Personnel performance appraisal systems based on KPI are becoming increasingly popular in Russia. The main advantages of such mechanisms are in the rational reflection of the activities of companies.
KPI: what is it
KPI (KPIs) is an English abbreviation for “key performance indicators”, in Russian it is referred to as KPIs – key performance indicators (sometimes parameters). But in the original foreign sounding it is used as a norm. KPI is a system that allows you to evaluate the performance of the company's employees in order to achieve goals (strategic and tactical).
"Key indicators" allow the company to analyze the quality of its structure, the potential in solving problems. On the basis of KPI, a goal management system is also formed. This is the most important factor: if there are no signs of targeting performance indicators, then there is nothing to apply to “key indicators”. Management by objectives and KPI are thus two interrelated phenomena. The first involves, first of all, forecasting the results of work, as well as planning how these results will be achieved.
Who came up with KPI?
History does not give an unambiguous answer to this question, howeveryou can see how the world management went to understand KPIs, what they are and why they are useful. In the late 19th and early 20th century, the sociologist Max Weber determined that there are two ways to evaluate the work of employees: the so-called "sultan" and meritocratic. According to the first, the boss (“sultan”), at his own discretion, assessed how well a person copes with his duties. The rational beginning here plays a secondary role, the main thing is a purely emotional perception of the work of a subordinate.
The meritocratic method is when the results of labor are evaluated by real achievements, with the involvement of objective measurement mechanisms. This approach was adapted by management theorists in Western countries and gradually crystallized into what we know as the KPI system. An important role in systematizing the rational evaluation of personnel performance was played by the works of Peter Drucker, who is considered to have turned management into a scientific discipline. The concepts of the scientist directly state that there are goals, but there is an assessment of the degree of their achievement through key performance indicators.
KPI benefits
The main positive side of the KPI system is the presence of a mechanism for evaluating labor and the work of the enterprise as a whole that is transparent to all employees of the company. This allows the authorities to evaluate the performance of all subordinate structures in real time, predict how tasks will be solved and goals achieved. The next plus of KPI is that the management has a tool for adjusting the work of subordinates if the current results lag behindfrom planned.
If, for example, performance measurement in the first half of the year reveals that certain performance parameters are not high enough, then workshops are held to identify the reasons and encourage employees to perform better after the next six months. Another positive side of KPI is the feedback between the specialist and the manager. The first will receive not just instructions and sometimes seemingly biased nit-picking, but well-founded comments, the second will improve performance by specifying mistakes and shortcomings in the work performed by the subordinate.
KPI cons
The results of assessments within the framework of KPIs (performance indicators as such) can be interpreted not quite correctly, and this is the main drawback of this system. As a rule, the probability of occurrence of such a problem is the lower, the more attention is paid at the stage of formation of criteria for how to evaluate performance parameters. Another minus of KPI is that companies will have to spend a lot of resources to implement this system (calculated, as a rule, in time, labor and finances). We are talking, of course, about working on the key parameters of the effectiveness of the proper level of elaboration. There is a possibility that it will be necessary to carry out large-scale retraining of employees: specialists - with a view to changing tasks, and hence working conditions, while management will have to master new methods for assessing the work of subordinates. The firm may not be ready to give the team extra time to masterinnovations.
KPI implementation details
The main task when implementing a KPI system (“from scratch”) is to prevent negative attitudes towards it from employees. Therefore, the management of the company needs to clearly convey the meaning and practical benefits of innovations to each of the subordinates, whose work is subject to subsequent evaluation for effectiveness. The best method here, according to some experts from the field of HR, is an individual presentation, an explanation to specialists in specific positions: KPIs - what are they and why implement this system in a company.
It would be a mistake to unconditionally impose efficiency parameters by order, but the necessary step is an appeal from the top officials of the company. If, for example, a line manager informs subordinates in his department about the imminent implementation of KPI, then this information should also be confirmed by the CEO. The specialist must understand that the system of key performance indicators is not an invention of the boss, but an element of the strategic policy of the entire company.
Optimal timing for KPI implementation
There is an opinion among experts that KPI indicators, if we are talking about a system, should be implemented simultaneously at all levels of company management - from ordinary specialists to top managers. According to this point of view, the timing of the implementation of key performance indicators cannot be extended in time: the system starts working immediately. The only question is how to optimally choose the moment of its launch. There is a point of view that it is enough to notifyemployees about the start of KPI in about three months. This is enough for the company's staff to study the specifics of the future assessment of the effectiveness of their work.
There is also the thesis that for some time KPI can work in parallel with the previous payment system. Depending on the degree of liberalism of the authorities, the employee will be able to choose according to which scheme he will be paid. You can completely motivate a person to work according to the new KPI through bonuses and bonuses, the conditions for receiving which will be clearly spelled out in the key parameters.
Stages of creating a KPI system
Actually, as such, the introduction of KPI mechanisms is preceded by several stages of preparatory work. Firstly, this is the period associated with the formulation of strategic goals that are set for the company. As part of the same stage of work, the general concept is divided into tactical areas, the effectiveness of which is to be measured. Secondly, it is the development of key performance indicators, the definition of their essence. Thirdly, this is work on the distribution of official powers related to the implementation of the system, so that each person in charge asks a question like “KPIs - what are they?”
Thus, all indicators will be assigned to specific individuals (divisions) in the firm. Fourth, current business processes may need to be adjusted (if the updated strategy requires it). Fifth, it is the development of a new motivation systememployees, creating payroll formulas based on fresh criteria. After completing all the specified procedures, you can start the KPI system.
KPI requirements
As mentioned above, KPIs are key performance indicators that are inextricably linked to the company's goals. The quality of targeting development is the main requirement for the KPI system. Goals can be formed according to different principles, but one of the most popular in the HR environment is the SMART concept. Means "specific" (specific), "measurable" (measurable), "achievable" (achievable), "relevant to the result" (relevant), "time-bound" (time-bound), and, as a result, giving worked out and quality KPIs.
Examples of goals that meet these criteria: "open so many (measurable) outlets (specific) in a city (relevant) in the first quarter (time-bound)", or "sell so many air tickets to such and such a country in three weeks. Each goal should be divided into tasks, which, in turn, are reduced to the level of personal KPIs (for employees or departments). The optimal number, according to some experts, is 6-8.
KPI Automation
One of the factors for successful KPI implementation is the technological infrastructure. Since key performance indicators are a set of rational indicators, a computer will do a very good job with them. There are many software solutions for managing KPIs. The possibilities available in such distributions are quite extensive. First, it's convenientpresentation of information (in the form of graphs, analytics, documentation) about the processes associated with KPIs. What does it give? Mainly, the unity of data perception, reducing the likelihood of misinterpretation of numbers. Secondly, it is the automation of the collection and calculation of performance indicators. Thirdly, this is a multidimensional (with very large volumes of numbers) analysis, which will be difficult for a person without a program to perform. Fourth (in the presence of a network infrastructure), it is the exchange of information between individual employees and the establishment of feedback channels "boss-subordinate".
