KPI system in the company: how not to go for three letters

Evaluating something is very difficult. To do this, you must be an expert in the field in question, be able to take into account external factors, to choose. But all know and can not be. However, the business got close to solving the problem of evaluation closely - KPI indicators were invented. But this powerful and sophisticated tool was not so simple and harmless. In companies around KPI raging serious passions, in which there is a place even for hatred and personal motives. A few months of our company's life were devoted to the creation of a KPI calculation system within CRM. Today you can breathe out and say that everything turned out. And at the same time share interesting information and their findings. In general, we now know much more about these three letters than about those.



While you are reading this post, somewhere in the world one PR man is crying. Joke. Crying content manager. It's a joke again. It was not by chance that I mentioned the article in combination with the position of the person who is responsible for preparing the text in large companies. Unfortunately, content browsing, likes on Facebook, sharing on social networks, the number of group subscribers, etc. are starting to come into the KPI. But what to say, if someone in KPI includes the number of lines of code written in a month.

So, this is not serious. A metric should become a KPI (I’ll remind you again - a key performance indicator) only when it can significantly affect a business process or a business as a whole. For example, a failure to fulfill a sales plan or a decrease in the average cost of an order will lead to a shortfall in income and, in a relative perspective, to financial difficulties. But the number of likes on Facebook will bring the maximum to the spoiled mood of the SMM box, which has a long photoshop logo on the ear of a Friday cat. Of course, there are business categories for which these indicators are decisive, but these categories can be listed on the fingers of one hand.
')
In this case, all shows, transitions and likes must be measured - but these are just analytical quantitative indicators. And, if very necessary, for KPI purposes, they need to be taken in aggregate. The general rule is simple: if you cannot correlate an indicator (retweets, followers, views and likes or something else) with real income, do not turn it into a KPI. And now about the history of the issue and private rules.

Every disease has its own history

Honestly, we in RegionSoft often have companies in which there is a KPI system, but something goes wrong. For example, filling in data turns into a formality, data is taken from the ceiling or, on the contrary, total control arises in a company and KPIs turn into the only meaning of the work of each employee. To understand where the problems start from, it is worth looking into the history of the issue. For all the seriousness of the topic, the story turns out to be quite curious.

By the middle of the 20th century, industrial production and implemented technologies required a new dimension of productivity. It is no coincidence that the first “KPI models” appeared not in scientific theoretical publications, but became business initiatives. The first metrics of performance in the 50s were introduced by General Electric, and a little later in France, the Tableau de bord was developed (dashboard, dashboard, dashboard), which is still widely used in French companies. Just Tableau de bord for the first time mentioned financial and non-financial indicators that differ for different levels of government. And it was precisely in her that the indicators for the first time were divided into target (vision strategies) and functional (controlled, calculated, linked to goals).


The founder of the KPI system is considered to be the professor, economist and one of the leading figures of the management, Peter Drucker. That he owns the words "Strategy without metrics - just a desire. Metrics that do not meet strategic goals are a waste of time. ” Drucker also proposed a set of metrics and indicators that could be used in business. However, almost until the end of the 90s, the KPI system was not widely used. By the end of the 90s - the beginning of the 2000s, there were prerequisites for the widespread use of KPI abroad.

• There were suitable technologies: Microsoft office suite, CRM, business intelligence systems. They allowed to count KPIs directly within the system, based on the data entered. It's simple: once you set the logic, and you get monthly results, monitor, build reports. About how we did it in our RegionSoft CRM - below.
  
  
• Business has become difficult, multi-criteria evaluations have appeared - these challenges required a new system of employee motivation, taking into account several criteria.
  
  
• New types of business have appeared, the role of the commercial unit in the company has sharply increased. Promotion, sales, analytics and market research have begun to demand efficiency. Productivity alone was not enough.
  
  
• A good impetus to the development was given by the works of Robert Kaplan and David Norton. They developed a balanced scorecard that includes financial and non-financial factors. In a short time, the system became widespread in more than 50% of US companies, and then won the rest of the world. By the way, there are still disputes among management theorists whether the balanced scorecard is different from the Tableau de bord or is it just another implementation of the “steal as an artist” principle.
  

All indicators within the business can be divided into how many types.

• Strategic indicators are indicators based on aggregated values. These include, for example, market share, company value. They are not suitable for KPI employees, but they are quite capable of being key indicators for the quarter or year for evaluating the effectiveness of top managers.
  
  
• Analytical - indicators for assessing trends. They are complex, but they have clear logic; users have access to data and the ability to make comparisons over periods. These are sales, gross revenues, accounts receivable, and so on. Most often they are KPIs.
  
  
• Operational - control in real time and anticipation of deviations from the norm. This could include retail sales per day or week as part of the monthly plan, daily traffic to the site, contextual advertising indicators, the number of calls, and so on. In fact, these are analytical indicators, but in a short period, that is, a display of the rate of achievement of KPI. We in RegionSoft CRM monitored such indicators using progress bars available in the main CRM window for employees and their supervisor.
  

Let us try to tell you how to build a KPI system so that it is efficient, powerful and meets real business goals, and not the petty and sometimes petty interests of individual employees.

Large KPI study - numbers say a lot

In September 2015, a regular forum on productivity growth and KPI was held in Malaysia (Kuala Lumpur), in anticipation of which the researchers conducted a large-scale survey . Questions were asked to answer 73,000 people. The results were very interesting.

Thus, 49% at one level or another use the performance management system at the operational level and 39% at the strategic level. 42% use a balanced scorecard (the one that comes from the US - we talked about it above). 12% do not use the performance management system. After the introduction of KPI, 68% of respondents noted a positive impact, 15% found it difficult to assess, 14% are sure that they did not have any influence on KPI and only 3% noticed a negative effect.

The reasons (motives) for introducing KPI were assessed by respondents as follows:

> 43% - improvement of the state of business, objective increase in the level of achievements
> 18% focus on what needs special attention.
> 17% - transparency, detailed numerical evaluation of the desired result
> 13% - a sense of the results of company management through the formation of responsibility and accountability
> 6% - communication, transmission of key messages (on the state of the business) to external and internal stakeholders
> 3% - learning, forming a better understanding of the business

With the development of a performance management system, a business faces several difficult things. So, the most difficult aspect is expected - the choice of those indicators that should be key. 32% of respondents consider this a real difficulty. 28% cause problems with data collection, 19% - setting target KPI values, 14% - analyzing indicators, 5% - documenting, and only 3% - visualizing KPI data.

After the results are collected and the indicators on hand,

> 32% find it difficult how to build and debug performance management culture
> 22% find it difficult to implement initiatives to improve the KPI system
> 18% have difficulty making corrective actions
> 16% experience problems analyzing data
> 6% do not understand how to make reports and how to build training based on the results

Further more, in establishing the correspondence between the KPI plans of the employees and the strategic goals of the company, 16% recognized a complete discrepancy, 23% recognized full compliance, and 56% agreed that the plans partially corresponded.

As for automation , the analytics has not bypassed it. 74% of professionals use Microsoft Excel spreadsheets to collect data and calculate KPIs, 10% use various cloud solutions, 9% use desktop systems installed on their own server (our RegionSoft CRM is one of them ), 7% do not know what is used in their company . By the way, I’ll note from myself that the problem is that the majority of managers and managers do not expect that KPI performance indicators can be calculated in CRM. Meanwhile, this is just logical: the data, the logic of calculation and the result in one place.


Only 18% of specialists use KPI for forecasting and modeling, 33% use calculated indicators in the decision-making process. 55% have special units that deal with KPI, 45% do not.

KPI: how not to do

To get to the problems associated with KPI, consider the real case, which is as sick as possible.

---

By the way, if you know how to create KPI dreams, own Pascal Script or just want to sell RegionSoft CRM in your region on the basis of remote work in a company, write and call all available ways to contact@regionsoft.ru mail. We have powerful CRM without bugs and with features, cool conditions, good team, adequate leadership and active PR support for the product. Read more - under the post.

---

In one rather large Russian company (> 400 people), they introduced the so-called matrices - complex multicomponent KPI systems, on the basis of which a part of the monthly salary was formed for employees. Total ratios could both increase and decrease the amount of payments. They were calculated by a group of personnel assessment and motivation based on coefficients that were placed in the matrix tables by the managers (from -3 to +3) and relative values ​​(fulfillment of the plan, the number of clients served, etc.). The coefficients with the estimates were absolutely subjective: outstanding tasks, common tasks, failed tasks, general corporate loyalty (approximately as a grade for student behavior). Needless to say that these same matrices were a wonderful tool of pressure, revenge, meanness and other clerical intrigues.


Illustration for a reduced KPI system - you can’t think better

And all because these KPI initially carried a few errors. Let's start with them.

• The KPI system should not be built as a punishment system or an instrument of retribution. This should be a set of indicators reflecting the goals of the business, the dynamics of development and the contribution of each employee to the achievement of the intended. If management allows a group of employees (for example, department heads) to manipulate indicators, it should be prepared for negative scenarios, the most neutral of which is staff dissatisfaction. And the most fatal is falsification, when KPIs are adjusted to the desired values. The same effect arises if the manager is crazy about KPI, and employees are forced to “draw” in order to survive in the company.
  
  
• KPI should not include indicators that are not measurable. These include assessing the quality of service based on certification by senior managers, customer satisfaction, employee loyalty, and so on. The advice here is one - less subjectivity, more real quality calculated values.
  
  
• KPIs should be such that the employee can directly influence their achievement and implementation of the plan. This is a very common conflict when an employee is responsible for something he cannot influence. For example, there is a commercial service, in it: sales managers, a marketer, a PR man, an analyst, and a programmer who makes samples and reports for the analyst’s order. Everyone in KPI is worth the implementation of the sales plan. Although, in fact, the analyst and the programmer can in no way affect sales, they are working on the results of these very sales. Therefore, it is better to make changes in their KPIs. If time does not correct the conflict, there will be discontent in the team, there will be constant accusations of each other in problems with the implementation of the plan, etc.
  

• KPI should not be turned into an end in itself. While working to achieve several indicators, employees miss other tasks, there are unpleasant imbalances in business development. I will illustrate this point with a wonderful discussion.
  

A couple of years ago, on Linkedin, I came across a brief and concise article by Bernard Marr “Be careful: when KPI becomes poison”. I liked two analogies in it: 1) KPI ceases to be useful when goal metrics become goal itself. 2) KPI - torches in a large dark room. One we can illuminate only a limited space, in the other corners - darkness.

But the first comment dotted even more aptly.

Sam Kishaish:

I like the torch analogy. A single KPI will only illuminate a part of the room. If you’re still in the same corner of the room And, most importantly, if you chase KPIs instead of using them to illuminate, you'll get burned, like moths to the flame. To quote an old movie, “Don't go into the light!”

Translation: A cool torch analogy. One KPI will illuminate only part of the room. If you put the rest of the torches in the same corner, they will cast long shadows into other corners, but you still won't see much of the room. And, most importantly, if you chase KPIs, and not use them as a lighting device, you will burn like moths in a flame. Quoting an old film, “Don't go to the light!”

In fact, the negative, which concerns KPI, each has its own and strongly depends on the forms of implementation of the system and the participation of units in it. Therefore, let us analyze what must necessarily be taken into account when developing KPI and working with the performance management system.

KPI: how to do

The KPI system is a motivational system aimed at improving the efficiency of the work of employees or departments for which the corresponding criteria for evaluating their effectiveness are set. The KPI system combines two main tasks - targeted and financial planning in combination with the plan-actual analysis. In other words, the KPI system allows you to assess the degree of achievement of the planned results. That is, it must motivate, help plan and evaluate.

KPI should be a metric that has the ability to directly influence the company's revenues and costs, or potentially create prerequisites for significant events (for example, participation in tenders). And all these metrics must comply with a set of rules.

Configuring KPI in RegionSoft CRM 7.0 - the company's flagship solution (release date - August 2018)

Basic KPI Setup


Advanced KPI Setup


KPI and payroll in RegionSoft CRM

The most expensive and most valuable asset of the company - employees. The KPI system should combine the pursuit of the strategic goals of the company and the motivation of employees. That is, at the head of the corner is still a person who works and with his activity brings income, other benefits. He should understand in what points he influences the business process and how he should build his work in order to bring more benefits and get more income. KPI is a guideline that helps an employee build himself into the process.

KPI panel must be flexible, customizable, because just this process can not be unified. More than once on Habré they wrote about the benefits and harms of KPI, especially in development companies. Obviously, programmers, salespeople, and KPI financial service employees must have different and relevant results for the employee (and not for the imaginary countable indicator such as the number of lines of code). Accordingly, it is important to carefully work on the scorecard, highlight the really significant and adjust the weight.

KPI should be viewed not just as an estimate, but as an indicator in dynamics - only then the system will be working, can it serve for planning and forecasting.

You need to think carefully about the mechanism for calculating KPI. For example, you can choose a cumulative indicator with weights of coefficients (the sum of the contribution of each indicator multiplied by the indicator), you can multiply the KPI, when the indicators are multiplied.

It is better to look at a specific example. Suppose employees have three KPIs: sales and accounts receivable.Manager A sold for 250,000, closed accounts receivable for 60,000. Manager B - 200,000 and 25,000.

So, if we have rules: sales to 100,000 - 0, from 100,000 to 200,000 - 0.5, from 200,000 to 300,000 - 0.7, over 300,000 - 1, accounts receivable up to 10,000 - 0, up to 20,000 - 0.5, up to 60,000 - 0.7, from 60,001 - 1. KPI comes from salary - 30 000 rubles.

With a multiplicative model, the total payout:

Manager A: 30,000 + 30,000 * (0.7 * 0.7) = 30,000 + 14,700 = 44,700
Manager B: 30,000 + 30,000 * (0.7 * 0, 5) = 30,000 + 10,500 = 40,500

For cumulative, total payout:

Manager A: 30,000 * (0.7 + 0.7) = 42,000
Manager B: 30,000 * (0.7 + 0.5) = 36 000

If you look at the achievements of managers subjectively, the first seems to be more effective than the second, and the cumulative model emphasizes the difference in efficiency more noticeably than the multiplicative one. Weights must also be assigned with caution. It happens that not the most important indicator with a small weight gives a coefficient of 0.1 or 0.2, and this in the multiplicative model dramatically reduces the amount of the premium. There are many charging options - below we will tell you what model you can build in RegionSoft CRM and automate the monthly KPI calculation there.

KPI in its totality should reflect the progress of the team and business in relation to the goals set, which means there must always be a plan.

The metrics show each team’s involvement in achieving the goal, which means thatthey must be understood by the staff . It is best to document the KPI system and familiarize employees, clarify controversial issues.

KPI - these are key indicators, that is, reflecting those processes that have an impact on business development. Select 2-3 indicators. Focus on the essentials and on what is really important for business. As experience shows, the temptation to measure and evaluate everything within the framework of KPI pursues leaders - do not give in, you will later drown yourself in indicators. You need to measure everything, but only the most important things should be put into key indicators.

If there are structural or product changes, change the KPI.The scorecard should only display actual goals. For large companies or companies sensitive to external economic conditions, systemic changes should also be taken into account. For example, during the economic crisis, there is a decline in demand among travel companies and it becomes impossible to perform pre-crisis KPIs. Naturally, you need to calculate new target values.

Discuss the KPI system with the team, track the best practices. You have already seen in the statistics, which is slightly more than in half of the companies, a separate division deals with the topic of KPI. This is good practice, but it is worth including leaders of all departments in the working group, since they understand all the specifics of their work.

Do not overwhelm business with competition indicators.It is no secret that in small and medium-sized companies there are employees who perform several functions at once - in this case, it is necessary to take into account the priority areas of their work. For example, the department is engaged in affiliate, agent and direct sales. At the same time, direct sales "cost" in KPI is more expensive than affiliate. Sooner or later it will lead to a reduction in the latter, and this is the loss of an important sales channel. In the same way, the establishment of KPI by the number of closed bug-cases can lead to a decrease in the speed of work on the main functionality of the program.


My dream is that one day I will find all the right KPIs.

How we KPI in RegionSoft CRM implemented

In RegionSoft CRM , KPI parameters can be configured individually for each employee, group, department, or company as a whole, depending on the responsibilities and goals to be achieved. For example, for a secretary, targeted planning is relevant, regardless of the amount of money brought (number of sent faxes, received calls, etc.). While for a sales manager, it is financial planning that is relevant: the amount of bills issued, the number of transactions, shipments of goods, etc. An additional feature of the KPI system is the calculation of employee remuneration based on a system for assessing the achievement of goals through key performance indicators.

The KPI system consists of several modules, each of which is finely tuned.

Key indicators.Incidents (quantity), documents (sums on them and quantity), any quantitative information that is collected using the built-in PascalScript script (these are custom indicators; how to create a script, is described in detail in our wiki help on the KPI system ).


Obviously, every document, transaction and any incident has a different value for a business, and this must be taken into account in the KPI system. To do this, RegionSoft CRM provides the ability to put down weights that increase or decrease the value of the indicator. In the process of work, the number of goals achieved is accumulated, the system groups the goals and applies the coefficients, determining the total value of the employee’s actions. The total value is calculated using the following formula:

Σ (Ci × Ki)

Where:

C is the number of targeted incidents. It should be noted that for each goal, the search for events is done separately and does not affect the results for other goals;
K - coefficient for the goal (the coefficient may be absent, then the number of incidents is taken into account, that is, K = 1).

The indicator for the documents is also entered into the system, but is calculated simply as the resulting amount (the number of documents, the amount of money on them). In the process of establishing the coefficient in the CRM, you can specify the condition of the sample (for example, take into account only the invoices carried out).

Custom scripts allow you to create scripts that implement arbitrary logic for calculating the resulting value. You can also create child measures based on the original calculation. It is quite simple to create scripts, there is a detailed instruction for them - basic programming knowledge is enough.

Plans and profiles. Planning profiles are set up in RegionSoft CRM and help to carry out a subsequent plan-actual analysis and display the performance of indicators based on the data collected in CRM. The profile mechanism is designed so that, based on one indicator, several profiles can be configured and vice versa - one profile can contain any set of indicators. The plan can be set for: day, week, month, quarter, year.


Depending on the configured access rights (and in RegionSoft CRM they are configured both as a whole and for individual modules and even clients), you can see the progress bars of the performance of indicators by employees. So, for example, the employee himself sees only his personal indicators, and the head of the department - the indicators of all his managers and the department as a whole.

Indicators can be individual or group, i.e. You can monitor the performance of a specific employee, and the performance of the department or the entire company as a whole.

Templates of bonus rules and payroll.Using the KPI system, you can organize the calculation of employee remuneration, which will be based on the results of compliance with standards in the context of key indicators. To organize the calculation, it is necessary to define a set of remuneration rules, and then apply these rules to employees. The principles of monetization are configured in RegionSoft CRM as rule templates in a convenient graphical interface: the name, description, indicator, value of indicator, premium or expression for calculating the premium are specified.

Rewards are customized for each user individually. In the user compensation settings interface, you must specify the salary size and select a list of templates for calculating the bonus. The same bonus template in the user settings can be specified only once.


The calculation of user remuneration is performed using the following expression:

S + ΣBiS + ΣBi

where: S is the user's salary;
B - the size of the award, calculated using the template.

If necessary, additional adjustment of the amount of remuneration, you can use a software script that allows you to implement arbitrarily complex logic. The script is executed after the values ​​of all indicators and templates are calculated. The values ​​of all indicators and templates are available in the body of the script and can be obtained and modified through their variables.

We know about all the problems associated with setting up and calculating the KPI system, which is why in RegionSoft CRMbuilt-in "KPI Configuration Wizard", which takes the user through the steps and helps to configure the system of key indicators. In the future, you can review the system, make changes, or even manually write scripts that take into account the most subtle wishes for the composition of the KPI.


The KPI scorecard must be such that it is easy to delegate their implementation, and for staff to read formulas and components and to understand them. Visualization and interactivity produce a competitive effect, transparency makes the system fair, and KPIs themselves help to manage the business according to goals. So, the owners get the desired profit, and employees - deserved remuneration.

---