Target indicators are Definition of the concept, features, methods of definition

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Target indicators are an important tool for the development of an enterprise, which allows 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 when planning work with groups, and specialists from the UN program dealing with the food crisis at the international level. In short, any plan, any program almost always implies the existence of certain indicators that must be achieved.

General information

Project targets in English are encoded with the well-established abbreviation KPI. In the general case, the definition involves the evaluation of indicators as parameters that reflect how efficiently a company or its department is working. Indexes are necessary to effectively organize the achievement of various goals both in the field ofgeneral development strategy, as well as practical operational ones. Using such indicators, you can quickly and accurately assess the state of affairs, the state of the enterprise, the level of success in the current strategy.

Target performance indicators - a tool for monitoring the activity of each hired employee, department of the enterprise, the company as a whole. Quite interesting interpretations of this term can be found in ISO 9000, published in 2008. The standard proposes to regard performance as the level of achievement of some result, fixed in advance in the plan. It 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 results and the resources that were spent to achieve them. This term refers to the ability of an enterprise to realize its tasks, adhering to a predetermined level of quality. To express this ability, they resort to estimates of time, spending. The KPI system involves the evaluation of both efficiency and effectiveness, resorting to key indices. This understanding of the term is due to the fact that as a result there is always the degree of its achievement and the expenditure that firms have gone to to achieve this.

Understanding and terminology

Targets (education, energy conservation, product distribution, production) are a tool to measure how much the plan is realized. If the indicator selected for analysis is not associated withthe purpose 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, based on the technology of formulating key indicators, monitoring the achievement of goals, and revising them as necessary. The predominant percentage of modern enterprises are managed according to this scheme.

Methodology

Adhering to the idea of development program targets, one can manage an enterprise by planning how the set goals should be achieved, as well as by analyzing the possible outcomes of all ongoing operations. It is believed that Peter Drucker (1909-2005) became a pioneer in this area. This German economist made a scientific discipline out of the direction of "management" of little interest to the public. In the middle of the last century, this area seemed unpromising to many, did not command the respect of society. Thanks to Drucker, primary systems for evaluating performance were developed. He suggests taking key indicators through which the goals were analyzed.

The new metrology proposed by Drucker was supposed to avoid time traps, that is, a situation where the company's management team is completely immersed in solving current issues and problems at the expense of tasks that are really important for achieving the company's goal. As Drucker noted, over-involvement in petty dailycomplexity leads to the fact that attention is scattered. People forget about what can be called paramount in terms of importance. Today, this 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 classical target management, allowing the company to reach a new level of efficiency.

Relevance and nuances

Explaining the importance of development targets, the author of the scientific discipline urged to pay attention to the fact that only selected aspects of management can influence the enterprise as strongly as the assessment of the activity of departments and the company as a whole. It is important to note that evaluation is one of the least thought out scientific management areas, which is associated with a certain risk of error if such an approach is to be applied in practice. Some time ago, American researchers organized a survey, from which it became clear that more than half (about 60%) of top-level managers do not consider the systems implemented in their enterprises to evaluate results really working and effective. In our country (according to the researchers responsible for statistics) the number of such dissatisfied people reaches 80%. The reason for dissatisfaction is the lack of a pronounced and effective connection between the executive department, plans, the motivating component and real results.

In recent years, the calculation of targets is considered unusuallyclose 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 setting of such a system is a guarantee of fairness, and therefore the interest of each hired in the best quality of the work process.

Options and opportunities

Fulfillment of targets varies from case to case. It all depends on what is decided to be used 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 has a lot to do with it. Typically, KPIs are used to measure how effectively a firm's management and management staff are performing.

KPIs should not be equated with key success factors. Suppose the task of the 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 will be some tool through which the plan is achieved. For example, you can get the desired result by reformulating the production process by launching new products.

Indices

Targets are lagging and leading indices. The first ones show how good the results were for some analyzed period. The latter 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 achievecompletion of the reporting period for successful reaching the planned level.

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 delay in financial indicators is a fact that does not allow using this group of information to describe the 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 moment in time. They allow you to evaluate the work of departments, the enterprise as a whole. Some give direct information, while others indirectly follow what the cash flows are, what they will be in the near future. Focusing on such indices, you can 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 debugged.

Attention to aspects

Targets are an element of a balanced index system that can link causes and effects. The task of introducing such a system is to determine the aspects and indicators that are important for achieving the goals. By correctly applying KPIs, you can clearly form patterns and determine how different factors affect each other. It must be remembered that the results of each department always correct the work of other departments of the enterprise. Thanks toKPIs provide the clearest and most accurate measure of this impact.

Where to get the result

To be useful, targets (energy savings, education, productivity) need to be implemented correctly. There is a special methodology for developing KPIs, which involves a sequence of operations. First, you need to do the pre-project work, get the consent of the senior management, initiate the project, start drawing up a plan and form a group that will work on the project. The next step is the development of the methodology itself. It involves the analysis of the organizational structure in order to improve it, the formation of a methodological model and management processes, applying the idea of KPI. The task of the project team is to form all the regulations, documents, standards and methodological materials that are necessary for the application of the system in practice.

An important element in achieving the 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 configure it and train the personnel who are supposed to use this system in the subtleties of working with it. The last step of this stage is the trial operation of the software product.

The conclusion is to put the KPIs (both the methodology and the software system) into use.

Subtleties of the issue

To maximize performance targetsuseful, it is necessary to remember the basic principles of the formation and implementation of such production practices. We will have to rebuild organizational processes, make changes to the culture at the enterprise in such a way that KPIs are perceived by the staff correctly. The task of managers is to convey to each hired employee the importance and advantages of this approach, to develop a unified strategy for the development of indices. When implementing KPIs, it is necessary to analyze which indicators are most important for the company as a whole, and for this, you will first have to identify management ratios that apply to the entire corporation.

To achieve the targets quickly and successfully, the teams responsible for designing and implementing KPIs need to establish a reporting structure that includes all levels of staff. Having chosen the main indicators, it is necessary to coordinate the nuances of their application, as well as create mechanisms for updating data so that KPIs are always as accurate as possible.

How to embed

Considering the topic of KPIs, renowned economists Norton and Kaplan suggested using the 10/80/10 system. The idea is to choose no more than two dozen target indices. It is advisable to divide them in half: a dozen points fall on efficiency, the same number - on the evaluation of results. The remaining 80% are manufacturing indexes.

An alternative version of the economist Panov proposes the selection of no more than 155 indices. Considering performance targets, the scientist assumes that more will overburden those responsible forplanning for managers. At the same time, this will have a negative impact on the work of management personnel, who will have to immerse themselves in the analysis of problems and clarify the circumstances that did not allow achieving the 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 particular department and in the enterprise as a whole.

Working principles

In order for the performance targets to be at their best, it is necessary to build the work of the enterprise, based on the principles of subservience to control and management processes. If a department is assigned responsibility for an index, management must provide employees with the tools, capabilities, and resources through which staff will manage the indicator. It is equally important to give workers the ability to control the results within certain limits.

Another important working principle is partnership. In order for productivity to grow, and all the tasks facing the enterprise to be successfully solved, it is necessary to establish mutually beneficial work between interested persons. The strategy and information system should be developed and implemented by those who will use them, and the management should explain to the entire staff of the enterprise the need for a new approach.

Basic First

When planning the achievement of target indicators of wages, enterprise success, energy conservation, training, it makes sense to determine which direction is the most important for solving the problem. Exactly onit needs to concentrate all forces and resources. This approach provides an increased chance of successfully solving the tasks. The growth of the company's productivity is usually associated with the empowerment of individual employees. To a greater extent, this applies to those who work closest to the task. The task of management is to provide the state with the opportunity to improve skills. Managers of the enterprise 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 keeping in mind the integrative principle according to which targets are assessed. 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 motivating for staff at the same time. It is necessary to design the workflow in such a way that people have an incentive to do everything on time, as efficiently and effectively as possible. Managers are encouraged to hold meetings on reports and meeting deadlines, while choosing the frequency of such events, assessing the complexity of the task assigned to employees.

Efficiency nuances

Another important principle, following which allows us to guarantee high performance targets, is the consistency of production indices. These should be in balance with the strategy. While there is no connection to realitywork in the company, indexes are just a meaningless set of sounds and words. Critical success factors, on which the formation of KPIs depends, should be associated with these indices, thereby forming a harmonious information system of indicators that fits into the understanding of the company's strategy.

Connections and work

Some believe that KPIs are directly related 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 measure, not necessarily KPI.

However, the indirect relationship between these two systems cannot be denied. A balanced system calls for future evaluation of business processes. This is how you can accurately reflect and describe the goals that are associated with these processes. You can use KPIs to measure how well you are achieving your goals.

Types and forms

There are several types of indexes in the KPI system. To evaluate the results and their volumes, there are corresponding indicators. One of them is used to reflect the spent resources. The performance indicator shows the extent to which the business process is executed, and also gives an idea of the correspondence between the real workflow and the algorithm according to which it is supposed to be executed. The performance indicator (derivative) describes the relationship between the results and the time periods spent to achieve them. The performance index is a derived indicator that shows howthe total and the resources spent on it are correlated.

When creating a KPI system for a specific enterprise, it is necessary to create it in such a way that there are the minimum possible number of indexes. However, they should be enough to control the process. Factors that are strictly measurable should be taken as indices. The cost of their measurement should be less than or equal to the management effect associated with the use of the indicator in practice.