1. What is a KPI?

KPI (Key Performance Indicators) - "key performance indicators", but more often translated as "key performance indicators". KPI is one of the tools with which you can analyze how effectively the staff works to achieve the company's goals.

KPI indicators are often used by larger companies (not where the owner, director, seller and loader are the same person), but vice versa when the company has a large number of employees and branches. The use of "kipiai" greatly simplifies the control of the efficiency of all departments of the company. Having key performance indicators, we get the opportunity to manage the process and make changes to it. Set goals for staff and motivate them to achieve them.

Let's look at an example of key performance indicators. You are the owner of a large household appliance store and you have 12 sales managers on your staff. The performance of each manager for a month can be assessed according to the following criteria:

• what % of the customers the manager interacted with made a purchase;
• average check of clients;
• fulfillment of the sales plan (for example, the minimum bar for a month is 350,000 rubles, and the manager’s salary will depend on how much% he exceeds the plan);

If, for example, you need to sell blenders of a certain model, you can set a plan for each manager of at least 5 units, if more, then the seller receives 3% of its value from each “extra” unit. Thus, the goal is achieved to sell a certain product and motivate managers for this. As practice shows, the optimal number of KPI criteria for one employee is from 5 to 8.

2. Types and principles of KPI

Types of key performance indicators:

• KPI of the result - quantitative and qualitative indicators of the result;
• Cost KPI - the amount of resource costs;
• KPI of functioning - how the execution process corresponds to the established algorithm;
• Performance KPIs are derived indicators that characterize the ratio of the result obtained and the time spent to obtain it;
• Efficiency KPIs (performance indicators) are derived indicators that characterize the ratio of the result obtained to the cost of resources.

There are principles to follow when developing key performance indicators. The cost of measuring performance indicators should not exceed the managerial benefit from using the indicator. After all, you can't hire a person who will count the number and duration of the manager's calls, the result will not justify the costs. For a more accurate result and the possibility of comparison, the indicators should be measurable and as simple as possible, understood by each unit in the same way, in order to avoid misinformation. And, most importantly, that KPIs are necessary, if we do nothing based on the results of their measurement, then in this case they are meaningless.

3. Pros and Cons of KPIs

Key benefits of the KPI include:

• fairness, transparency and comparability of results (management and staff see who works and earns how much);
• adjusting the work of an employee according to a lagging indicator;
• involvement of personnel in achieving the goals of the enterprise;
• quality control of the performance of duties.

Despite all the positive aspects of the KPI system, it is not universal. Not all indicators in the work of personnel can be measured quantitatively, and therefore each business has its own ways of assessing efficiency, and finding them will require a lot of time, labor and finances.

4. How to calculate KPI. Example

There is no single formula for calculating KPI, since each company has its own specifics and, therefore, its own “kipiai”. Let's take an example of the calculation of the salary of a sales manager, taking into account his KPI in the Kotelok online store. The rate is 7,000 rubles. + 2% of personal sales (800,000 * 0.02 = 16,000 rubles) + bonus for fulfilling the plan by the number of new customers (2,000 rubles) + bonus for fulfilling the enterprise plan (for example, the plan is 100% completed - 5,000 rubles , by 70% - 3,500 rubles) in our case, by 80% - 4,000 rubles. In total, at the end of the month, the manager will receive a salary of 29,000 rubles. This scoring system motivates managers to sell to existing customers and attract new ones.

5. What is KPI in sales

In the field of sales, the main key performance indicators for the sales manager and the sales department are:

1. Sales volume. The manager is set a plan for a certain period of time (month, quarter, year). For example, in March, the manager must make sales for 1,300,000 rubles.

2. Number of sales. The number of customers who made a purchase (number of receipts).

3. Traffic. The number of customers who have learned about your product are potential buyers. Of course, attracting traffic is the task of marketers, but the seller himself can also influence the flow of customers, for example, using word of mouth.

4. Average check. Introduced in order to encourage the manager to sell additional products. For example, purchase a heat-resistant glass plate or baking dish for the oven.

You can develop a KPI system on your own, but this will require a lot of effort and eat more than one dog. Most large companies still prefer to entrust the construction of the Kipiai system to professionals with extensive experience in this field. If you need help implementing KPIs in your company, please contact us, we will be happy to help!

Today, among the leaders of companies, there are practically no those who have never used KPI performance indicators. The abbreviation that everyone hears stands for "Key Performance Indicators", which means "key performance indicators". In the Russian environment, KPI is interpreted a little differently, measuring the effectiveness of an enterprise, which in essence is no different from the original interpretation.

The main questions of the article:

• What is a KPI?
• Key KPIs
• Applying KPIs in practice
• Examples of KPIs

What is a KPI?

KPI is a set of indicators by which the performance of a company, department or individual is evaluated. Such indicators, comparing the tasks set with the result obtained, assess how certain goals were achieved.

The main characteristics evaluated by KPI indicators:

• a productive result is what the activity of the enterprise is aimed at, i.e. received net profit, volumes of sold products, sales proceeds, volumes of manufactured products, market share occupied by the enterprise, number of acquired customers, their positive reviews, image, etc.;
• indirect effect - results, the receipt of which is unfavorable for the company: debts, excessive staff turnover, etc.;
• resource costs - all costs incurred by production;
• time costs - the amount of time spent on completing tasks;
• an objective assessment of the productive effect (useful) is the main KPI indicator that characterizes efficiency, all other indicators evaluate performance. This indicator is calculated by the ratio productive result(beneficial effect) to the sum of all costs (resource and time).

Related video: how to determine the right KPI

Key KPIs

Most often, KPI indicators are used by large retail chains that own a huge number of branches. It is easier for the head office management team to evaluate the performance of the company in one plane, using a set of specific indicators. On the basis of which it is easy to track a particular trend. In medium and small businesses, the use of a KPI scorecard is more complex in terms of evaluation, but nevertheless it is used quite often.

Each manager has the right to choose the required number of KPI indicators independently. The main criterion in the choice is the simplicity of calculating the values. It is also important to remember that the selected indicator should fully analyze the outcome of the activity.

Among the indicators used for performance analysis, the most commonly used are:

• sales volume indicator - cash receipts from goods sold are analyzed;
• the staff turnover rate is the percentage ratio of the number of hired and fired employees for a certain period;
• service standards indicator - % expression of the secret assessment of the quality of service.

Depending on the goals of the analysis, the scope of activity, the specifics of the company's work, the indicators may be different.

Applying KPIs in practice

There are several basic methods for using the most optimal list of KPI indicators. However, long-term practice has deduced the main rule "10/80/10", where:

• 10 is the number of key indicators for evaluating the result obtained;
• 80 is the number of indicators evaluating production activities (operational);
• 10 is the number of indicators by which performance is assessed.

It should be understood that the main principle of using a KPI system is the ability to manage and control the receipt of the necessary results, i.e. the company, department or individual employee who is entrusted with the implementation of KPI analysis should have all the authority to influence the progress of obtaining the indicators necessary for further KPI analysis.

There are also a few more principles that greatly facilitate the process of KPI analysis:

• the principle of partnership - you need to understand that in order to obtain the most positive result of any activity, the cohesive work of the entire company is necessary, from management to service personnel;
• the principle of improvement - the essence of this principle is that the company's management needs to be ready to train the team, conduct a program to improve the skills of some employees, etc. to achieve the desired result;
• the principle of increasing responsibility - this principle implies that with the help of the introduction of KPI analysis, it is possible to increase the independence of employees regarding the adoption of managerial decisions;
• the principle of matching the analysis strategy and the indicators obtained - the purpose of the principle is to obtain optimal results of the KPI analysis that meet the basic requirements of the strategy for analyzing performance indicators.

Examples of KPIs

When implementing a system for analyzing KPI performance indicators, management often wonders how exactly KPI is calculated. You can come up with a whole list of indicators, but you need to remember that each indicator must identify a specific purpose of the analysis. To develop an effective system of KPI analysis of employees, it is necessary first of all to build on the tasks and functions that are their job responsibilities. For example, the performance of a Sales Manager can be assessed by the number of closed deals, customer feedback on the manager's work, and so on.

There are several conditions for conducting a KPI analysis (applies to any business structure):

1. A certain number of performance evaluation criteria (no more than 10 parameters, the most optimal - 5).
2. Logic. None of the criteria should contradict and level the other.
3. Monitoring the implementation of KPI-analysis tasks.

KPI of company management and subordinates

By and large, the KPI system of management and subordinate personnel is the same. The main thing is that the selected indicators meet the following requirements:

• measurability;
• specifics;
• realism;
• consistency;
• certainty in time.

The main "pros" and "cons" of using KPI indicators in enterprise practice

Conducting an analysis of KPI performance indicators in a company has both positive and negative sides.

The benefits of KPI analysis include:

• the result of KPI implementation, as a rule, is a greater motivation of employees to conscientiously fulfill their production tasks and functions;
• each employee of the company receives a specific list of required results;
• employees can visually evaluate their contribution to achieving the goals set by the company;
• management always has up-to-date information about the work of each employee, which increases the quality control of the employee's performance of official duties.

The main disadvantages include:

• sometimes it happens that the low productivity of the department leaves a negative imprint on the high productivity of a particular employee, as a result, the employee may quit without receiving a proper assessment of his work;
• Not all employees receive financial incentives as a result of achieving their goals. For example, administrative staff will be left out of work if the purpose of the analysis was to increase net profit, they simply will not have the opportunity to prove themselves;
• sometimes, the result of a KPI analysis is the so-called reverse motivation. Those. instead of being rewarded for achieving results, employees receive nothing, while those who do not improve on the task are penalized or punished.

KPI (Key Performance Indicator stands for) is a key performance indicator. Simply put, this is an indicator of the achievement of a result in a particular activity, which can be digitized and measured.

Motivational KPI system - in the Russian version, the abbreviation KPI (Key Performance Indicators) is sometimes used - an indicator of the effectiveness and success of meeting the goals. The task of this system is to direct the actions of employees of all departments in a single direction through the implementation of specific indicators. The KPI of each individual employee determines the effectiveness of the performance of his specific work and is financially reflected in his wages, but in general is aimed at solving the business goals of the entire enterprise.

Key parameters can be divided into two types:

1. Operational, which fully reflect the current activities of the enterprise and allow you to solve problems in connection with changing conditions.
2. Strategic, which reflect the work of the enterprise for the entire period and allow you to make adjustments to the plan for the next working period.

There are the following types of KPIs:

• Cost KPIs - illustrate the amount of costs;
• Efficiency KPI - characterize the ratio of the result obtained to the costs;
• KPI functioning - evaluate the compliance of a process with a given algorithm;
• Performance KPIs - evaluate the ratio of the result to the time spent to achieve it;
• Result KPI - show what result you got.

The last indicator has highest value in personnel management, as it shows what results employees achieve as a result of their labor activity. Also, the KPI of the result is used when calculating the bonus part of the salary, if the enterprise has an appropriate remuneration system.

What is KPI in salary

When developing and implementing efficiency parameters for remuneration, it is necessary to clearly understand what goals the company is pursuing. These goals should have specific features, and for goal setting, verbs and numbers must be used.

For example:

• increase turnover by 20%;
• take 5th place in terms of brand awareness among manufacturers of this product;
• reduce logistics costs by 15%;
• increase sales profitability by 25%;
• reduce the average application processing time to 5 minutes;
• increase the number of site views by 1000;
• handle large quantity addresses per unit of time, etc.

Any motivational system should be aimed at increasing interest in the work and the quality of the indicators being implemented. But you also need to understand that not all departments can influence the implementation of the company's business goals. For example, a secretary or an accountant. But even for such employees, you can set criteria for the effectiveness of their work. Just tie them not to common business goals, but to the implementation of the goals and objectives of the unit.

For a secretary, this can be: the quality of processing incoming and outgoing documentation, the speed of answering incoming phone calls, and for an accountant, the time for processing documents or the quality of interaction in matters of document management with accountants of counterparties.

The implementation of the KPI system provides for:

• clearly defined goals for the business;
• development of the lowest and highest performance indicators;
• proper distribution of powers and responsibilities among employees;
• determining how and which indicators to achieve the goals are affected by each unit;
• finding out what exactly within the department an employee of the company can influence;
• search and formulation of specific indicators for each employee;
• creation of a new payroll algorithm taking into account KPIs.

When implementing a KPI system, it is advisable to first implement it as a pilot or test project in one department whose work has a direct impact on the company's financial performance (for example, in the sales department). And then, after correcting possible errors, extend its effect to all other units. In the event of a change in the conditions of the external market environment or a change in the strategy and goals of the company, KPI indicators are necessarily revised.

It is important that the development of the KPI system is not carried out only by employees of one department, for example, the personnel department. It should be teamwork heads of all departments, so as not to make mistakes in determining key parameters. Within the department, it is necessary to develop a system from top to bottom, i.e., first to the head, and then to his subordinates, so that the goals and objectives within the unit are uniform. Instead, it would not work that, for example, the head of the department should increase the sale of low-margin positions, and managers receive a percentage of the sale of positions with high profitability. With such indicators, managers are generally not interested in selling positions with low profitability, and the tasks of the manager will be difficult to fulfill.

In a properly built system, each KPI coefficient is a well-thought-out and defined value.

It is also very important to understand: KPI salary - what is it. One employee should not have many indicators for which he is responsible (3-5 is the most optimal number). Each indicator must have its financial value, which will be reflected in the salary. It is also recommended to keep the employee's salary, and make the motivational component additional, and not part of the former salary.

Development of KPI, rules and principles of implementation:

• there should not be many indicators;
• each indicator must be measurable;
• the costs (time and financial) for measuring a parameter should not exceed its cost.

When implementing new system wages, you need to be prepared for resistance from workers. Often, employees assume that they want to deprive them of their salaries, and not increase their income, they are afraid of not meeting the new established standards and losing their jobs altogether. It is very important to explain to employees what this developed system is aimed at, what results management expects from them. And understand that the goals set by management may turn out to be radically opposite for employees to what they did before. It is especially difficult for workers of the “Soviet temper”, accustomed to other systems of motivation and remuneration, to get used to such innovations.

In general, the development of a KPI system is a very controversial topic for any leader. This process can be quite costly and painful for employees, but right approach is an excellent tool to motivate and stimulate employees to work.

How to evaluate performance

Evaluation of the fulfillment of the tasks set is an important element of the work of this motivational system. The standards of ordinary workers should be transparent in their assessment, so that a person himself can understand during the accounting period whether he fulfills them or not, and not learn about it after the end of the period. Managers may have indicators that may take time to determine the implementation of, such as % of the company's return on sales. But within a month, the employee should understand in which direction he is moving, and be able to evaluate his current work by other indicators.

In large companies, performance evaluation is usually automated, and the results are determined "with a button". In small companies, either managers or representatives of the personnel department are involved in evaluating the results.

Based on the performance of the indicators, a bonus is awarded.

The following calculation formula is usually used:

• KPI weight - the weight of each indicator of the system in the total amount equal to one. The maximum weight is given to the most significant indicator. For example, the main achievement of a sales manager will be an increase in the amount of sales;
• plan - the planned result that the employee must achieve;
• fact - the result actually achieved.

By calculating the index for each indicator, you can immediately see which tasks the employee had problems with and how this affected the overall results of his labor activity for the reporting period.

To determine the appropriateness of bonuses and calculate the bonus component of wages, a general performance ratio is used, which is the sum of all indices.

If it is more than one, then this indicates an overfulfillment of the set plan, which means that the employee can be rewarded.

This approach makes it possible to make the bonus distribution process more transparent and understandable both for the employee and for the company's management personnel distributing bonuses.

In addition to paying a bonus, an employee can be encouraged in some other way. For example, provide an unscheduled day off, transfer a more promising project to him, include him in the personnel reserve for a higher position, etc.

It is optimal to combine material and non-material incentives. It is this motivational system that will allow employees to work well and efficiently, and companies to achieve high financial results.

Pros and cons of the KPI system

Pros (and, as a result, the achievement of goals):

• the employee's ability to influence his salary;
• responsibility of the employee for his area of ​​work and transparency of tasks;
• participation of the employee in achieving the overall goal of the company;
• the possibility of adjusting the goals of the head in the process of work;
• the interaction of the leader with the subordinate in a more dense mode.

Cons (and, as a result, demotivation of the employee):

• unattainability of the set parameters;
• a small share of each indicator in the total bonus due to their large number;
• labor input of the system implementation;
• uneven problem solving due to incorrect determination of the cost of standards.

KPI examples for different positions

It is necessary to understand very clearly, speaking about KPI, what it is when paying. For different positions, even to achieve the same goal, it is necessary to use different indicators.

Consider examples of indicators for achieving the goal of “increasing profitability (delta between revenue and expenditure) of sales” in a company that sells sweets.

What is a KPI matrix

On the Internet you can find different interpretations this concept. Sometimes the concept of "KPI matrix - agreement on goals" is used. But the most accurate interpretation is the efficiency matrix.

This table contains indicators of the employee's KPI system, planned and actual values, as well as the KPI coefficient for each item. The final average value in this matrix reflects the effectiveness of the employee in his activities within the framework of the tasks set and the indicators determined for his position.

An example of a KPI matrix for the above employees of a company that sells sweets, within the limits of the indicators defined for them.

Special opinion

When developing KPIs, there are 2 main mistakes. The first is the confusion between KPI and money. KPI is not a description of a bonus system. Yes, bonuses can be paid for the achievement of indicators. But in general, KPI is a reflection of the effectiveness of an employee, department, direction, department. For example, in production, there should be a client assessment of the quality of work. Most large companies do not include it in the bonus system, but fix it only as a KPI - if an employee is in critical areas, they pull him up to the desired level or part with them, but he is not paid a bonus if 90% of customers are satisfied with his work.

The second is KPI for the sake of KPI. KPI is always a decomposed goal of a company. For example, in a salon, the arrival of an administrator by 9 am can be recorded in KPI (otherwise the shopping center will fine the company for a closed salon), but in production such an indicator is meaningless (an employee can come at 9 and leave at 18 o’clock, but the amount of work will not change, namely, the volume of work affects profit).

Boris Teklin

Head of Customs Department in Russia DHL Worldwide Express

It is believed that correctly selected KPIs must meet the so-called SMART criteria (Simple, Measurable, Agreed, Relative, Timebound). This means the following: KPIs must be understandable to the employee and easy to calculate. KPIs should be "digital", that is, measurable in certain units (in cubic meters of excavated soil, tons of cargo transported, the number of calls answered, the percentage of the plan completed, etc.). You cannot use unmeasurable "analogue" indicators as KPIs, such as "quality", "good", "beautiful", etc. KPIs must be consistent with the goals of the unit and agreed between the employee and his manager. KPIs should be related specifically to this employee and the work assigned to him, the expected result of the work should depend on this employee. KPIs should be measured at the agreed time intervals (if there is a link to a premium, then it is logical to "link" the indicator to a month or quarter).

KPIs should be as clear as possible to those who set the task and those who complete it. Their main task is to contribute to the achievement of planned indicators and to motivate them to fulfill new ones. Based on our experience, we highlight a few errors.

1. KPI is not developed for business management, but to motivate specific departments, employees, divisions, to evaluate the effectiveness of their work. If these indicators are not related to common system and do not work to achieve business goals, the question arises: what effect do they bring to the business?

2. KPIs are not integrated into the motivation system. The indicators are set, but employees have no incentive to meet them.

3. KPI indicators are only financial. In a properly designed KPI system, there are a large number of not financial, but leading indicators by which we control the activities of the business and the achievement of the necessary results.

4. There is no planning and KPI accounting system. Indicators are needed when we know how to count them, when we can get them from the accounting system and calculate them objectively, and the employee trusts these indicators.

5. KPI indicators are compiled in such a way that the employee works not for the result, but for the indicators.

In our opinion, KPI is not effective in creative professions and in unstable markets. Today we see the following alternatives to the traditional KPI: a) The employee makes decisions independently (the principle of work according to the "Turquoise Management Model"); b) Planning for performance targets.

Olga Pavlenko

HR manager Soyuzkhimtrans-Auto

The article presents in sufficient detail the important aspects in the development of a KPI system. I would like to add an important, in my opinion, nuance that there should not be too many key indicators. Of course, there are positions in which it is very important to take into account many different factors and components. But the more parameters for taking into account the effectiveness of an employee, the more difficult it is to keep them all in the head and the more difficult it is to focus. After all, developing a KPI system is still half the battle, the system must work. And for this, one should not forget the basics of psychology, namely the features of attention and memory. 3-5 indicators are exactly what is optimal for a working KPI system.

And the second important point that I would like to add concerns the base salary paid to the employee. The salary part of the salary must be unchanged and indivisible. This state of affairs gives the employee a sense of stability and confidence. Complementary base salary payments according to the KPI system should motivate and encourage the employee to professional development and more successful completion of tasks. If the base salary also becomes a variable value, there is a risk of demotivating the employee and provoking him to avoid difficult situations instead of solving them.

When developing KPIs, it is important to consider the following factors.

1. An employee must necessarily influence KPI.

2. Achievable KPI. An ambitious goal is good, but keep in mind that it is impossible to build a house in 2 days.

3. Relevance to functionality. KPI - an indicator for the achievement / improvement of which this position exists (marketing - attracting customers; seller - sales).

4. KPI weight depending on the position. For example, for a sales manager, KPI can be up to 80% of the salary level. For a back office employee, it cannot be more than 50%, because the presence of his activity already creates value, and KPI is an additional motivation.

5. The optimal number of KPIs is from 1 to 3.

KPI is not effective in the following cases:

1. High degree of uncertainty of the final result/product.

2. The competencies of the employee are unique (in the company/industry).

3. We need a super result (build a house in 2 days).

4. The employee does not have tools to influence the result. KPI will push and limit, which will lead to regression.

An alternative is: the introduction of additional bonuses for super performance; description of the lower bar when high degree uncertainty of the result; checklist for a unique employee.

Now we list a number of rules that must be taken into account when creating your system for evaluating the performance of KPI work.

1. Firstly, it is worth noting that the calculation of KPI indicators cannot be overly complex and lengthy, so that any manager is not distracted from his direct duties, and is not forced to do all his work time dedicate to this work.
2. Secondly, the indicators should be transparent and as measurable as possible so that they can be understood by all employees in the enterprise in the same way.
3. Thirdly, and most importantly, these indicators should not just be received and ignored, but on their basis a picture of the work of each employee was drawn up. On the implementation of the plan - a bonus or encouragement is paid, if the plan is not fulfilled, on the contrary, a fine is imposed.

Positive and negative sides of KPI

The positives include:

• Motivation for employees to implement the plan.
• Honesty, transparency and adequacy in wages. You can see which of the employees works best and how much he receives.
• Making adjustments to the work of a lagging employee.
• The staff is involved in achieving the goals of the company.
  Monitoring the quality of work and the fulfillment of their duties.

The disadvantages of the indicator include the fact that it is not ideal. Not in all areas KPI can be effectively and rationally applied, since it is not always possible to measure in quantification one job or another. This means that in order to find it or bring the system to the desired indicators, the manager will have to spend a significant amount of time, nerves and budget.

Motivation by KPI

It sounds ominous, but it's actually very simple. There are 3 main levels in the system: minimum (at which the employee is not fired), normal (when the employee shows a satisfactory result) and maximum (where the staff should strive). If each employee of the enterprise clearly assesses what indicators he has and where he needs to grow in order to receive a salary increase, bonus or new position, he begins to work with redoubled energy.

Example of KPI calculation

There is no formula for calculating this indicator, because each enterprise is unique and has its own specifications, but we will take a fictitious company, let it be the “Your Milkman” store and our employee-manager:

• The rate is 10 thousand rubles.
• He receives 5% from each of his sales (the turnover is 500 thousand rubles).
• He receives a bonus of 2 thousand rubles if he finds the right number of new customers.
• It is not difficult to calculate that he will earn 37 thousand rubles.

As you can see, the calculation is made transparently and understandably for any employee, which means that this increases the motivation of company managers to sell and attract new customers.

How to implement KPIs

To implement the system in an enterprise where none of the employees have ever encountered such a system can become a real problem, it can even go as far as refusing to enter the workplace.

That is why, first of all, you need to carefully analyze all the points, find key indicators and submit them for temporary testing. This moment will help to reveal all weak sides your system and improve it, bringing it to a good result.

The most important factor in a successfully implemented KPI system, is its automaticity of all processes.

Summarizing

From the article, we learned that KPI is a key performance indicator, analyzed its positive and negative sides, learned how to calculate this indicator, analyzed how it can affect employees and how to properly implement the system in production.

To write this note  it took:

• 68338 kilometers for travel.
• 72 man-hours for mail correspondence.
• 423 man-hours for experiments with a team of 30 people.
• 88 hours for preparation of reports and presentations at conferences.
• 17 cups of coffee to chat with wise people at the afterparty.
• About 25 hours to type this text and fix bugs in it :).
• A tortured copywriter to death who was forced to parse my drafts, audio recordings, and generally thanks to him.

Lots of money and time. Perhaps the most costly (in terms of nerves, time and money) was the experiment on my own team, which I feel extremely embarrassed to remember. But more on that below.

Sooner or later, probably, every director has a desire to pay fairly. For the work done. And a lot of people are now trying to implement KPIs (Key Performance Indicators). It works like this: you, as a business owner, assign specific goals for employees. They achieve or do not achieve their goals in the process of work. Those who have reached - a bun (cash bonus) is issued.

The point of this approach is to pay fairly. How much you have earned - so much you have received. It's honest, it's logical, it's wonderful!

Well, it makes sense that:

• Sellers need to assign a percentage of turnover. Wolves must be hungry. (Yes, there is an alternative opinion that applying such an approach means “imposing an additional tax on yourself.” But as for me, everything is fair here :-)).
• Office plankton - set a salary. Stability for them is a very important condition for existence.

But with creative units (designers, programmers) - everything is much more complicated.

We recently conducted a survey of the heads of leading digital agencies and web studios in the country on the topic “how do you use KPI in relation to the work of creative units”, as a result, we got this picture:

Some companies (15%) use KPIs to evaluate the performance of programmers and designers.

About 25% of companies are implementing KPIs at the moment / meeting resistance within the company or working according to a simplified scheme.

Approximately 30% of companies pay employees based on the subjective assessments of managers. Or rather, 30% admit it ;-)
The remaining 30% do not confess.

The most interesting thing is that many have tried to implement KPIs or are trying now. And not very successful. This does not mean that “KPI is bad”. Poorly prepared food is impossible to eat. Maybe we just don't know how to prepare this KPI?

But statistics show that the overwhelming majority have difficulties with implementation. And there is a suspicion that the same problem is common to all. Let's try to figure it out.

The first thing you will have to face when implementing KPI is the resistance of the team

The question arises: What hovers developers the most when implementing KPIs?

After conducting several experiments and surveys among colleagues, we identified 6 main reasons:

1. Fear of novelty. Everyone is totally afraid of innovations, thinking that it will get worse (less money, more work, etc.).
2. Opaque scheme. By using a compensation scheme with multiple parameters, we increase the risk that workers will not understand it. People get frustrated and demotivated when they don't understand exactly how they can achieve the best results or why they suddenly get less money.
3. "Why so many?" Yes, this happens too. If the scheme is built in such a way that the result of this month will appear only in two or three. “This month I worked worse, but I got more. So, last time I didn't get it. Management are idiots, they don’t understand anything about my work!”
4. The employee's heart rate. It is almost impossible to get into a person's sense of self and give him a "fair" bonus.
5. Incomplete dependency achievement criteria from the worker. For example, it is not entirely up to the designer whether the design he draws will be sold or whether 50 edits will have to be made.
6. Reports. I don’t know anyone who likes to write reports, put down the time spent, promise “exact dates”.

If you look at this list carefully, you will find that most of the claims are related to choice, consideration, transparency and the adequacy of the criteria.

OK. So, you just need to come up with Good Criteria!

Well, those who will understand everyone, who will not soar anyone, who will be easy to explain even at an interview. And so that everything was honest, and I wanted to work more and more.

In general, let's try to find Good Criteria. (By the way, "Good" - for whom?). We have three key affected stakeholders: the studio owner, the customer, and the developers.

What can be a Good Criteria from the customer's point of view? Usually it all comes down to money (well, or some actual results):

• ROI - Roughly speaking, this is a "return on financial injections." The indicator derived by economists is not entirely applicable to developers: after all, they cannot control the return on their work and measure it in money on the go. That is, they cannot directly affect the indicator.
• Low cost of the feature. It is beneficial for the customer to have a low cost feature. And for the developer, this is a pattern break ("How is it: I get more money because I work cheaply?").
• Degree of satisfaction. I don’t know how to calculate it, but given that people want happiness or at least less steam (Dmitry Satin), then we can even offer this formula:

However, the reality now is such that to come and offer, for example, to a designer the dependence of his salary on the ephemeral “satisfaction” of the customer is a guaranteed way to be left without a designer. A very serious crisis is needed for this topic to start working. Or a lot of good extra designers.

• Date of release. Everything seems to be logical: we hand over the project on time - we get a lot of money, we hand it over ahead of schedule - we get even more money. The indicator is suitable, but it has an already identified problem: not everything depends on the developer. Deadlines most often arise from the client-management side. (Hence the fair: “Why should I lose in salary, although this manager did not knock content out of the customer?”).

OK. These Criteria, which are Good for the customer, will obviously not be Good for the developer. (I have no illusions, now you can easily come up with another 200 pieces of different criteria that are significant for business. Write and discuss in the comments :))

But you can measure PERFORMANCE! It's so simple!

Or not? How to measure it? If I painted the fence, then everything is obvious. But there is a catch. There are many thinking, creative, talented people in our industry, and no one paints the fences. Let's look at the example of programmers. So what Good Performance Measures come to mind?

• KSLOC. Do you know what it is? And what is the Hindu code - do you know? Implement - find out. KSLOC is the number of thousands of lines of code. If you link this indicator to salary, then wait for thousands of lines of copy-paste. A friend of mine received a completed order somewhere in Bangalore - a php script, for only ten dollars, but for as much as 20 MB. And he worked!
• The amount of some shit per hour (WTF/h). The number of pages drawn per day, the number of features implemented per hour, etc. It seems to be a normal metric - something can actually be calculated and used to distribute goodies. However, a problem similar to the previous point arises: a drop in quality at the expense of quantity, an increase in technological debt. Motivation, interest, satisfaction - everything is rapidly falling down. As a result, turnover and low qualification.
• The number of bugs. The fewer bugs, the more we pay. Everything is logical, isn't it? Not really. Is there a bugtracker implemented in your studio? If yes, forget it. Your testers will very soon agree with your programmers on how many bugs to write and how many not, so that it is not to the detriment of both parties.
• Processing.“If you stay late at work, you don’t work well.” Is that also logical? We fight overwork, for example, turn off the electricity after 18:00. However, here it must be remembered that the psychology of a developer is fundamentally different from the psychology of office plankton: if he sits until the evening, then he is interested (and this should be encouraged).

People work in our field mainly because they are interested in it.

Do not interfere with stupid corporate rules.

• focus factor. This metric came to us from my favorite Scrum. Shows how much the task should have taken ideally, and how much it ended up being. "Concentration" of the team on the project. Is it possible to pay money based on this criterion? Quite, but if your managers are not “techies”, then programmers will deliberately overestimate time estimates, minimizing their own risks. The consequence of this approach is that the deadlines are stretched, the customer is indignant (or does not buy from you). Yes, and every meeting will turn into squabbles and arguments in 10 minutes.
• Velocity. Also from Scrum. The notorious "performance". It is rather non-obvious here, the humanities can skip the paragraph.

Allows you to predict how many tasks the team will be able to score in the next stage, depending on how many they completed in the previous one. The problems are the same as the focus factor, plus one more is added. Often a manager (especially an inexperienced one) who senses that team performance can be "measured" begins to use this tool "in the other direction." But Velocity cannot be an accurate criterion, because shows how long the same task can take, performed by the same team under the same conditions. However, after completing the task, the team has already changed: it has gained experience on how to solve this particular task. And the metric won't work again.

• cycle time. How quickly time passes from the moment the idea arose to implement a feature on the project, until the moment it was done.

I personally really like this metric. One of the key ones that should be measured and optimized. But developers do not directly influence this factor. This is a very high level metric. If you start paying the team a salary based on their Cycle Time, it means that you, as a leader, do not seek to solve the problems of the team and understand the processes, but simply transfer everything to the team.

An attempt to make a developer's salary dependent on a high-level metric is evidence of managerial impotence

So, is it possible to measure the effectiveness of a team? Yes, you can, especially since we have written about a dozen indicators for this. And another dozen or two can be thought of in the comments. Another question is whether it is worth making the developer's salary dependent on indicators? Now this is risky.

I start working, and I do my job - it's good, because I'm a professional and it's interesting for me. But if they start to spread rot on me with stupid metrics, I will optimize these stupid metrics. I will write 1000 lines or draw 10 shit designs a day. And my interest in work will dry up very, very quickly, I will stupidly want dough. This is called substituting intrinsic motivation for extrinsic motivation.

The story of a madness

Once, “a good friend of mine”, the head of the studio, got excited about the idea of ​​introducing a very fair wage, where a bunch of parameters would be taken into account. Naturally, the matter was approached on a grand scale. Wrote a whole bunch of criteria, such as:

- monthly plan for worked man-hours and actual hours worked;

- quarterly sales plan;

- the number of wards and their salaries;

- the amount of positive communication from customers (satisfaction);

- the number of repeated requests from the client with new projects;

- awards at specialized competitions;

— negative communication with the client;

- the number of bugs found by QA;

- growth of receivables;

- the number of bugs found by the client after the start of the project;

reading books, writing articles.

And 20 more pieces. ( useful list take it ;-)).

All this was brought into one system. Naturally, the system had to be balanced. Therefore, in the first few months, it was decided to calibrate it on virtual "wrappers". A large board was invented on which a list of employees was drawn. Various “wrappers” were posted on the board - as soon as the payment was received, the project ended or some good (or bad) event occurred that would affect the salary in the future.

Literally within 1 hour, the faces of the employees became very, very gloomy. A couple of days later, questions began: “why do I have fewer candy wrappers?” or “why didn’t they give me a candy wrapper - did I help Vasya?”.

The mood was becoming unsettling. Within a week, project evaluations were taking 4 times as long as they used to, and each evaluation turned into an endless argument between the developer and the project manager. By the end of the month, few people wanted to help their comrade - they explained that "there is enough of their own work." An infinite number of situations were revealed that could not be formalized. Many candy wrappers were issued according to subjective feelings.

Few people wanted to work without candy wrappers, the tension grew. Productivity and motivation - fell. A month later, the program was cancelled. After a couple of months, the anxiety disappeared.

As a conclusion:

Different metrics should be measured and thought-think-think how to influence them. But do not transfer high-level metrics directly to developers and designers. And further.

“A developer has four components: body, heart, mind and soul.

1. The body needs money and security.
2. Heart - love and recognition.
3. Mind - development and self-improvement.
4. Soul - self-realization.

S. Archipenkov

Respect other people and give them the opportunity to do what they like)).

And the very last. There is a suspicion that every leader must understand for himself whether his organization is ready for the transition to KPI. I hope this small selection of articles that we managed to collect will help in making the right decision.