Targets - this is an important tool for the development of the enterprise, allowing you to fix what are the main vectors of progress, how you can achieve success in the chosen direction. The term is widely used not only in this environment. Certain targets are identified by teachers, planning work with groups, UN program specialists who are involved in the food crisis at the international level. In a word, any plan, any program almost always implies the presence of certain indicators that must be achieved.
general information
The project targets in English are encoded by the established abbreviation KPI. In the general case, the definition involves the pricing of indicators as parameters that reflect how efficiently the company or its department works. Indices are necessary in order to effectively organize the achievement of various goals both in the sphere of the general development strategy and in practical operational ones. Using these indicators, you can quickly and accurately assess the state of affairs, the state of the enterprise, the level of success in the current strategy.
Performance targets are an instrument for monitoring the activity of each employed employee, department of an enterprise, company, in general. Quite interesting interpretations of this term can be found in ISO 9000, published in 2008. The standard suggests evaluating effectiveness as the level of achievement of a certain result, fixed in advance in the plan. This largely depends on the indicator of how the company is able to work, focusing on the result.
Efficiency (according to ISO) is the ratio of the results and the resources that have been spent to achieve them. This term refers to the ability of the enterprise to realize its tasks, adhering to a predetermined level of quality. To express this ability resort to estimates of time, wastes. The KPI system involves evaluating both efficiency and effectiveness, using key indices. Such an understanding of the term is due to the fact that as a result there is always a degree of its achievement and expenditure, which the company went to in order to achieve this.
Understanding and terminology
Targets (education, energy conservation, distribution of products, production) are a tool to measure how conceived is implemented. If the indicator selected for analysis is not related to the goal set for the enterprise (not formed directly from the content of the work), its application does not give reliable results. It is pointless to resort to such an indicator.
Management by goals is a modern concept, the basis of which is the technology of formulating key indicators, monitoring the achievement of goals, and revising them as necessary. The predominant percentage of modern enterprises is managed according to this scheme.
Methodology
Adhering to the idea of the target indicators of the development program, you can manage the enterprise, planning how the goals should be achieved, and also analyzing the possible outcomes of all ongoing operations. It is believed that Peter Drucker (1909-2005) became the pioneer in this area. This German economist made a scientific discipline out of the direction of "management" that was of little interest to the public. In the middle of the last century, this area seemed to many to be unpromising, did not arouse respect from society. Thanks to Drucker, primary systems for evaluating performance were developed. He suggested taking key indicators through which goals were analyzed.
The new metrology, proposed by Drucker, intended to avoid temporary traps, that is, a situation where the management team is completely immersed in solving current issues and problems to the detriment of tasks that are really important to achieve the goal set for the company. As Drucker noted, excessive involvement in small everyday difficulties leads to the fact that attention is sprayed. People forget about what can be called paramount in terms of importance. Today, such an approach (slightly modified) is known to the public as a KPI system. It contains numerous management concepts. This area has been actively improved in the last few decades. The use of such a system productively complements the classic target management, allowing the company to reach a new level of efficiency.
Relevance and nuances
Explaining the importance of development targets, the author of a scientific discipline called for attention to the fact that only selected aspects of management can influence the enterprise as much as evaluating the activity of departments and the company as a whole. It is important to note that the assessment is one of the least thought-out scientific management areas, which is associated with a certain risk of errors if it is necessary to apply this approach in practice. Some time ago, American researchers organized a survey, from which it became clear that more than half (about 60%) of senior management did not consider the systems implemented at their enterprises to be effective and efficient to evaluate the results. In our country (as the researchers responsible for the statistics calculated) the number of such dissatisfied reaches 80%. The reason for dissatisfaction is the lack of a pronounced and effective relationship between the executive department, plans, the motivating component and real results.
In recent years, the calculation of targets is considered unusually close to the motivation of hired workers. It is through KPI systems that it is possible to form a really working motivating system that would allow stimulating the personnel of the enterprise. The correct setup of such a system is a guarantee of justice, which means that everyone employed is interested in the best quality of the work process.
Options and Opportunities
The fulfillment of targets varies from case to case. It all depends on what it is decided to use as an index, and this, in turn, is determined by the global goals and objectives set for the company. The development strategy of the company is largely affected. Typically, KPIs are used to evaluate how efficiently the company’s administrative staff and management personnel are working.
KPIs cannot be equated with key success factors. Suppose the task of staff is to increase the average income per client by 15 rubles. In this case, the index will be the average income, and the factor is a certain tool, thanks to which the plan is achieved. For example, you can get the desired result by reformulating the production process, launching new products.
Indices
Target indicators are lagging and leading indexes. The first ones show how good the results were for a certain analyzed period. The second ones help to control the developing situation in real time, that is, within the period for which the report will be generated. The main idea of using leading indexes is to achieve successful completion of the planned level by the end of the reporting period.
A typical representative of lagging indicators is financial. This kind of information demonstrates how consistent the capabilities of the enterprise and the aspirations of its owner, how the company can create cash flows. At the same time, the lag of financial indicators is a fact that does not allow using this group of information to describe current efficiency in the context of a separate group of employees or a legal entity.
Operational targets are indices from which you can find out how circumstances are developing at the current time. They allow you to evaluate the work of departments, enterprises, in general. Some give direct information, while others indirectly indicate what cash flows are and what they will be in the near future. Focusing on such indices, it is possible to determine whether customers are satisfied with the product and service, how good the products manufactured by the company are, how well the internal work processes are properly tuned.
Attention to aspects
Targets - this is an element of a balanced index system, through which you can establish a relationship between causes and consequences. The task of introducing such a system is to identify aspects and indicators that are important for achieving goals. By correctly applying KPIs, you can clearly formulate patterns and determine how different factors influence each other. It must be remembered that the results of each department always adjust the work of other departments of the enterprise. It is thanks to the KPI that we can most clearly and accurately assess the degree of this effect.
Where to get the result
In order for the target indicators (energy saving, education, productivity) to be useful, it is necessary to implement them correctly. There is a special methodology for the development of KPIs, which involves a sequence of operations. First, it is necessary to do the work that precedes the project, obtain the consent of the senior management, initiate the project, begin drawing up a plan and forming a group that will work on the project. The next step is the development of the methodology itself. It involves an analysis of the organizational structure with the aim of improving it, the formation of a methodological model and management processes, applying the idea of KPI. The task of the project team is to formulate all the regulations, documents, standards and methodological materials that are necessary to put the system into practice.
An important element in achieving targets is the creation of an information system that fully meets the requirements of a particular enterprise. For programmers, it is necessary to draw up a technical task, according to which the project will be configured, then set it up and train the personnel who are supposed to use this system, the subtleties of working with it. The last step of this stage is the trial operation of the software product.
The conclusion is the introduction of KPIs (both methodology and software system) into use.
Subtleties of the question
In order for the performance targets to be as useful as possible, it is necessary to remember the basic principles of the formation and implementation of such production practices. We will have to reorganize organizational processes, make changes in the culture of the enterprise in such a way that KPIs are perceived correctly by staff. The task of managers is to convey to each employed employee the importance and advantages of such an approach, to develop a unified strategy for the development of indices. Implementing KPIs, it is necessary to analyze which particular indicators are most important for the company as a whole, and for this you will first need to identify managerial ratios that apply to the entire corporation.
In order for the achievement of the target indicators to be quick and successful, the groups responsible for the design and implementation of KPIs must form a reporting structure, including all personnel levels. Having chosen the main indicators, it is necessary to coordinate the nuances of their application, as well as to create mechanisms for updating the data so that KPIs are always as accurate as possible.
How to implement
Considering the topic of KPIs, well-known economists Norton and Kaplan suggested using the 10/80/10 system. The idea is to select no more than two dozen target indices. It is advisable to divide them in half: a dozen points fall on efficiency, the same amount on the evaluation of results. The remaining 80% are manufacturing indices.
An alternative version of the economist Panov offers the allocation of no more than 155 indexes. Considering performance targets, the scientist suggests that a larger number will overload managers responsible for drawing up plans. At the same time, this will negatively affect the work of the managing staff, who will have to plunge headlong into the analysis of problems and clarification of circumstances that did not allow achieving a formulated index in a particular case. In addition, it is highly likely that the indicator actually has a rather weak effect on the work and its results both in a specific department and in the enterprise as a whole.
Work principles
In order for the target performance indicators to be at their best, it is necessary to build the enterprise’s work based on the principles of the subjectness of processes to control and management. If a department is assigned responsibility for the index, management should provide employees with the tools, capabilities, and resources through which staff will manage the indicator. It is equally important to give employees the ability to control results within certain boundaries.
Another important working principle is partnership. In order for productivity to grow, and all the tasks facing the enterprise to be solved successfully, it is necessary to establish mutually beneficial work between interested persons. The strategy and information system should be developed and implemented by those who have to use them, and management should explain to the entire staff of the enterprise the need for a new approach.
The main thing - first of all
When planning to achieve the target indicators of wages, enterprise successes, energy conservation, training, it makes sense to determine which direction is most important for solving the problem. It is on it that you need to concentrate all the forces and resources. This approach provides increased chances of successfully solving assigned tasks. A company's productivity growth is usually associated with the expansion of the authority of individual employees. To a greater extent, this applies to those who work closest to the task. The task of management is to provide staff with the opportunity to upgrade their skills. Company managers can regularly conduct trainings, debug the communication system both within the same level and between hierarchical steps. In addition, it makes sense to entrust the formation of individual indices to employees.
In order for KPIs to be high, they should be implemented, bearing in mind the integrative principle, according to which the target indicators are evaluated. The task of managers is to form an integrated scheme by which indices can be evaluated, as well as a reporting system that would be simultaneously motivating for the staff. It is necessary to formalize the work process in such a way that people have an incentive to do everything on time, as efficiently and effectively as possible. Managers are encouraged to arrange meetings on reports and meeting deadlines, while choosing the frequency of such events, assessing the complexity of the task assigned to employees.
Performance Nuances
Another important principle, the observance of which allows us to guarantee high target performance indicators, is the consistency of production indices. Those should be in balance with the strategy. While there is no reference to the realities of work in the company, indices are just a meaningless set of sounds and words. Critical success factors, on which the formation of KPIs depend, should be associated with these indices, thereby forming a harmonious information system of indicators that fits into the understanding of the enterprise strategy.
Communications and work
Some are convinced that KPIs are directly linked to a balanced index system. The authors of this approach are the previously mentioned Norton and Kaplan. Economists point out that when creating a balanced system, they suggested resorting to some meter, not necessarily KPIs.
However, the indirect relationship between the two systems cannot be denied. A balanced system calls for evaluating business processes in the future. That is how it is possible to accurately reflect and describe the goals that are associated with these processes. To assess how well you can achieve your goals, you can resort to KPIs.
Types and Forms
There are several types of indexes in the KPI system. To evaluate the results and their volumes there are relevant indicators. One of them is used to reflect the resources spent. , - , , . () . – , , , .
Forming a KPI system for a particular enterprise, you need to create it so that there are as few indexes as possible. However, they should be enough to control the process. Strictly measurable factors should be taken as indices. The cost of their measurement should be less than or equal to the managerial effect associated with the application of the indicator in practice.