1, concept
Key Performance Appraisal Indicator (KPI): It is an objective and quantitative management indicator to measure process performance by setting, sampling, calculating and analyzing key parameters at the input and output ends of internal processes. It is a tool to decompose the strategic objectives of an enterprise into operational objectives, and it is the basis of enterprise performance management. KPI can make the department head clear about the main responsibilities of the department, and on this basis, make clear the performance measurement indicators of the department personnel. Establishing a clear and feasible KPI system is the key to do a good job in performance management. Key performance indicators (KPI) are quantitative indicators used to measure employees' performance and an important part of performance plan.
2. SMART principle of key performance indicators
? There is an important SMART principle when determining key performance indicators. SMART is the abbreviation of the initials of five English words:
S stands for Specific, which means that performance appraisal should focus on specific work indicators, not generalities; M stands for measurable, indicating that performance indicators are quantitative or behavioral, and data or information to verify these performance indicators can be obtained; A stands for achievable, which means that performance indicators can be achieved by trying to avoid setting too high or too low a goal; R stands for correlation, which means that the performance indicators are clearly related to the superior goals and finally combined with the company goals; T stands for time limit, focusing on the specific time limit for completing performance indicators.
Determining key performance indicators usually follows the following process.
1, the establishment of evaluation index system
According to the order from macro to micro, the index system at all levels can be established in turn. Firstly, the strategic objectives of the enterprise are defined, the business priorities of the enterprise are found out, and the key performance indicators (KPIs) of these key business areas are determined, so as to establish enterprise-level KPIs. Next, department heads need to establish department-level KPIs according to enterprise-level KPIs. Then, the supervisors of each department and the KPI personnel of each department will further decompose the KPI into more detailed KPIs. These performance indicators are the elements and basis of employee assessment.
2. Set evaluation criteria
Generally speaking, indicators refer to the aspects of measuring or evaluating work; Standard refers to the level of each index. Indicators solve the problem of what we need to evaluate, while standards solve the problem of how to do and how much to do.
3. Review key performance indicators
The main purpose of auditing key performance indicators is to confirm whether these key performance indicators can comprehensively and objectively reflect the work performance of the evaluated object and whether they are suitable for evaluation operation.
Second, the basic idea of KPI design
? 1. fishbone diagram analysis method
Using the "fishbone diagram" analysis method, the key performance index system is established, and its main process is as follows:
(1) According to the division of responsibilities, determine which personal factors or organizational factors are related to the overall interests of the company.
(2) According to the post standard, 1%, define the key factors of success.
(3) Determine the relationship among key performance indicators, performance standards and practical factors.
(4) Decomposition of key performance indicators.
2. Flexible handling of work quantification
The work of some departments is really difficult to quantify, so it is quantified from the job requirements and time nodes. Such as human resource managers, administrative personnel and financial personnel, it is relatively difficult to quantify their key performance indicators. It is unreasonable to quantify from their own responsibilities, and it is unreasonable not to quantify. The actual treatment can be defined from the assessment of their work tasks or work requirements, and can be defined by time. In essence, the tasks or goals defined by time are also quantitative indicators.
3.PDCA cycle
PDCA cycle is gradually improved and implemented, and its main process is as follows:
(1) Key performance indicators are designed by professionals.
(2) Submit the draft design to the leading group of the company for deliberation.
(3) Modify according to the opinions of the company leaders.
(4) Submit the revised draft to various functional departments for discussion.
(5) Focus on discussing opinions and then revise them.
(6) Report for approval and issuance.
Among them, (1)-(5), there will be several round trips in actual work.
4.4 support environment. KPI evaluation
With the key performance appraisal index system, there is no guarantee that these indicators can be applied to performance appraisal and achieve the expected results. To achieve real results, it depends on whether the enterprise has a supporting environment for the assessment of key performance indicators. This supporting environment must also be considered when designing key performance indicators.
(1) Performance-oriented corporate culture support. Establish a performance-oriented organizational atmosphere, resolve contradictions and conflicts in the process of performance appraisal through corporate culture, and form a corporate culture that pursues outstanding performance core values.
(2) Supervisors at all levels shoulder the task of performance management. It is the responsibility of supervisors at all levels to decompose and formulate key performance indicators. Professionals only play the role of technical support.
(3) Pay attention to the construction of performance communication system. In the process of decomposing and formulating key performance indicators, the establishment and implementation of key performance indicators is a top-down and bottom-up institutionalized process. Without a good communication system as a guarantee, the evaluation of key performance indicators will not be effective and challenging.
(4) The results of performance appraisal are linked to the value distribution. Practice shows that the two are closely related, and the performance appraisal system with key performance indicators as the core can really play a role.
Third, the establishment process of KPI index system
The extraction of KPI indicators can be summarized in one sentence: "cross focus, responsibility correction". However, in the specific operation process, it is not easy to decompose the vertical strategic objectives into all levels and extract the "ten" from the horizontal business process. The following tables are mainly used to illustrate the extraction process of KPI indicators.
Figure: Summary of KPI Index Extraction
Decompose the strategic objectives of the enterprise, analyze and establish the relationship between each sub-objective and the main business processes.
In general, the overall strategic goal of an enterprise can be decomposed into several major supporting sub-goals, and these supporting and more specific sub-goals themselves need the support of some major business processes of the enterprise to achieve them to a certain extent. Therefore, the following tasks need to be completed in this link:
1. The senior management of the enterprise establishes the overall strategic goal of the company (fishbone diagram can be used);
2, by the enterprise (middle) high-level strategic objectives are decomposed into main support sub-objectives (fishbone diagram can be used).
3. Link the main business processes of the enterprise with the supported sub-goals.
Figure: An example of how a strategic goal decomposes a fishbone diagram.
Figure: Examples of Strategic Objectives and Process Decomposition
Determine the objectives of supporting business processes.
After determining the supported business processes for each strategic sub-goal, it is necessary to further determine the overall goal of each business process on the premise of supporting the realization of the strategic sub-goal, and further determine the detailed decomposition content of the overall goal of the process in different dimensions by using Nine palace map method.
Table: Example of Confirmation Process Objectives
Confirm the relationship between business processes and functional departments.
In this link, the relationship between process and work function is established by Nine palace map, so as to establish the relationship between process, function and index at a more microscopic departmental level, and to establish the relationship between the overall strategic objectives of the enterprise and departmental performance indicators.
Examples of confirming the connection between business processes and functional departments
Extraction of KPI index at department level
In this link, KPI indicators at the department level will be extracted from the relationship between process priority and department responsibilities established through the above links.
Table: Example of KPI Index Extraction at Department Level
Unity of objectives, processes, functions and work objectives
Establish the unity of enterprise objectives, processes, functions and positions according to department KPI, business process and responsibilities of each position.
Table: Example of further decomposition of KPI into positions
Fourth, KPI target setting
From the perspective of organizational structure, KPI system is a vertical index system: first, determine the KPI that the company pays attention to, and then determine the KPI that departments and even individuals should bear. Due to the decomposition of KPI system, strategy falls to "people" in the index system. To implement the strategy concretely, it is necessary to be "clear", allocate KPIs at each level and form a corresponding vertical target system. Therefore, there are "two lines" when implementing the strategy: one is the index system, which is a tool; The other is the target system, which is obtained by using the indexing tool. Of course, the target system itself is a communication and transmission system. Even if the KPI system is used, the specific goal setting needs communication between managers at all levels: the lower-level manager must participate in the formulation of the higher-level goal, so that he can clearly understand the position of his department in the larger system, and also let the higher-level manager know more about his own requirements for his department, thus ensuring the formulation of appropriate and effective sub-goals. In this way, by setting corresponding goals at different levels, a "target line" without deviation is formed to ensure the effective transmission and implementation of the strategy to the specific operational level. Specific to the implementation of performance management, the KPI undertaken by each department is determined by strategy, but in a certain year, it is not necessary to assign values and set goals to all KPI undertaken by each department.
Because the strategic goal is relatively long-term, there will definitely be deviations in the year, so it is required to comprehensively measure the KPI of the strategy according to the strategic choice. The formulation of specific annual goals is based on the comprehensive analysis of the internal and external environment and conditions of the enterprise, and according to the annual strategic concept, the KPI determined this year is assigned to obtain. Among them, KPI is just a tool system; The key to setting goals lies in the communication and understanding between "people" and "people", which requires managers to communicate 360 degrees with superiors, peers, subordinates, external customers and suppliers. Management is a process of communication and implementation when setting goals and implementing strategies. The implementation of the so-called strategy is gradually realized through the continuous definition and realization of this phased target state.
Five, the main points of establishing KPI indicators
The key points of establishing KPI index are process, planning and systematicness. First of all, make clear the strategic objectives of the enterprise, and find out the business focus of the enterprise through brainstorming and fishbone analysis at the enterprise meeting, which is the focus of enterprise value evaluation. Then, the key performance indicators (KPIs) of these key business areas, that is, enterprise-level KPIs, are found by brainstorming.
Next, department heads need to establish department-level KPIs according to enterprise-level KPIs, and decompose the KPIs of corresponding departments, determine the relevant factor objectives, analyze the performance drivers (technology, organization and people), determine the workflow to achieve the objectives, decompose the department-level KPIs, and determine the evaluation index system.
Then, the supervisors of each department and KPI staff of each department will further subdivide the KPI into more detailed KPI and performance measurement indicators of each position. These performance indicators are the elements and basis of employee assessment. This process of establishing and evaluating KPI system is a process of unifying the efforts of all employees to the strategic objectives of the enterprise, which will certainly play a great role in promoting the performance management of managers in various departments.
After the establishment of the index system, it is necessary to formulate evaluation standards. Generally speaking, indicators refer to the way of measuring or evaluating work, and solve the problem of "what to evaluate"; Standard refers to the level of each index to be reached in order to solve the problem of "how to do it and how much to do it".
Finally, the key performance indicators must be audited. For example, some audit questions: can multiple evaluators get the same result by evaluating the same performance indicator? Can the sum of these indicators explain more than 80% of the work objectives of the assessed? Track and monitor whether these key performance indicators can be operated? Wait a minute. Audit is mainly to ensure that these key performance indicators can comprehensively and objectively reflect the performance of the evaluated object and are easy to operate.
Each position affects a process of a business process, or a certain point in the process. When setting goals and conducting performance appraisal, it is necessary to consider whether the incumbent of this position can control the result of this indicator. If the incumbent can't control it, this indicator can't be used as a performance measure of the incumbent. For example, cross-departmental indicators can not be used as assessment indicators for grass-roots employees, but should be used as assessment indicators for department heads or superiors.
Performance management is a process in which both parties reach a consensus on the goal and how to achieve it, and it is also a management method to improve employees' success in achieving the goal. The basis for managers to set work goals for subordinates comes from the department's KPI, the department's KPI comes from the superior department's KPI, and the superior department's KPI comes from the enterprise KPI. Only in this way can we ensure that every post is working hard in the direction required by the enterprise.
Making good use of KPI to evaluate enterprises is helpful to the integration of enterprise organizational structure, improve the efficiency of enterprises and streamline unnecessary institutions, processes and systems.
6. misunderstanding of KPl system design principles
When designing KPI system, the designer follows the SMART principle. Generally speaking, KPI designers are familiar with this SMART principle, but they often fall into the following misunderstandings in actual design and application.
1, due to misunderstanding of specific principles, the indicators are too detailed.
The original intention of specific principles is that performance appraisal should be aimed at specific work indicators, not general ones. However, many designers understand that the indicators should be as detailed as possible. However, too detailed indicators may lead to indicators not being the key driver of enterprise value creation. For example, in its original KPI assessment system, a chemical raw material manufacturing enterprise in Tianjin also set an assessment index for clerks who are in charge of office supplies distribution on weekdays: "Office Supplies Distribution Attitude". Relevant personnel explained that in order to gain employees' understanding and operation, they set indicators for each employee's work, and refined each indicator to make it concrete and feasible. In fact, although this "attitude towards office supplies" index can be used to measure the work effect of clerks, it is not the "key" of enterprise value creation. Therefore, it is not appropriate to incorporate this indicator into the KPI system.
2. Misunderstanding of the measurable principle leads to the lack of key indicators.
Measurable principle means that performance indicators are quantitative or behavioral, and data or information to verify these performance indicators can be obtained. The principle of measurability is a soul principle that all KPI designers should attach importance to, because the feasibility of assessment is often most directly related to whether it meets this principle. However, testability does not simply mean quantification, and the principle of testability does not require that all KPI indicators must be quantitative indicators. However, in the actual design of KPI system, some designers excessively pursue quantification and try their best to make all indicators quantifiable. It is true that quantitative indicators are more convenient for assessment and comparison, but excessive pursuit of quantitative indicators often leads to some unmeasurable key indicators being left out of the KPI system. For example, most of the indicators in the sales department can be quantified, so try to use quantitative indicators, while some work in the human resources department is difficult to quantify. At this time, if the quantification of indicators is still emphasized, the number of KPI indicators in some departments will be insufficient and cannot reflect the key performance in their work.
3. The "golden mean" problem caused by realization principle's comprehensibility deviation.
Realization principle means that performance indicators can be achieved through hard work, and it is necessary to avoid setting too high or too low targets. Because the goal is too high, employees and enterprises can't accomplish it no matter how hard they try, so the indicators are useless and meaningless; However, too low a goal setting cannot be motivated. Therefore, in order to avoid the polarization of goal setting, the designers of KPI system tend to be "moderate" and usually prefer to choose the mean as the index. However, not all the "golden mean" goals are applicable, and the selection of indicators needs to be considered in combination with the growth of the industry, the growth of enterprises and the life cycle of products. For example, a software company in Xiamen is a growth enterprise, with sales revenue of 8 million yuan in 2003. When the KPI system was established in 2004, the sales revenue was initially set at19.8 million yuan. After the consulting company intervened in KPI system design, it pointed out that this goal was set too high, it was difficult to achieve, and it would lose its incentive function. Then, through market research, the enterprise re-estimated the sales revenue in 2004, and thought that it should be between 9 million yuan and130,000 yuan, and prepared to take the average of the two as the KPI assessment index. After analyzing all the factors, especially the growth of the company, the consulting company puts forward the seemingly "moderate" goal of 65,438+065,438+0000 yuan, which is still insufficient compared with the 654,380+0000 yuan that can be achieved through active efforts, although it is higher than the sales revenue of the previous year for a growing company. The consulting company suggested that130,000 yuan should be selected as the KPI index. Under the existing strength of the enterprise, employees have to make great efforts to achieve it. Therefore, for the understanding of this principle, the indicators should not only be achieved, but also be achieved through great efforts, so that the assessment can play an incentive role.
4. Evading the principle of seeking truth from facts leads to the problem that the evaluation deviates from the target.
The principle of authenticity means that performance indicators are real and can be proved and observed. Because of the cost of assessment, but the enterprise itself is profit-driven, many designers of KPI system in enterprises give up some key performance indicators that need to pay a certain fee in order to cater to the idea of reducing the cost as much as possible, so as to reduce the difficulty of assessment and reduce the cost of assessment, and their reasons (or excuses) are often based on realistic principles and put forward "unobservable and provable" indicators. In fact, in many cases, the indicators abandoned for this excuse play a key role in the achievement of enterprise strategy. Even if such indicators are abandoned too much, KPI will be divorced from the company's strategic objectives, and the direction of the position it measures will be different from the realization of the company's strategic objectives. Therefore, if it is temporarily impossible to assess such indicators due to the limited knowledge resources and technical level within the enterprise, and such indicators are the key driving factors that affect the value creation of the enterprise, then external help can be sought, such as hiring external experts or consulting companies to design the KPI system, and the correct selection of KPI indicators cannot be hindered by cost issues.
5. Due to misunderstanding of the principle of time limit, the evaluation period is too short.
The principle of time limit refers to the specific time limit for completing performance indicators, which cannot be completed in the foreseeable future. When designing KPI system, enterprises sometimes have the problem of short cycle. Although some KPI designers are middle and senior managers in enterprises, some of them have not received systematic performance appraisal training and have insufficient grasp and understanding of the regularity of appraisal. They often think that in order to keep abreast of employees' status and work dynamics, the shorter the assessment period, the better. This understanding is biased. In practice, different indicators should have different assessment cycles. Some indicators can see short-term effects and can be assessed once a quarter. Some indicators take a long time to see the effects, so they may need to be assessed once a year. However, in general, monthly assessment is not recommended for KPI indicators, because it will waste a lot of manpower and material resources, disrupt the normal work plan and make the assessment a burden for enterprises. In the long run, the assessment system is bound to become a mere formality.
Seven. KPI indicators of major responsibility centers
● R&D system
1, organizational growth
Indicator name: new product sales proportion growth rate and old product market growth rate
Indicator definition: the annual growth rate of the proportion of new product orders to total sales orders and the net growth of old products.
Purpose of establishment: reflect the effect of product research and development, reflect the growth of the company's stamina, and adhere to the market inspection standards of products.
Data Collection: Finance Department
2, the improvement of productivity
Indicator name: per capita gross profit growth rate of new products
Indicator definition: the gross profit of new product sales minus the growth rate of the ratio of new product sales cost to the average number of employees in R&D system during the planning period.
Objective: To reflect the average efficiency of personnel in R&D system, control the personnel structure of R&D system and improve R&D management.
Data Collection: Human Resources Department
3. Cost control
Index name: old product technology optimization and material cost reduction
Indicator definition: after deducting the increase (decrease) factor of comparable procurement cost, the amount of material cost reduction of old products sold during the planning period.
Purpose of establishment: To urge the R&D department to continuously improve and improve the old products, reduce the material cost of the old products, and improve the competitiveness of the old products.
Data Collection: Finance Department
Indicator Name: Decline Rate of Failure Number of Operating Products
Indicator definition: the decline rate of the total number of online product failures during the planning period.
Purpose: To urge R&D system to improve the quality and stability of new and old products and reduce the maintenance cost of products.
Data Collection: Marketing Department
● Marketing system
1, organizational growth
Indicator Name: Sales Growth Rate
Indicator definition: sales growth rate calculated by order caliber and sales collection caliber respectively during the planning period.
Purpose of establishment: as the main index to reflect the overall organizational growth and market share of the company.
Data Collection: Finance Department
Name of indicator: percentage growth rate of export revenue to sales revenue
Indicator definition: the growth rate of export revenue as a percentage of sales revenue during the planning period.
Purpose: to emphasize the strategic significance of increasing export revenue and promote export revenue growth.
Data Collection: Finance Department
2, the improvement of productivity
Indicator name: per capita sales gross profit growth rate
Indicator definition: the gross profit of product sales revenue minus the ratio of product sales cost to the average number of employees in the marketing system during the planning period.
Compilation purpose: to reflect the fulfillment and efficiency of the payment responsibility of the marketing system, increase the company's income and improve the cash flow.
Data Collection: Human Resources Department
3. Cost control
Indicator Name: Sales Expense Rate Reduction Rate
Indicator definition: the decline rate of sales expenses as a percentage of sales revenue during the planning period.
Compilation purpose: to reflect the effect of sales revenue generated by sales expense investment, and to promote the marketing system to allocate and use sales expenses more effectively.
Data Collection: Finance Department
Indicator name: reduction rate of contract error rate
Indicator definition: the reduction rate of the number of contracts with errors in the planning period to the total number of contracts.
Purpose of establishment: to promote the marketing system to reduce contract errors and reasonably promise the delivery time, so as to improve the planning level and economic benefits of the whole company.
Data collection: production headquarters
● Procurement system
1, organizational growth
Indicator name: improvement rate of timely supply rate of qualified materials
Indicator definition: refers to the growth rate of the ratio of timely supply items of purchased materials that have passed IQC inspection to purchase items of production demand during the planning period.
Purpose of establishment: To reflect the purchasing system's ability to manage suppliers and ensure and respond to balanced production.
Data collection: production headquarters
2, the improvement of productivity
Indicator name: growth rate of per capita material purchase volume
Indicator definition: the ratio of the total amount of purchased materials to the average number of employees in the procurement system during the planning period.
Purpose of establishment: to reflect the productivity of the procurement system and promote its reduction of staff and increase efficiency.
Data Collection: Human Resources Department
3. Cost control
Indicator name: comparable procurement cost reduction rate
Indicator definition: the decline rate of procurement cost compared with the same period of last year or the best level in the industry, calculated by representative material varieties (focusing on Class A projects), including the cost allocation of procurement system.
Purpose of establishment: to reduce the comprehensive cost of material procurement.
Data collection: production headquarters
● Production system
1, organizational growth
Indicator Name: Timely Completion of Delivery Rate Growth Rate
Indicator definition: refers to the ratio of the output value of the production system to the timely and complete planned output value according to the order contract during the planning period.
Compilation purpose: to reflect the contract performance ability of the production system and the company as a whole.
Data Collection: Marketing Department
2, the improvement of productivity
Indicator name: growth rate of per capita output value
Indicator definition: the ratio of the total output value of the production system to the average number of employees in the planned period.
Purpose of establishment: to reflect the labor productivity of the production system and promote its reduction of staff and increase efficiency.
Data Collection: Human Resources Department
3. Cost control
Indicator name: manufacturing expense rate reduction rate
Index definition: the reduction rate of the proportion of manufacturing cost to product manufacturing cost.
Purpose of establishment: to urge the production system to reduce the manufacturing cost.
Data Collection: Finance Department
Indicator name: the improvement rate of first-time qualified rate of product manufacturing.
Index definition: the increase rate of the proportion of batches that pass the inspection in all stages of the production process of products (including parts) to all production batches.
Purpose of establishment: improve manufacturing quality and reduce manufacturing quality cost.
Data Collection: Management Engineering Department
● Financial management system
1, organizational growth
Indicator name: net profit growth rate
Indicator definition: the growth rate of net profit during the planning period.
Purpose of establishment: to promote the financial management system to effectively control the overall budget and effectively monitor the recovery of payment for goods, and to promote the final performance growth of the company.
Data Collection: Management Engineering Department
2, the improvement of productivity
Indicator name: Reduction rate of financial management personnel.
Indicator definition: the reduction rate of the average number of employees in Huawei's technical financial management system to the average number of employees in the company during the planning period.
Purpose: to promote the financial management system to reduce staff and increase efficiency.
Data Collection: Human Resources Department
3. Cost control
Indicator Name: Management Rate Reduction Rate
Indicator definition: the decline rate of the ratio of company management expenses (excluding R&D expenses) to sales revenue during the planning period.
Purpose of establishment: Through comprehensive budget management, the financial management system can effectively improve the use effect of management expenses and reduce the management rate.
Data Collection: Management Engineering Department