What is KPI, types and examples of key performance indicators. Calculating KPIs in Excel examples and formulas

KPI development

In order for a sales manager to show decent results, it is important to competently build a motivation system and determine KPIs for the work of managers. In some companies, managers are divided into those who work with a regular client base and those who search for new clients.

Quite often, companies reward managers solely for achieving individual performance indicators. At the end of the year, as a rule, a “salesperson of the year” is selected, who receives additional bonuses for achieving results.

Such incentives lead to the encouragement of individualists interested solely in personal development. These managers won't want to share personal experience, transfer their skills, because for them, colleagues are not part of the team, but rivals who can take away leadership.

That is why it is important, in addition to rewarding individual contributions, to motivate the team to fulfill the overall plan. But there are pitfalls here too.

For example: The company's sales department has 3 strong and seven weak managers. You choose as a reward a bonus for individual fulfillment of the plan + a bonus for fulfilling the plan of the entire department in a ratio of 60:40.

It turns out that strong managers will always receive less of their 40% due to the failure of the entire department to fulfill the plan, although the reason lies in the large number of weak managers. This will lead to the fact that strong managers will consider that the bonus is given unfairly and will leave the company.

So, how to build motivation for sales managers, and what KPI system will be effective.

To effectively work with KPIs, sales managers need a convenient system for automating store operations. The Business.Ru system can track the performance of each employee for any period of time.
All information can be uploaded as a report online to a smartphone or tablet.

Traditional motivation system and KPIs

Today, many companies use the same remuneration system for sales managers: salary +%. Such a system has its advantages, but also its disadvantages. The advantages include the transparency of the bonus scheme, ease of calculation and motivation of sales managers for high performance.

However, there are also disadvantages:

• Such a motivation system for sales managers does not allow team spirit to develop. Managers are primarily interested in their own indicators: they are not motivated to improve the company’s performance and are not interested in helping their colleagues.
• Managers receive interest on any sales volume, even if the indicators are unprofitable for the business.
• The KPI of sales managers is exclusively sales growth; they are not interested in the quality of service and the number of attracted clients. Therefore, most managers stop at collecting their client base and working only with it, performing exclusively the function of an operator.
• Even if sales grow, they may grow not due to the manager’s efforts, but due to the market reaction. In this case, the company is forced to pay them unreasonable wages.

Comprehensive KPI system for sales manager

There is another approach to KPIs for a sales manager. Its essence is to introduce several performance indicators.

Example: salary +% of sales +% number of new clients + bonus for quality customer service.

As a result, we get the formula:

Salary + K1 + K2 + K3

Here K1, K2, K3 are different KPI indicators.

Thus, we can enter any indicators into the formula and change them depending on the company’s goals.

The advantages of such a KPI system for managers:

• Focus on achieving results on several indicators important to the company.
• Ability to change indicators based on company goals.
• Increase in active sales.
• Transparent and understandable motivation scheme.

Development of a KPI system for sales managers

A motivation system built on the basis of KPIs allows each manager to evaluate their effectiveness and manage results.

Take advantage of the capabilities of the Business.Ru CRM system. Employees will be able to see the quantity and quality of their sales and calculate their income according to KPI. The store director, in turn, will see general indicators on the amount and quality of transactions carried out for each individual sales manager.

To develop a matrix of goals and KPIs, you need to take six steps:

1. Make sure that the established goals can actually be achieved. Unattainable goals demotivate employees, which leads them to give up and stop striving for high results.

2. Properly decompose goals to the level of divisions, departments and employees. The company's goals should not be in the manager's matrix.

3. After the decomposition of goals, goals and KPIs are determined specifically for each sales manager. Each goal can have two indicators. Make sure your metrics are aligned with your company's goals.

For each goal, a weight is determined. The higher the significance of the goal, the more weight is given to it (the total weight of all goals should be 100%). Alternatively, you can also take into account the difficulty of achieving the goal. Figure 1 shows an example of a goal table for the head of the sales department.

Rice. 1 Example of a table of goals and KPIs for a sales manager

4. Determine target indicators. To do this, you need to analyze data for the past period. If such calculations have not been made before, analyze the market situation, especially if your company’s activities are seasonal.

Also analyze available resources (for example, production capacity) and only after that set the targets. Too high indicators lead to demotivation of staff, and underestimated ones lead to inflated bonuses based on performance.

5. Then begin developing performance criteria. Here is the calculation formula:

6. Link results to employee performance. For each goal, an acceptable outcome must be defined. The results of each goal are summed up, and we get an overall result, based on which the employee’s remuneration is determined.

In Fig. Figure 2 shows the relationship between results and remuneration, expressed as a percentage of salary using the example of the head of the sales department.

Rice. 2 Reward amount

In the future, you can use a comprehensive construction of a goal matrix, where all indicators can be divided into three levels:

• invalid;
• planned;
• leadership.

The bonus is paid according to the indicators obtained by the manager. For example, if a manager fulfills a plan at an unacceptable level, his bonus is set to zero.

A well-built KPI system for sales managers provides high-quality management accounting and helps regulate personnel policies. Don't chase quantity, put quality first. Remember that a sales manager is, for the most part, creative profession: everyone should have individual approach, and too strict boundaries can reduce motivation and quality of work.

Read articles about working with store staff:

1. How to conduct trainings and educational programs for sales assistants and cashiers

KPI (Key Performance Indicators) – key performance indicators. KPI in sales These are indicators by which the performance of a company or individual divisions can be assessed. By influencing which the company can achieve its goals. For large companies multi-level KPI systems are being developed, this helps management different levels divisions. For example, the average check indicator can be calculated both for the seller and for the store and department as a whole.

It's no secret that final goal any business is profit. But to achieve this profit, you need to implement a whole complex various processes, for which completely different departments may be responsible. And the most important thing is that each division can have a different impact on achieving profit. If the seller needs to sell a lot and the KPIs are aimed at achieving high sales, then the purchasing department needs to monitor such indicators as the turnover time of goods, thereby reducing costs. And naturally, the KPIs for these departments will be completely different. We will only consider KPIs in sales only.

Basic KPIs:

1. . This is the number of potential buyers who learned about the product. We either gave them a presentation, or they themselves came to our store or visited our website. The more traffic the better. Attracting traffic is mostly not a direct task of the sales department. This is mostly done by marketing, advertising, etc. But for example, there is such a thing as “word of mouth”; it is usually created by the seller himself. For example, as a competent seller, they may recommend you to their friends. There are sales where you create your own traffic, for example in network marketing or active sales.
2. Number of sales. This is the numerical number of customers who made a purchase in the time period under consideration. In stores this is called the number of receipts.
3. . Essentially, conversion is percentage number of sales to traffic. The higher the conversion, the better the work of the selling organization. The easiest way to understand conversion is using an online store as an example. 1000 people visited the site, 250 people placed an order. It turns out that conversion = 250/1000 = 0.25, that is, 25% of those who came in became buyers. In those sales where the sale is carried out not in one stage, but in several, a more complex scheme is formed -.
4. Profit per client. A very important indicator; naturally, clients are different; in almost all sales, management is given a task. This can be done in two ways, either by selling a more expensive product or service, or by increasing the number of goods in the check.

These are basic KPIs by which you can compare any selling structures with each other. But almost all companies have 5 or more KPIs, why are there so many of them? The fact is that each sale has its own specifics. In some places it is important that the goods are sold quickly, in others it is important that there are no receivables for positions, etc. In addition, almost everywhere there are goods or services that bring the company more profit and the sales of which begin to be stimulated by introducing your own KPI on them and tying the motivation of staff to the implementation of this KPI. For example, sellers of air conditioners will receive more profit not from the sale of an air conditioner, but from the sale of the installation of this device.

Naturally, these indicators are not suitable for everyone. But to understand processes, it is quite acceptable to use them. It is recommended to use no more than 10 performance indicators, there is no need to reload line staff with goals, and for ordinary salespeople it is recommended to set no more than 5 goals.

In any business there are always not only profits, but also costs. Costs need to be well controlled, so campaign and department reports always show cost metrics. In addition to costs, there are other KPIs related to sales. There are quite a lot of them, I will give just a few:

1. Payroll – wage fund. Naturally, a business has to balance and seek a compromise between the interests of the company and employees. Payroll is assessed differently in different sales. For example, in stores the ratio of payroll to maintenance (turnover) is often used.
2. Loss of goods. This indicator is available in retail chains, since goods can, for example, be stolen by customers or employees or damaged, for example, during transportation.
3. Returns and exchanges or outflow. Customers sometimes return goods, or when selling services, refuse the service. In telecommunications, churn is one of the most important indicators.
4. Costs for renting premises. In retail there is such an indicator as revenue per square meter.
5. ARPU (Average revenue per user) – revenue per subscriber (client). The indicator is also used in telecommunications.
6. . Many of the company's services are provided on a post-payment basis, and if you do not monitor accounts receivable, the company may incur serious losses.

If you decide to start your own business, then think in advance about what KPIs you will evaluate. In addition, if you are going for an interview with a serious company, it is recommended to improve your knowledge, since many managers like to ask questions about KPI knowledge.

KPI - Key Performance Indicator. KPIs are key performance indicators of a company.

Why are they key? Because the company's management has determined that these indicators are vital to achieving the company's specific goals.

For each specific company, key indicators will be different. If, for example, a company is just entering the market, then one of the main KPIs may be sales volume, market share or the number of new customers.

However, margin indicators at this stage of the company's development may not be as important as at stages of later development of the company. Let's look at KPIs using examples of the work of a sales manager.

What's happened kpi simple words

Let's look at what KPI is using the example of the work of a sales manager. Let's assume that in the sales manager's motivation system there is only one point on which his income depends. Let this point be sales volume. What will the manager do to fulfill the sales plan? He will perform it based on the following points:

1. Sell ​​what sells itself.
2. Sell ​​what you have in stock.
3. Sell ​​what you can sell quickly and a lot.
4. Sell ​​to the largest clients.
5. Weed out from incoming requests those whose customers are ready to buy right now.

In other words, the manager will not think about tomorrow. His task is to sell now. He won't think about:

1. That the company has a plan to sell the entire range of goods, for which it will receive a discount or other preferences.
2. That the company becomes potentially unstable due to the fact that 90% of all sales go through 1-2 clients.
3. That the company pays money for incoming calls, of which the manager only works on hot calls and rejects others.
4. That custom-made goods can bring greater profits.

In other words, the manager fulfills the sales plan, but in the long term this can lead to disastrous consequences for the company.

KPI for sales manager

Observing this, management comes to the conclusion that paying only for sales volume is wrong. Management understands that it is necessary for the manager not only to fulfill the sales plan, but to do it in the manner necessary for the company.

That is, first a strategy is born. For example, to become number 1 in sales of product A. Then goals are born that need to be achieved in order to become number 1, for example:

1. Maintain warehouse volume for a specific supplier.
2. Maintain a certain range of stock.
3. Attract certain partners who can sell all this.
4. Attract specific size financing.
5. Hire managers to sell these products or distribute this work among existing managers.

Points 1 -5 will be the same KPIs.

KPI for sales manager calculation example

For example, if previously the manager’s income formula looked like:

Income = (% * sales volume), then now:

Income = (% *sales volume)*0.8 + (KPI 1 fact/KPI 1 plan)*((% *sales volume)*0.2.

In the new formula, 20% of the manager’s income will depend on the fulfillment of KPI 1, which, for example, can be formulated as attracting 10 new partners for a certain type of product.

At the same time, if the manager sells the old-fashioned way, he will lose 20% of his usual income. To get as much as before, he will need to make additional efforts in finding new partners.

Ratios and KPIs themselves can be calculated depending on the situation.

Typically, such a motivation system uses 1-3 KPIs with their own coefficients.

Next comes the process of monitoring how these KPIs work towards the set goal. If the goal is approaching, then you can leave these KPIs as they are. If the goal is not approaching, then the KPIs themselves need to be changed.

KPIs for sales manager examples

KPI for sales volumes.

Sales volumes, shipments, sales, turnover, sales are synonyms for various types business. Sales volumes are presented to managers as a specific plan figure for a certain period of time. Usually this is a month, quarter, year.

Examples of KPIs for sales volume.

You need to achieve a sales level of 1,000,000 rubles to your partners for the quarter.

Sales may be expressed as a percentage of the previous period or the same period last year. Either as a percentage or in physical terms.

Examples of sales volume KPIs relative to other periods.

You need to achieve a 15% increase in sales in the 3rd quarter of this year compared to the level of sales in the 3rd quarter of last year.

KPI for profit (margin).

Examples of KPIs for profit.

You need to achieve a profit of 100,000 rubles in November of this year.

KPI for market share.

Here we are already measuring the work of the sales manager relative to competitors. This indicator implies sufficient independence of the sales manager in choosing more specific KPIs, such as margin (profit), number of clients.

KPI for attracting new clients.

If you see that your sales are falling, then one of the methods to increase sales is to attract new customers. This especially works during a crisis, when existing clients reduce their purchase volumes, and some simply go out of business. KPI can be set not just on quantity, but on sales volumes or on attracting new customers, a certain type or customers of a certain market. Or, for example, KPI for the number of meetings with clients.

KPI for customer loss.

Unfortunately, customer losses happen and you need to be able to manage this process. This could be a KPI for winning back lost customers. Managers often forget to follow up with customers who stop buying.

Alternatively, it could be a KPI - the ratio of lost customers to new ones.

KPIs for promoting certain products or groups of products.

You set sales plans for specific products or groups of products. It is possible to establish plans for warehouse balances at the end of the reporting period. Typically, product managers set these inventory plans.

KPI - accounts receivable.

You can set the maximum level of accounts receivable and/or the amount of debt by days of delay.