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

Evaluating something is very difficult. To do this, you need to be an expert in the field in question, be able to take into account external factors, choose. But you cannot know and be able to. However, the business got close to solving the assessment problem closely - KPI indicators were invented. But this powerful and sophisticated tool was not so simple and harmless. Serious passions rage in companies around KPI, in which there is even room for hatred and personal motives. Several months of our company’s life were devoted to creating a KPI calculation system inside CRM. Today you can exhale and say that everything worked 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 cries. Joke. The content manager is crying. Another joke. It is no coincidence that I mentioned the article in combination with the position of the one who is responsible for the preparation of the text in large-large companies. Unfortunately, more and more often KPI starts to include content views, likes on Facebook, sharing on social networks, the number of subscribers to groups, etc. What can I say, if someone in KPI includes the number of lines of code written per month.

So, this is not serious. A metric should become a KPI (let me remind you again - a key indicator of activity) only when it can significantly affect the business process or the business as a whole. For example, non-fulfillment of a sales plan or a decrease in the average cost of an order will lead to a loss of income and, in a relative perspective, to financial difficulties. But the number of likes on Facebook will lead to a maximum of the spoiled mood of the SMM-box, which for a long time photoshopped the logo in the ear of a Friday cat. Of course, there are categories of business for which these indicators are decisive, but these categories can be listed on the fingers of one hand.

At the same time, all impressions, transitions and likes must be measured - but these are just analytical quantitative indicators. And, if you really need to, for the purposes of KPI, you need to take them together. The general rule is simple: if you can not correlate the 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.

Each disease has its own story.

Honestly, in RegionSoft we often meet companies that have a KPI system, but something goes wrong. For example, filling out data turns into a formality, data is taken from the ceiling, or, conversely, the company has total control and KPI turns into the only meaning of the work of each employee. To understand where the problems begin, it is worth looking into the history of the issue. For all the seriousness of the topic, the story is quite curious.

By the middle of the 20th century, industrial production and implemented technologies required a new measurement of productivity. It is no coincidence that the first "KPI models" did not appear in scientific theoretical publications, but became a business initiative. The first performance metrics in the 1950s were introduced by General Electric, and a little later in France, the Tableau de bord (dashboard, dashboard, dashboard) was developed, which is still widely used in French companies. Just Tableau de bord first mentioned financial and non-financial indicators that differ for different levels of government. And it was in it that the indicators were first divided into target (vision of the strategy) and functional (controlled, calculated, linked to goals).


The founder of the KPI system is considered to be professor, economist and one of the leading figures in management Peter Drucker. It was he who owned the words “Strategy without metrics is just a desire. Metrics that do not meet strategic goals are a waste of time. ” Drucker proposed a set of metrics and indicators that could be used in business. However, almost until the end of the 90s, the KPI system did not receive wide distribution. By the end of the 90s and the beginning of the 2000s, prerequisites for the widespread use of KPI developed overseas.

• Appropriate technologies have appeared: Microsoft office suite, CRM, business intelligence systems. They made it possible to read KPI directly inside the system, based on the data entered. It's simple: once you set the logic, and monthly get the results, monitor, build reports. About how we did it in our RegionSoft CRM - below.
  
  
• The business became complicated, multi-criteria evaluations appeared - these challenges required a new employee motivation system, 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 began to require an assessment of effectiveness. Labor productivity alone was not enough.
  
  
• A good impetus to the development was given by the works of Robert Kaplan and David Norton. They have developed a balanced scorecard that includes financial and non-financial factors. In a short time, the system gained distribution in more than 50% of American companies, and then conquered the rest of the world. By the way, there are still disputes among management theorists whether the balanced scorecard differs from Tableau de bord or is it another implementation of the principle of “steal as an artist”.
  

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

• Strategic indicators - 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 a quarter or a year to assess 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. This is sales, gross revenue, receivables, and so on. Most often they are KPI.
  
  
• Operational - real-time monitoring and the prevention of deviations from the norm. This may include retail sales per day or week as part of the implementation of the monthly plan, daily traffic to the site, indicators of contextual advertising, 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 at RegionSoft CRM implemented monitoring of such indicators using progress bars available in the main CRM window for employees and their manager.
  

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

Great KPI research - numbers say a lot

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

So, a performance management system in one form or another is used by 49% at the operational level and 39% at the strategic level. 42% use a balanced scorecard (the same one that comes from the US - we talked about it above). 12% do not use a performance management system. After the introduction of KPI, 68% of respondents noted a positive impact, 15% found it difficult to evaluate, 14% were sure that they had no influence on KPIs, and only 3% noticed a negative effect.

The reasons (motives) for the introduction of KPI were assessed by the respondents as follows:

> 43% - improvement in the state of the business, objective increase in the level of achievements
> 18% - focus on what requires special attention
> 17% - transparency, detailed numerical assessment of the desired result
> 13% - a sense of the results of company management through the formation of responsibility and accountability
> 6% - communication, broadcasting key messages (about the state of the business) to external and internal stakeholders
> 3% - training, building a better understanding of business CA

When developing a performance management system, a business is faced with several complex things.So, the most difficult aspect is expected - the choice of those indicators that should become key. 32% of respondents consider this a real difficulty. In 28%, data collection causes problems, in 19% - setting target KPIs, 14% - analysis of indicators, 5% - documentation and only 3% - visualization of KPI data.

After the results are collected and indicators on hand,

> 32% find it difficult to build and debug a culture of performance management
> 22% find it difficult to implement initiatives to improve the KPI system
> 18% have difficulty making decisions about corrective actions
> 16% feel problems when analyzing the received data
> for 6% they don’t understand how to make reports and how to build training based on the results.

Further, more, within establishing compliance between the KPI plans of employees and the strategic goals of the company, 16% recognized complete non-compliance, 23% recognized full compliance and 56% agreed that the plans partially met.

As for automation , analytics did not bypass it either. 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 (this includes our RegionSoft CRM), 7% do not know what is used in their company. By the way, I’ll note from myself that the problem is that most managers and managers do not expect that KPI performance indicators can be calculated in CRM. Meanwhile, this is just logical: data, calculation logic 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 a real case that is as sick as possible.

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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 the company, write and call in any available way to contact@regionsoft.ru We have powerful CRM without bugs and with features, cool conditions, a good team, adequate leadership and active PR-support of the product. More details - under the post.

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One fairly large Russian company (> 400 people) introduced the so-called matrices - complex multi-component KPI systems, on the basis of which employees formed part of the monthly salary. The final ratios could both increase and decrease the amount of payments. They were calculated by a staff assessment and motivation group based on coefficients that managers (from -3 to +3) and relative values ​​(plan fulfillment, number of clients served, etc.) put down in the matrix tables, Odds with ratings were absolutely subjective: outstanding tasks, ordinary tasks, failed tasks, general corporate loyalty (approximately as an assessment for a student’s behavior). Needless to say, these same matrices were a wonderful tool of pressure, revenge, meanness and other office intrigues.


You can’t imagine a better illustration of the above KPI system.

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

• The KPI system should not be built as a system of punishments or an instrument of retaliation. 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 what was planned. 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 occurs if the head raves about KPI, and employees are forced to "draw" in order to survive in the company.
  
  
• KPIs should not include indicators that are not to be measured. These include assessing the quality of service based on certification by senior managers, customer satisfaction, employee loyalty, and so on. There is only one advice - less subjectivity, more real qualitative 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 that he cannot influence in any way. For example, there is a commercial service, in it: sales people, a marketer, a PR specialist, an analyst and a programmer who makes selections and reports for an analyst. Everyone at KPI has a sales plan. Although, in fact, the analyst and programmer cannot influence sales in any way, they work on the results of these sales. Therefore, it is better to make changes to their KPIs. If the conflict is not corrected in time, discontent will mature 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. Working to achieve several indicators, employees miss other tasks, unpleasant distortions appear in business development. I will illustrate this point with a wonderful discussion.
  

A couple of years ago on Linkedin, I came across a short and capacious article by Bernard Marr, “Caution: When KPI Becomes Poison”. I liked two analogies in it: 1) KPI ceases to be useful when goal metrics turn into a goal itself. 2) KPI - torches in a large dark room. One we can illuminate only a limited space, in the other corners - a haze.

But the first comment dotted even more accurately.

Sam Kishaish:

I like the torch analogy. A single KPI will only illuminate a part of the room. If you put all your torches in the same corner, they'll cast long shadows in other corners, but you still wont see much 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 analogy with a torch. One KPI will cover only part of the room. If you stack the rest of the torches in the same corner, they will cast long shadows to other corners, but you still won't see much of the room. And, most importantly, if you chase after KPI, 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 that applies to KPI, each has its own and strongly depends on the forms of implementation of the system and the participation of units in it. Therefore, we will analyze what must be taken into account when developing KPI and working with a performance management system.

KPI: how to do it

The KPI system is a motivational system aimed at improving the performance of employees or departments for which appropriate criteria for evaluating their effectiveness are configured. The KPI system combines two main tasks - target and financial planning in conjunction with a plan-factual analysis. In other words, the KPI system allows you to evaluate the degree of achievement of the planned results. That is, it should motivate, help plan and evaluate.

KPI should be a metric that has the ability to directly affect the income and expenses of the company, or potentially create the prerequisites for significant events (for example, participation in tenders). And all these metrics must comply with a number of rules.

Setting KPI in RegionSoft CRM 7.0 - the flagship decision of the company (release date - August 2018)

Basic KPI setting

Advanced KPI Setup

KPI and payroll in RegionSoft CRM

The most expensive and most valuable asset of the company is employees. The KPI system should combine following the strategic goals of the company and employee motivation. That is, at the forefront is still a person who works and brings income, other benefits through his activities. He must understand at what points he influences the business process and how he should build his work in order to bring more benefits and receive more income. KPI is a benchmark that helps an employee integrate himself into the process.

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

KPI should be considered not just as an assessment, but as an indicator in dynamics - only then will the system turn out to be working and can serve for planning and forecasting.

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

Here it is better to look at a specific example. Suppose employees have three KPIs: sales volume and receivables. 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 up to 100,000 - 0, from 100,000 to 200,000 - 0.5, from 200 000 to 300 000 - 0.7, more than 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.

In the 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

When cumulative, the 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 more effective than the second, and the cumulative model emphasizes the difference in efficiency more significantly than the multiplicative one. Weights must also be assigned with caution. It happens that not the most important indicator with low weight gives a coefficient of 0.1 or 0.2, and this in the multiplicative model dramatically reduces the amount of premium. There are many accrual options - below we will tell you which model can be built in RegionSoft CRM and there to automate the monthly calculation of KPI there.

KPIs together must show progressteam and business regarding the goals, which means there should always be a plan.

Metrics show the involvement of each team in achieving the goal, which means that they must be understood by employees . It is best to document the KPI system and introduce employees to clarify controversial issues.

KPIs are key indicators, that is, reflecting those processes that have an impact on business development. Choose 2-3 indicators. Focus on the essentials and what really matters to the business. Experience shows that the temptation to measure and evaluate everything within the framework of KPI pursues leaders - do not give in, then you yourself will drown in indicators. Everything needs to be measured, but only the most important should be included in key indicators.

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

Discuss the KPI system with the team, follow the best practices.You have already seen in the above statistics that a little 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 the heads of all departments in the working group, since it is they who understand the specifics of their work.

Do not ruin your business with competition indicators.It is no secret that small and medium-sized companies have 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, agency and direct sales. At the same time, direct sales "cost" in KPI more expensive than affiliate. Sooner or later, this will lead to a reduction in the latter, and this is the loss of an important sales channel. In the same way, establishing 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 implemented KPI in RegionSoft CRM

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 that must be achieved. For example, for the secretary, targeted planning is important, independent of the amount of money brought (the number of faxes sent, received calls, etc.). At the same time, financial planning is relevant for a sales manager: the amount of invoices 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.The basis for calculating indicators can be incidents (quantity), documents (sums of them and quantity), any quantitative information that is collected using the built-in PascalScript script (these are user indicators; how to create a script is described in detail in our wiki-help according to the KPI system ).


Obviously, each document, transaction and any incident has a different value for business, and this must be taken into account in the KPI system. To do this, RegionSoft CRM provides the ability to affix weight factors that increase or decrease the value of the indicator. In the process, the number of goals achieved is accumulated, the system groups goals and applies coefficients, determining the total value of the employee’s actions. The calculation of the final value is carried out according to 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 carried out separately and does not affect the results for other goals;
K is the coefficient for the target (the coefficient may be absent, then the number of incidents is taken into account, that is, K = 1).

The indicator for documents is also entered in the system, but it is calculated simply as the resulting amount (the number of documents, the amount of money on them). At the same time, in the process of entering the coefficient into the CRM, you can clarify the sampling condition (for example, take into account only the invoices made).

User scripts allow you to create scripts that implement arbitrary logic for calculating the resulting value. You can also create child indicators based on the initial calculation. Creating scripts is quite simple; there is a detailed instruction for them - enough basic programming knowledge.

Plans and profiles.Planning profiles are configured in RegionSoft CRM and help to conduct a subsequent plan-fact analysis and display the performance of indicators based on the data collected in CRM. The profile mechanism is designed so that on the basis of 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 as a whole, as well as for individual modules and even clients), you can see the progress bars for 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 control both the performance of a specific employee, and the performance of the department or the entire company as a whole.

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

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


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

S + ΣBiS + ΣBi

where: S is the size of the user's salary;
B - premium size 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 changed 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 Setup Wizard”, which guides the user through the steps and helps set up a system of key indicators. In the future, you can revise the system, make changes, or even write scripts manually that take into account the most subtle wishes for the composition of KPI.


The KPI scorecard should be such that its implementation is easy to entrust, and it is easy for employees to read the formulas and components and understand them. Visualization and interactivity give a competitive effect, transparency makes the system fair, and KPIs themselves help to manage the business according to goals. This means that owners receive the desired profit, and employees deserved rewards.

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