plan; Award for achievement of KPI level by subordinate managers; Payment "for consistency".

Moreover, all values ​​for determining efficiency are transparent and comparable. The first point of this chain can be the permanent - salary - part. You shouldn’t give it more than 30%. The greater the variable part of income, determined by efficiency, the more subordinates will strive to attract a new client and fulfill the plan.

Indicators are not everything

The introduction of a motivation system using KPIs solves many difficulties with managing and controlling subordinates. It is quite possible to calculate the number of successful transactions and profits per month per manager. Not everything is measurable, even in a work environment. For example, creating a system for measuring authority is problematic. But this factor cannot be ignored, because the authority of a superior colleague determines the outcome of the work.

The ability to make decisions in difficult situations, the ability to direct the development of subordinates in the right direction, the willingness to demonstrate by example how to work with difficult stages of implementation - qualities that a leading employee possesses. It is difficult to “drive” such concepts into the system due to their immeasurability.

But do not forget that a true professional with leadership qualities and the ability to manage people will show excellent results month after month in a measurable “field.” After all, it is impossible to bring stable profits to a company without the classic qualities of a sales guru.

© Konstantin Baksht, General Director of Baksht Consulting Group.

The best way to quickly master and implement the technology of building a sales department is to attend K. Baksht’s training on sales management “Sales System”.

The balanced scorecard, which emerged in the early 90s in the West as a dictate of the times, came into Russian management practice in the 2000s. Initially, it was generally accepted that BSC serves as a powerful motivational regulator of procedural business practices. In this article we will consider the question of what key performance indicators can be successfully applied in project activities. Such experience is gradually gaining more and more importance in modern management.

Brief overview of BSC

The Balanced Scorecard (BSC) theory became known and popular in the minds of managers thanks to the books and activities of two authors R.S. Kaplan and D.P. Norton. One of the essential components of this system are models of motivational indicators, which gradually began to be called KPI (Key Performance Indicators). Due to the difficulties of correct translation, these indicators in the Russian-speaking environment began to be called KPR (key performance indicators) or KPI (key performance indicators). For some reason, the latter has taken root better in the mentality of managers.

KPI models implemented in real business, being part of the balanced scorecard, themselves represent a system integrated into many functional control blocks. Among them, strategic management and personnel management occupy a dominant place.

In recent years, many Russian companies have learned to achieve success in developing strategy. However, the reasons for business failures still lie in the weakness of the methodical development and implementation of programs of specific actions for strategic implementation. The BSC and its key performance indicators are designed to close the gaps that remain between strategy and grassroots processes and development projects.

Company Balanced Scorecard Pyramid

The BSC system is called balanced because it represents a pyramid-hierarchy of goals that has a harmonious logic of decomposition from the vision, mission of the company, through strategy and strategic goals to goals of lower and lower levels:

• financial;
• client;
• process and design and technical;
• business system goals and personnel needs.

As you know, the traditional BSC methodology pays more attention to processes than to design tasks. This state of affairs remained unchanged for a long time. Currently, the architecture of post-industrial business itself is becoming increasingly project-oriented, therefore the need for localizing the KPI system in relation to projects is increasing. Below are two schemes for relaying the strategy down to the components of the project implementation, which do not require separate explanation.

Balanced Scorecard Project Block Model

Dividing the company's projects into two main types within the BSC

Whether we like it or not, our companies are already in the business environment of a new era. And if the path of degradation and bankruptcy is categorically unacceptable, there is no alternative to BSC. The most interesting thing is that in recent years the size of the business has not been an obstacle to the implementation of a balanced KPI system, but there are and will be implementation difficulties. Here, as always, the important thing is the movement towards a full-fledged model; it never works out perfectly the first time.

Personnel motivation in projects and KPIs

A system of performance indicators is built for management purposes by motivating personnel to solve cyclical problems (processes) and unique tasks under constraints (projects). In Russian business practice, sometimes one has to deal with a situation where a project manager is at a loss due to the unclear issues related to the motivation of not only his team members, but also himself. This is one of the significant reasons for the failure of successful endeavors.

Of course, a project-oriented system of personnel motivation needs to be carefully developed and regulated. The key role here is played by the HR director. It should be remembered that all projects are unique not only in the composition of the tasks being solved, but also in the motivational configuration. Using key performance indicators, you need to motivate not only the project team and its manager. This issue should also be addressed in relation to the project office, project management teams and, sometimes, the curator. The KPI system that motivates project participants should include the following.

1. Goals of responsible employees and teams.
2. Coverage of company employees and third party participants.
3. Validity period of motivation.
4. Evaluation criteria, its procedures and persons responsible for setting the KPI size.
5. Regulation of procedures for penalties and incentives.
6. Calendar schedule for calculating KPIs.
7. Regulations for the formation of a motivational budget.

It is very important that from the very beginning, at the level of strategy, investment and motivational policies, the company’s policy in the field of motivating personnel engaged in project activities is conceptually established. Some companies don't have this. A budget should be allocated for a fixed part of the incentives for workers involved in project activities, and funds should be raised for bonuses for their successful implementation. In my practice, I have always strived to achieve from senior management a level of bonus fund in the amount of 30-40% of the fixed part of the budget for these purposes.

Model for providing information to the procedure for calculating company KPIs

The budget management system, PMS (project management system) and the KPI system are in close interaction both from the position of the personnel motivation budget and from the position of information support for the calculation base of performance indicators. This is quite natural. Moreover, in many companies, in addition to purely financial plans and reports, the budget management complex integrates a subsystem of labor, technical and other types of regulation. In some companies, on the contrary, the normative planning system completely replaces the budgetary one and works very effectively. Whatever model of financial regulation is chosen, I am convinced that these three systems are best implemented and developed together, because they are parts of the whole.

KPIs for project-oriented business

Let us remind ourselves that project tasks in an organization are divided into two large groups: internal corporate development projects and contract-type projects inherent in the nature of a business that has a project type of production. Within the framework of this section, we are interested in the second type of organization, inherent in business in the field of construction, IT development, small-scale and piece production, and consulting activities. In this regard, examples of the development of KPI systems for company projects in these areas are of interest.

The criterion foundation for the effectiveness and efficiency of the project is formed at the stage of developing the project charter. Its components are success factors (indicators of successful implementation), which lay the foundation for the future composition of KPIs. Taking into account the main management functions, stages of project implementation, its content, limitations and risks, we focus on three subject elements of the “triangle of restrictions”:

• "money" or budgetary constraints;
• “time limits” or time limits;
• substantive limitations or “quality” of the project.

The effectiveness of projects is mainly determined by the skillful handling of these three aspects. A system of indicators should be built around them. Both according to the logic of the BSC methodology and common wisdom, budget constraints are paramount for motivating efficiency. It is more advisable to adopt the earned value method (EVM) as a basis for developing relevant KPIs. The purpose of developing indicators for this group is to determine the compliance of the actual work performed with the planned volumes within the budget.

Composition of EVM indicators that serve as the basis for project KPIs

Key performance indicators generated on the basis of the EVM methodology are well applicable in practice using the widespread MS Project. For example, the most accessible indicator - the standard value of CV - cost deviation shows whether the project manager fits into the budget allocated to him or not. We can also distinguish practiced KPIs from the category of indices, among which the CPI indicator is used for the purposes of budget restrictions. It gives a relative assessment of the efficiency of resource use.

The efficiency of project implementation in terms of time is characterized by SV and SPI indicators. Deviation from the schedule can be calculated in monetary units or time units, depending on the adopted measurement logic. This also applies to the index indicator. When considering the issue of meaningful indicators, one cannot fail to take into account the need to complete project milestones on time. So far there is no need to talk about the deployment of full-fledged BSC within the framework of individual project tasks, but element-by-element development of such systems is underway according to traditional components:

• clients;
• processes;
• systems and personnel.

Product innovation project and KPI

I will describe a real example of a project for introducing a new service “N” in a mid-level company, but with a fairly developed management. The company's personnel and motivation policies involve the allocation of motivational budgets for the implementation of development projects. The company does not have a project office, but there is a project administrator who assists several supervisors from among senior management and project managers from among functional managers and highly qualified specialists. There is no monetary motivation for curators, since they are tied to financial performance results and non-monetary KPIs from corporate strategic maps.

Within the framework of project regulations, work was carried out according to the concept and charter of the project. Criteria for assessing the success of the project have been developed and agreed upon between the curator and the PM. They include the following positions.

1. Delivery of fully developed service “N” into industrial production by deadline A within the approved budget Y.
2. Gross revenue from the provision of services “N” by term B for the period from the launch of the project is F thousand rubles.
3. Marginal profit by term B – G thousand rubles.
4. Achieving payback by deadline C.
5. Project funding is provided within the approved budget of Y.
6. 85% of specialists of the I and II qualification categories passed the test and were certified for the right to provide services “N” to the company’s clients by deadline D.
7. The breadth of use of service “N” by specialists of qualification category I and II by term E is at least 70%.
8. By deadline L, the number of calls to the company for service “N” reached the value of P calls per month.
9. The number of customer complaints in the business area decreased to level X by date T.

Please note that a number of criteria have the nature of milestones. Many of the listed parameters are essentially KPIs, which can be used to motivate workers involved in the project. I do not recommend using a large number of indicators to motivate project staff. For our example, at the PM level, I would leave two KPIs (points 1 and 3), and distribute the rest among the responsible executors. But I would reduce the total number of “salary” indicators to five.

Model of dependence of project management parameters on the number of indicators

The reason lies in the requirements for economy and consistency of the motivation system for personnel involved in the project. Employees included in the project team simultaneously perform work at their functional places. This should be remembered.

In this article we have touched on some very interesting issues. I feel the need to return more than once to the issue of the holistic nature of the BSC project, and to industry solutions in this area. It was completely impossible to think about the topic of translating down corporate goals, through project goals to key performance indicators. And since the development of project management doctrine is far from exhausted, and there are still a lot of “blank spots”, I am sure that this material on project motivation is just the beginning.

Top management uses project scorecards, also known as balanced scorecards, to ensure that project events are consistent with the organization's strategies and concepts. The scorecard is a bit like putting the reader in the driver's seat of a car. They need to look through a clean windshield to determine which direction the project is going, and equipment such as the speedometer, tachometer, oil pressure gauge, and water temperature gauge to ensure the car is operating correctly and is not at risk of failure.

By the way, this is why these scorecards are often called “balanced scorecards.” Before their appearance, performers had an idea only of the financial indicators of actions or projects. A need was identified for a more “balanced” view of performance that included measures of other aspects of job performance.

Project scorecards must satisfy two project requirements: the need for a mechanism for transmitting information about the results of the project and its status to busy performers and the need to compare the results of work across multiple projects.

The tips and techniques described in this article are taken from project management best practices outlined in the PMBOK (Project Management Body of Knowledge). You can learn these best practices by taking a quality project management course or a project management exam prep course.

Balanced Scorecard (BSC)

Balanced Scorecards, or BSCs, were developed and introduced by David P. Norton and Robert S. Kaplan in 1992 to supplement the limited view of organizational performance provided by measurement tools in the past. Job performance was measured on a financial basis, and the disadvantage of financial performance measurement was that it did not take into account other elements of job performance. For example, an organization taking on a project with a budget of $5 million, the goal of which is to increase the company's market share by 10% (which at a cost of $4 million per year) will look great if it is completed at a cost of $4.5 million. but the return on investment cannot be measured until at least a year has passed since the completion of the project.

Norton and Kaplan proposed measuring organizational performance in 3 additional areas: Customers, Internal Business Processes, and Learning and Growth (development) to gain a more balanced view of organizational performance. Norton and Kaplan argued that an organization that performs well in these areas can expect good financial results from its work. Measuring performance in these areas will also help executives proactively address issues that could lead to poor financial performance, rather than reacting only when the organization is already performing poorly.

Balanced scorecards were designed to measure the quality of work in all areas of the organization, not just the quality of project work. Projects may fall under any of the 4 performance areas, or even more than one, but only one aspect of the organization's performance will be taken into account. An organization's use of BSC will definitely influence the development of the project scorecard, but the project scorecard cannot duplicate the BSC format because the available information does not satisfy the requirements of the BSC.

Key Performance Indicators (KPI)

Key performance indicators, or KPIs, is an acronym often used in conjunction with balanced scorecards. Balanced scorecards use 5 or 6 indicators in each of the 4 areas of organizational performance as a system of measures. These 5 or 6 metrics could be any of the thousands that have been measured, but the choice is limited by the nature of the domain (finance, customers, business processes, learning and growth), the nature of the organization, and the nature of the processes and tools suitable for measuring the metrics. These metrics are called Key Performance Indicators, or KPIs.

This article contains practical advice on creating a scorecard for your project and selecting accompanying indicators, rather than the theory of balanced scorecards and KPIs.

Selection of indicators

Tasks and goals

When choosing the metrics on which to base your scorecard, remember that quality is the ability of a product to meet customer requirements. The first question a senior manager might ask when reviewing your project is: “What strategic objective or goal will this project help me achieve?” ?" The answer to this question should be included in your business case and/or project charter. These documents should describe one or two main goals that answer the question. Strategic goals are those goals or objectives that your organization will be able to achieve as a result of the implementation of the goals and objectives of your project.

The goal of your project may be to create a specification and system that can store up to 100,000 previous software orders and up to 10,000 custom software packages, process a customer order, and produce the customer's central office telephone switch operating system software. By offering customers the ability to manage their software configuration using your new software system, your organization's strategic goal could be to increase market share by 10%. (offering clients the ability to manage their software configuration using your new software system.) Note that the project manager should not be responsible for achieving a 10% increase in market share. Achieving this goal will enable the creation and development of software and a configuration management system that senior management trusts.

Select high-level project objectives and goals that align with the organization's strategic goal and provide them with that goal. For example, you can make the strategic goal the main item on the list, and make the project goals sub-items:

• Increasing the company's market share by 10%
• Presentation of technical specifications and configuration system, which will:
  • Save up to 100,000 previous orders for programs.
  • Manage up to 10,000 custom software packages per order.
  • Process customer orders and create the operating system.
  • Manage configuration program library rules.
  • Manage the rules for working with the market.
  • Determine the software composition of each client switch.

The top item on the list should be the strategic goal, which should be accompanied by no more than a one-page list of secondary objectives and project goals.

Overall project performance

The overall project performance indicator should be derived from 3 or 4 project health indicators. They are: performance to budget, performance to schedule, performance to scope, and quality. The overall project performance indicator is a subjective assessment of the project’s state; there is no indicator that can be used for it.

The colors red, yellow and green are typically used to indicate the overall health of a project, with red indicating a project that is doing poorly and requires intervention from the sponsors or steering committee to bring it back to normal. Yellow indicates a project that is not being performed to established standards, but that can be repaired using the resources currently available to the project. Green indicates that the project is progressing well.

Regardless of what means you use to indicate the overall performance of a project, you should use the performance indicator for the area of ​​the project that is performing the worst to indicate the overall health of the project. If schedule performance is yellow, then overall performance cannot be green

Efficiency of working on a budget

Earned Value Management (EVM) provides useful and accepted metrics for measuring the performance of a project on budget. The goal is to determine whether you completed the intended work on the project within the budget you planned. The budget will include the cost of all goods, services, resources (human and non-human) and administrative services consumed by the project. There are several different ways to obtain the metrics needed to make these measurements. The simplest is an MS Project file for a project that can track all these metrics. MS Project shows costs in the same units as the work to complete the project. The budget for C++ programming was exactly 72% used, while C++ programming was 72% complete. This may not be exactly what your audience expects from you.

Review reports issued by your finance department that measure your project's budget consumption. It is likely that these reports will be reviewed by senior management, and issuing your own financial report that does not match the finance department's report may result in a large amount of time being spent reconciling the two reports. Some points to consider when collecting indicators:

• Does the finance department use any time tracking tools to track labor costs?
• When does the finance department consider the labor budget spent? When are funds spent? When is the check issued? When is a check exchanged for money?
• When does the finance department consider that funds for materials have been spent? When are materials purchased? When are they delivered? When are they used? When is the check issued?

Use the finance department reports as the basis for your reports and explain how you used them if possible. If project-based financial statements are not available to you, examine the methods used by the finance department to compile their reports and align your measures with your organization's financial reporting methods.

There are several different EVM performance measures using financial metrics. Deviation from standard costs is the simplest. It simply compares the Actual Cost of Work Performed with the Planned Cost of Work Performed (CV = BCWP - ACWP). A negative value indicates that the project is over budget; a positive value indicates that the project is within budget. Cost Performed is actually an EVM concept that stands for Planned Cost of Work Performed (CV = EV - ACWP).

Cost Delivery Index, or CPI, is another measure of a project's financial health. Cost performance is an absolute monetary value, while CPI is a ratio that can be used to compare the performance of a project on budget in one period of time with another period or with another project. CPI is calculated by comparing the deviation with 1, - with 1 exactly corresponding to the budget. The formula for calculating CPI is BCWP/ACWP. A CPI greater than 1 indicates a project is under budget, and a CPI less than 1 indicates a project over budget.

Average monthly costs are the third metric used to indicate how effectively a project is running on budget. Average monthly project costs are simply a measure of how the project budget is being spent. Faster than planned? Slower than planned? Or exactly according to plan? Average monthly costs are the inverse of CPI, so the formula to calculate average monthly costs is: Average monthly costs = 1/CPI. An average monthly cost greater than one means your project is consuming your budget faster than planned and will use up the entire budget before all the work is completed. An average monthly cost of less than one means your project is consuming your budget slower than planned and will end before the entire budget is spent.

Efficiency of work according to schedule

Schedule performance is a measure of how quickly work on a project is completed. Is it completed on time? Ahead of schedule? Behind schedule? Your project may be performing well on schedule but poorly on budget, so the metrics used to measure cost performance cannot be used to measure performance on schedule. Your project may be ahead of schedule because you spent the budget on overtime to gain an advantage (get a jump ahead).

Your MS Project file may be your only source of the metrics you need to measure your performance on schedule. The file must save graphs in the form of time - hours, days, weeks or months. The main indicator of schedule performance is Schedule Variance, or SV. SV can be calculated in monetary units (as prescribed in the EVM) or in time units, as long as you stick to one unit of measurement and use it consistently throughout the project. The EVM formula for calculating SV is: BCWP - BCWS (Planned cost of work performed - Planned cost of work performed according to schedule). You can use currency, hours, days, weeks, or months as the units of measurement for BCWP and BCWS. A positive schedule variance indicates that the project is ahead of schedule, and a negative schedule variance indicates that the project is behind schedule.

Schedule Performance Index, or SPI, is the equivalent of a schedule's CPI, calculated using the formula SPI = BCWP/BCWS. An SPI greater than 1 indicates that the project is ahead of schedule, and an SPI less than 1 indicates that the project is behind schedule.

Scale

Scope can be looked at in two different ways: the fit between the project and its original set of deliverables defined for it, and the amount of time or cost for approved changes in scope. Validate your project's performance in scope by showing the planned deliverables for the project, the delivered deliverables created, and the costs of new features approved for the project. Limit the list of deliverables to key deliverables and indicate whether they are planned or already created.

Changes in scope can be shown as differences from the planned scope of the project. Show additional features and functions and their associated costs, and show features and functions removed from the plan along with their costs.

Quality

Quality indicator can be measured in various ways. Your primary source of quality metrics should be an issue tracking tool used to record bugs found by the QA (Quality Assurance) team. This tool should be able to generate almost any report you need and be able to categorize reported issues according to the following categories:

• In terms of seriousness.
• For reason (program error, data, question, etc.)
• By area of ​​application.
• By status (open, temporary (interim), eliminated, closed, etc.)
• By owner (Software developer, database administrator, etc.)
• For newly opened tasks.

There are two metrics that will be of interest when performing quality control activities: the number of tickets opened per period and the number of tickets closed per period. You can also report the number of bugs found per thousand lines of code, or any other indicator of the quality of the design work. Remember that the ultimate goal of Quality Management is to produce a product that meets customer requirements, so reporting a large number of open tickets should not be a cause for alarm. If many more tickets are opened than closed in the same period, or a huge number of newly opened tickets, this may be a cause for alarm.

Accuracy

The value of your scorecard will depend very much on the accuracy of the metrics that comprise it. Be careful when choosing metrics to report. Choose only those that you can verify. Be careful when collecting and storing the information you use; start by keeping your MS Project file accurate and up to date.

Your data will likely not be 100% accurate, no matter how carefully you communicate your assessment of data accuracy to your audience, and no matter how the data is stored and retrieved for scorecard reporting.

Multimedia

Don't try to create a scorecard report using only text. The report will be unreadable. Use multimedia to better support the metrics you report on. You can stick with the car dashboard/windshield analogy, where a traffic light showing red (stop), yellow (proceed with caution) or green can be an effective visual representation to measure the overall performance of a project. A speedometer showing the range of Cost Absorption Rate values ​​with an arrow pointing to the current value of the metric is also a good visual indicator.

Column charts are ideal for displaying statistical information such as trends. Displaying a project's current CPI or SPI values ​​tells the viewer whether the project is on schedule, behind schedule, or ahead of schedule for a reporting period, but displaying a maximized window over 10 reporting periods costs the CPI or SPI values ​​telling the viewer the same thing, plus that , operating efficiency increases or decreases. Trend lines will make the picture clearer, and a line with an index of 1.0 will show how the project should be performed.

Data scatter plots are useful for showing the cause-and-effect relationship between two variables, one of which is controlled experimentally. The control, or independent variable, is plotted on the horizontal axis, and the dependent variable is plotted on the vertical axis. This type of chart is useful in displaying the results of process changes as a quality measure.

There are many toolkits that will take whatever metrics you need for your report and present them in a great visual form. You can use one of these tools and experiment with its features, choosing a combination that suits your audience, or you can use the visual tools available to you to modify them to suit your own requirements.

From this article you will learn:

• Why do we need KPIs for managers?
• What are the benefits of KPIs for managers?
• What KPI criteria should sales managers use?
• How to calculate KPIs for sales managers

The harmonious concept of KPI for managers, which appeared abroad in the last decade of the last century, came to us only in the 2000s. First of all, this system was recognized as a strong motivating regulator of business activities. In this publication, we will focus on the main performance indicators of managers that can be used productively for your organization.

Why do we need KPIs for managers?

The Balanced Scorecard (BSC) gained fame among managers due to the work of two authors - R.S. Kaplan and D.P. Norton. One of the significant components of this concept are models of motivational indicators, which over time received the name KPI (Key Performance Indicators). Due to the problematic nature and errors of translation, KPIs in Russian were called KPR (key performance indicators) or KPI (key performance indicators). The second option has gained great popularity, gaining a foothold among managers.
KPI models, embodied in real business, are an integral element of a harmonious concept of indicators. At the same time, they themselves are a system integrated into a significant number of functional management blocks, of which the leading positions are occupied by strategic management, sales and personnel management.

Which managers do KPIs apply to:

KPI for HR manager.

Today, KPIs are often used to motivate employees by linking their performance and salary. However, the main omission of a significant part of organizations is that either the wrong indicators or the largest number of them are taken into account. Therefore, the main goal when forming a KPI concept for an HR manager is to identify the correct indicators for each employee. Then the team will have a stable understanding of what tasks each of them faces, what kind of encouragement awaits them if they effectively achieve their goals.

KPI for project manager.

A high KPI for a project manager is not the most common indicator for available staff. The thing is that a good manager in this area is very valuable and is usually in no hurry to change jobs. Naturally, a high KPI for a project manager is a strong argument for decent remuneration. Even during a crisis, they are in demand and well-paid specialists. Project work, being a component of the entire work of the company, is also considered an agent of change. The exclusivity of high performance implies reforms in the settings of the entire management concept. It is necessary to make a good “sample” as part of the repeatable, cyclical activities of the company, that is, to integrate the results of the project into the processes of the organization.

KPIs for top managers.

The main indicators should be focused on the tasks set for the organization, on what you want to achieve in a specific period of time. For example, the goal may be to gain a high position in the market or to receive a good income from the sale of a business. For the first option, the manager’s KPIs will include sales volumes, increasing the customer base, and for the second - increasing the organization’s capitalization, selling at the highest possible price. The goal must be formalized; therefore, it is necessary to record it in writing and divide it into less significant parts, the totality of which will help to achieve the main goal.

KPI for office manager.

The main KPI indicators of the effectiveness of office managers are also areas of regulation. The following KPIs are meant:

• completing work within the set deadlines;
• acting within the budget, saving resources and choosing the right supplier;
• positive assessment by employees and management of the organization of the level of administrative support;
• indicators interconnected with the management of personnel of subordinate structures (staff turnover, compliance with positions, number of dismissals during the probationary period, high assessment of colleagues from other departments when interacting with the administrative team).

KPI for quality manager.

For example, KAMAZ OJSC uses several indicators to assess production efficiency, each of which is significant and effective in a certain position. You can call this a hierarchy of production or operational KPIs. They are led by two KPIs: assessment of the quality level of products from the consumer’s point of view - APA - Audit Past Assemble; the number of hours actually worked by employees per unit of production - HPU - Hours Per Unit. These KPIs define the organization's overall production processes. Just below are three more KPIs: the total time period of the production cycle - TPT - Through put Time; the share of products that were not subject to modifications and troubleshooting - FTT-First TimeThrough; compliance with the working schedule for delivery of final products - OTD - On Time Delivery.

KPI for development manager.

Typically, in a classic management approach, professionals recommend using 10 to 20 high-level KPIs. However, it is possible to go deeper into internal processes, increasing the number of KPIs that are relevant to local actions within the organization through monitoring. These KPIs relate to four main segments - finance, customers, processes, people. This approach helps regulate activities on all fronts.

KPI for sales manager.

The management of the organization decides to introduce KPIs for sales managers in order to have a forecast of financial receipts and company growth. There are good reasons for this, because a simple request addressed to a manager to provide a sales forecast for the next 2-3 months with a 75% probability of implementation can cause serious difficulties. All employee activities without KPI cannot be predicted, and the main goal that the organization needs to achieve is to achieve a planned economy. We consider it necessary to take a closer look at KPIs for a sales manager, examples of which will be found below.

5 benefits of using KPIs for a sales manager

1. Result oriented– the employee earns financial incentives commensurate with his performance.
2. Controllability– helps the manager regulate the efforts of employees depending on fluctuations in the market situation or the objectives of the organization.
3. Justice– adequate assessment of the employee’s contribution to the success of the organization and fair distribution of risks in case of failure.
4. Clarity and Transparency– employees understand why they receive remuneration, and they have the right to independently calculate the main indicators of their activities.
5. Stability– when target indicators change in some periods, the concept of motivation remains the same, which forms a trusting relationship.

What do KPI indicators consist of?

KPI is considered to be part of the general concept of goal setting, which, in addition to personnel performance indicators, contains strategic target indicators, a system of tactical and operational design and regulation. If the KPI concept is not related to long-term goals and basic parameters of the organization’s functioning, then it will remain only formal. In other words, the KPI concept for a manager will simply be ineffective.

Decomposition of goals by management levels:
Strategic business goals → Company goals → Division and department goals → Employee goals

Focusing on existing tasks, specifics of activity, powers and level of the official, KPIs for managers are identified. Speaking about KPIs, we can consider economic indicators that help assess commercial performance, as well as indicators of main processes and consumption of basic resources.

Step-by-step development of KPIs for managers

To develop a matrix of tasks and KPIs you need to take six steps:
Step 1. Make sure that the tasks put forward can actually be completed. Unrealistic demands from a manager can frustrate employees and significantly reduce their effectiveness.
Step 2. Optimally divide tasks into divisions, departments and employees. The goals of the organization should not be located in the manager's matrix.
Step 3. After properly dividing the goals, formulate personal goals and KPIs for managers. Two KPIs can correspond to one task. Pay attention to the full compliance of the KPI with the goals of the organization. Each task has its own weight, which directly depends on its importance, and their total sum is 100%. In addition, they may differ in the difficulty of achieving them, which should also be taken into account by the manager.
Step 4. Create planned indicators; to do this, you need to study information about the previous period. If this data is analyzed for the first time, then it is necessary to examine the market situation, especially for organizations with seasonal activities. Also consider existing resources. Only after collecting all the data can you put forward planned indicators. Remember that overestimated KPIs will lead to a decrease in performance, and too low ones will lead to unreasonably high financial incentives for employees.
Step 5. Start creating performance criteria. Refer to the calculation formula:

Performancei = Facti / Plan i, where fulfillment i = fulfillment of the i-th goal

Step 6. Correlate the results with the manager's indicators. For any goal, a satisfactory outcome must be identified. All received data is added up, and a total result is obtained, which directly affects the amount of the employee’s remuneration.
In the future, you can use a comprehensive construction of a goal matrix, where all indicators are divided into three groups:

• unacceptable;
• planned;
• leadership

The amount of remuneration for managers is determined in accordance with the listed groups. For example, if an employee's final result falls into an unacceptable group, then he does not receive a bonus.


A competent KPI concept for sales managers provides high-quality management accounting and helps regulate personnel policies. An employee should strive not for quantity, but for quality. You need to understand that a sales manager is a completely creative profession, and an employee needs his own approach, since restrictions and tightening often reduce motivation and efficiency.

How to calculate KPIs for a sales manager

There is a KPI formula for a sales manager. We provide an example of calculating the quantitative KPI coefficient below:
IF (variable part) = Planned amount of the variable part * (KPI1 weight * KPI1 coefficient + KPI2 weight * KPI2 coefficient).

Table 6. Control of all proposed salary options for all possible KPI values ​​(with a detailed explanation for many values)

KPI1/KPI2	<50%	51-89%	90-100%	>100%
<50%	5000 (option 4)	18 750	22 500	26 250
51-89%	18 750	22,500 (option 3)	26 250	30 000
90-100%	22 500	26 250	30,000 (option 1)	33 750
	26 250	30 000	33 750	37,500 (option 2)

Option 1
Fulfillment of the sales plan 90-100% (KPI1 coefficient value = 1). Execution of the activity plan 90-100% (KPI2 coefficient value = 1). The variable part (PV) is 50% and equal to 15,000 rubles.
IF = 15,000 rubles * (1×50% + 1 * 50%) = 15,000 rubles.
Monthly salary = 15,000 (fixed part) + 15,000 (variable part) = 30,000 rubles.
Conclusion: the employee has a planned salary established according to the payroll standard.
Option 2
Fulfillment of the sales plan is more than 100% (KPI1 coefficient value = 1.5).
Execution of the activity plan is more than 100% (KPI2 coefficient value = 1.5).
IF = 15,000 rubles * (1.5 * 50% + 1.5 * 50%) = 22,500 rubles.
Monthly salary = 15,000 (fixed part) + 22,500 (variable part) = 37,500 rubles.
Conclusion: the employee has more than the planned salary by 7,500 rubles, but the implementation of the plan for each of the indicators exceeds 100%.
Option 3
Fulfillment of sales plan 51-89% (KPI1 coefficient value = 0.5). Execution of the activity plan 51-89% (KPI2 coefficient value = 0.5).
IF = 15,000 rubles * (0.5 * 50% + 0.5 * 50%) = 7,500 rubles.
Monthly salary = 15,000 (fixed part) + 7,500 (variable part) = 22,500 rubles.
Conclusion: the employee has less than the planned salary by 7,500 rubles.
Option 4
Fulfillment of the sales plan is less than 50% (KPI1 coefficient value = 0). Fulfillment of the activity plan is less than 50% (KPI2 coefficient value = 0).
IF = 15,000 rubles * (0 * 50% + 0 * 50%) = 0 rubles.
Monthly salary = 15,000 (fixed part) + 0 (variable part) = 15,000 rubles.
Conclusion: the employee has 15,000 rubles less, because the variable component is 0 due to the implementation of the plan for each indicator being less than 50%.

In what case will KPI for a manager not work?

• The organization's management did not take part in the formation of the goal tree.
• It is not possible to calculate KPIs for managers due to the lack of information in the accounting system, subjectivity or falsity of their assessment.
• Incorrect formation of KPIs for managers occurs when necessary indicators for achieving certain goals are ignored.
• There is no direct connection between KPIs for managers and the concept of motivation.
• Use of KPIs for managers in absolutely all departments. Then the leadership system may have errors and distortions.
• There is a connection between KPIs for managers and the concept of motivation, but there is no consideration of the individual motivation of employees for whom the KPI system was implemented.
• If the KPI system for managers does not imply payment for current achievements in long-term projects, but focuses only on the final result. In such situations, employees lose the connection between effective performance and encouragement.

How to motivate managers to work with KPIs

1. It is necessary to convey to employees that the introduced KPI system is not something unknown and scary. It should be explained that KPIs will not make drastic changes or undo their past achievements.
2. KPI can be defined as a very complex tool. This is why it is worth introducing and explaining this technology to users early on. To study the reviews, conduct discussions, discuss emerging issues, etc.
3. An indicator of the future success of KPI implementation is considered to be active participation in activities to set up motivation for KPIs of the general director and top managers of the organization. If the management team is not confident in the effectiveness of this project, such implementations will not be successful, which means that there is no point in them.
4. Top managers are required to involve middle managers in the formation of KPIs. These are the employees who will evaluate and plan their actions in accordance with the new concept. Managers will have to act unitedly and formulate a step-by-step plan for the implementation of the proposed project. Most often, the initial test of the concept is entrusted to commercial departments, and the back office is the last to be connected to the KPI system for managers.
5. It is necessary to stimulate the activity of employees when introducing KPIs and it is necessary to reward all efforts and merits.
6. Document flow must necessarily correspond to the innovations being introduced. To do this, you should separately plan the transition from the existing concept to KPI, and this will not happen quickly. The transition period will take some time, so we need to control this process.
7. Changes and innovations can be very beneficial to an organization, but it must be ensured that they are consistent with and work for the company's core purpose.

How to easily implement KPIs for sales managers in your company

When creating and introducing a KPI system for managers, it is worth making sure that the calculation algorithm remains easy and does not require constant explanation. Complex and incomprehensible systems do not inspire confidence, but introduce dissonance into the work of the team. May go so far as to refuse work responsibilities. Managers need to clearly formulate the meaning of introducing KPIs; staff should not have any questions about this. When explaining, you need to draw the attention of employees to the advantages of this concept. It is advisable to implement KPIs for managers in test mode and eliminate all shortcomings identified by practice, this way you can avoid errors in salary calculation.
Automation of the process is recognized as an important factor in the effectiveness of introducing KPIs for managers; various CRM systems are used for this.
You can develop a KPI system yourself, but it is quite difficult and leads to making certain mistakes. Serious organizations trust the formation of a KPI system to specialists who have extensive experience in this field.

Who can help develop KPIs for managers