KPI – what is it in different spheres, the existing advantages and shortcomings, main types

The main criterion of activity both the enterprise, and the certain employee is its efficiency. There are various techniques of its assessment including the KPI system gaining popularity, what is it, why it is necessary and how organically to introduce in the company – useful information.

What is KPI?

The system of objective assessment of results of work was thought up by the famous sociologist Max Weber who gave the name to the child KPI. The abbreviation is deciphered as Key Performance Indicators that is translated as key performance indicators. And there is no universal formula, the suitable company or to division with any kind of activity.

Kipiay as assessment methodology, mostly is individual in each case. Coefficients and criteria are considered only those which are important for the concrete sphere of business. Firms enter this estimated model for fuller understanding of the situation in the market, job evaluation and motivations of personnel on achievement of the result planned by the top management. That is it at the same time both purposes, and instruments of control.

video1

What is KPI on sales?

For determination of success of the company selling goods or the rendering service, quite concrete key performance indicators are entered. It can be:

1. Sales volumes. There is a plan for a certain period and actual volume of the realized goods. The effectiveness ratio will equal to a ratio of the set plan and real result.
2. The number of sales for the estimated period.
3. Traffic of clients who positively reacted to the advertizing message. This indicator is more applicable to department of marketing.
4. Average bill.
5. Conversion of sales, that is the relation of the potential clients who addressed to the company, to number of those who made the transaction.
6. Level of service of clients. It is estimated in number of complaints or positive reviews.

What is KPI of employees?

By means of this method it is possible to estimate not only indicators of activity of the enterprise, but also the certain employee. Difference from a usual planned technique is the binding of actions of personnel to the general result of the company. That is works of all divisions should not contradict, brake or interfere with each other, and to be aimed at the general result.

Such technique allows to control work of each manager and to motivate him on achievement of definite purposes. Accurate tasks which directly influence the amount of the salary simplify performance by workers of the functional duties. Here can be considered:

1. The volume of sales and the done operations.
2. Observance of the budget.
3. Client satisfaction with personnel.
4. Mistakes in work.
5. Efficiency of use of working hours.

Pluses and minuses of KPI

Not the new KPI system, what is it knows the most part of modern managers of various levels. During real use of a system the management and employees managed to estimate advantages and shortcomings of methodology. It is possible to carry to pluses:

1. Clear understanding personnel of the tasks.
2. Transparent system of payments of motivations and bonuses.
3. At the correct introduction the system simplifies control of activity of all company, its divisions and each worker.

However key performance indicators of KPI have also a number of shortcomings:

1. On introduction of a system time and resources is required. Perhaps, retraining of personnel is necessary.
2. At the wrong calculation of the weight of one coefficient there can be distortions in work of divisions and personnel.
3. At the overestimated figures the employees are demotivated and lose interest in work.

Vida KPI

In essence KPI or key indicators can be:

1. That is those which show result of work for a certain period. Sales volume, number of transactions.
2. Quick or advancing. With their help it is possible to trace and adjust the current situation quickly. For example, the quantity of calls from managers directly affects quantity of the sold goods or the concluded bargains.

On scope of application the criteria can be:

1. Estimating efficiency of expenses, both temporary, and financial for achievement of the goals.
2. Criteria for evaluation of result. That is performance by the manager of the planned tasks, a deviation from the planned purposes and its reason.
3. Assessment of volume and quality of sales. Conversion between the entering leads and percent of the closed deals.

How to calculate KPI?

In each KPI company or key performance indicators which examples of calculation will be given below, are calculated individually, proceeding from a set of features. The most simplified example of calculation:

1. In a month the car sales manager has to work at least 150 clients and sell as a result of 37 cars.
2. In April there were 160 clients, and cars only 30 is sold.
3. The efficiency pays off as the relation of the actual number to planned, expressed as a percentage: (160/150) *100% = 106% and (30/37) *100% = 81%.
4. The general percent of efficiency is an arithmetic average of all indicators. (106+81)/2=93%.
5. At more difficult schemes the importance of one of indicators can be more or less therefore before each value a certain coefficient from 0.1 to 1 can be appointed.

Introduction of KPI

Practically in all trade enterprises the KPI system both for assessment of results of activity of firm, and for payroll calculation of employees is introduced. If the technique was not used at the enterprise, then the system of assessment takes root step by step:

1. Indicators of KPI have to be tied to common goals and the strategy of the company.
2. Development of the local purposes and tasks for each department and the employee.
3. Determination of real terms of execution of plans and tasks.
4. The notification of all employees about a new technique of job evaluation, an explanation of its essence and advantages.
5. Appointment of the controlling expert who will keep account of the obtained data.
6. Analysis and completion of a system.