Principles of building a KPI system for managers
Posted: Sun Jan 19, 2025 4:46 am
When developing KPIs for managers, it is important to consider the following aspects:
Alignment with strategy
Each company has its own strategic goals for a certain period of time, which are broken down into specific tasks. The latter serve as a guide for the manager.
For example, if a company is aiming to take a leading position in the market, it will need to increase sales, expand the customer base, and adjust the marketing strategy. These goals will be taken into account when developing the manager's KPI.
Limited number of metrics
As a rule, an employee can advertising data package effectively monitor no more than seven indicators at a time. This applies not only to personnel, but also to the manager.
KPI metrics for a manager
Source: shutterstock.com
Realism
It is necessary to set achievable goals for the manager. Otherwise, he may lose motivation. To assess the realism of goals, you can use the experience of competitor companies. Achievable indicators are those that exceed the average figures on the market by no more than 30%.
The relationship between general and personal KPIs
As a rule, a manager's KPI includes both general and personal indicators. The former reflect the results of the department under their control. They demonstrate the level of employee efficiency and the influence that the top manager has on this.
Personal indicators may include such achievements as retraining and obtaining additional certificates. As a rule, they make up only a small part of the KPI - 10-20% and may even be completely absent.
To determine the ratio, it is necessary to take into account the specifics of the industry. For example, for a commercial director, motivation and KPI will mainly be based on general indicators: sales plan, number of new clients and suppliers.
Clarity and transparency
It is very important that the indicators are formulated correctly. They should be easily understood by each employee. For this purpose, examples of bonus calculation can be given.
It is important to take into account that employees do not always understand the essence of innovations the first time. Therefore, it is recommended to hold one or two meetings at which the manager will explain all the nuances. It is quite possible that after such events it will be necessary to edit the KPI.
Specific digital value
The key aspect is the presentation of indicators in numerical format. This eliminates the possibility of ambiguous interpretations.
For example, the wording "replenish the department with new employees" is too vague. It is important to establish the exact number of employees that need to be found and hired, as well as set a specific deadline for completing this task.
The values expressed in numbers will also determine the size of the reward. If the task is fully completed, the manager will be able to receive the maximum bonus. In case of partial achievement of the goal (for example, by 20%), the bonus size will be reduced.
Fair amount of bonus
If the manager receives only a small bonus for exceeding the plan, it is unlikely to motivate him. He will most likely prefer to complete standard tasks without much effort. Therefore, it is recommended to set more significant amounts - at least 50% of the salary.
It is also necessary to follow the principle of fairness. You should not limit yourself to the figures that were designated at the beginning of the period. It is better to periodically compare them with the results of competitors.
Alignment with strategy
Each company has its own strategic goals for a certain period of time, which are broken down into specific tasks. The latter serve as a guide for the manager.
For example, if a company is aiming to take a leading position in the market, it will need to increase sales, expand the customer base, and adjust the marketing strategy. These goals will be taken into account when developing the manager's KPI.
Limited number of metrics
As a rule, an employee can advertising data package effectively monitor no more than seven indicators at a time. This applies not only to personnel, but also to the manager.
KPI metrics for a manager
Source: shutterstock.com
Realism
It is necessary to set achievable goals for the manager. Otherwise, he may lose motivation. To assess the realism of goals, you can use the experience of competitor companies. Achievable indicators are those that exceed the average figures on the market by no more than 30%.
The relationship between general and personal KPIs
As a rule, a manager's KPI includes both general and personal indicators. The former reflect the results of the department under their control. They demonstrate the level of employee efficiency and the influence that the top manager has on this.
Personal indicators may include such achievements as retraining and obtaining additional certificates. As a rule, they make up only a small part of the KPI - 10-20% and may even be completely absent.
To determine the ratio, it is necessary to take into account the specifics of the industry. For example, for a commercial director, motivation and KPI will mainly be based on general indicators: sales plan, number of new clients and suppliers.
Clarity and transparency
It is very important that the indicators are formulated correctly. They should be easily understood by each employee. For this purpose, examples of bonus calculation can be given.
It is important to take into account that employees do not always understand the essence of innovations the first time. Therefore, it is recommended to hold one or two meetings at which the manager will explain all the nuances. It is quite possible that after such events it will be necessary to edit the KPI.
Specific digital value
The key aspect is the presentation of indicators in numerical format. This eliminates the possibility of ambiguous interpretations.
For example, the wording "replenish the department with new employees" is too vague. It is important to establish the exact number of employees that need to be found and hired, as well as set a specific deadline for completing this task.
The values expressed in numbers will also determine the size of the reward. If the task is fully completed, the manager will be able to receive the maximum bonus. In case of partial achievement of the goal (for example, by 20%), the bonus size will be reduced.
Fair amount of bonus
If the manager receives only a small bonus for exceeding the plan, it is unlikely to motivate him. He will most likely prefer to complete standard tasks without much effort. Therefore, it is recommended to set more significant amounts - at least 50% of the salary.
It is also necessary to follow the principle of fairness. You should not limit yourself to the figures that were designated at the beginning of the period. It is better to periodically compare them with the results of competitors.