KPI. What it is and how it works
We cannot manage what we do not measure. This is a well-known saying that best illustrates the essence of economic activity. KPIs are about measuring performance, about evaluating the result not in terms of “like”/“dislike”, but in specific numbers.
KPIs (key performance indicators) are key performance indicators. The meaning is in the name itself:
- They are indicators, that is, something that can be measured by numbers;
- they are used to measure the efficiency of employees and the result of their activities;
- these indicators are key, i.e., the achievement of the company's goals depends on them.
Advantages of KPIs
KPIs are key performance indicators that reflect the quality of work of each individual employee. An employee's KPI shows his or her strengths and weaknesses, which will help to fairly award a monetary reward or other incentives in the future. This system is also useful for employees themselves. For example, if you need to analyze your own results and compare them with previous indicators.
By using key performance indicators, the company is able to manage the process and make changes to it, as well as set goals for staff and motivate employees to achieve their goals.
- employee motivation;
- fairness, transparency and comparability of results (it becomes clear to the management and staff which of the company's employees works how much and earns how much);
- adjustment of the employee's work depending on his/her performance;
- staff participation in achieving the organization's goals;
- quality control of the performance of duties.
Thus, the advantage of the KPI system is the active motivation of personnel based on calculated comparable indicators.
As part of an employee's functional responsibilities, no more than three indicators are selected that have a key impact on the company's results, the ratio of salary to bonus is determined, and a bonus plan is set. Often, after the implementation of KPIs, it turns out that the employee whom everyone considered to be the strongest is so bad that it is no longer a question of bonuses, but of dismissal.