To avoid any contradictions between goals and KPIs when using the head-on method, it is recommended to carry out cascading and aggregation.
Cascading of indicators is performed independently of the tasks. In this case, assumptions are developed about what the goals to which specific KPIs are tied might look like. High-level indicators are formulated as goals. This allows you to avoid contradictions between metrics of different levels and ensure that each of them is linked to the system.
To cascade , you need to reformulate the top-level metrics. They should look like goals. Then you need to create KPIs based on them.
Aggregation is the opposite of cascading. It is used in companies where there are no defined top-level goals and corresponding KPIs for managers, but there are specific tasks for different departments.
Cascading kpi
Source: shutterstock.com
The process of developing a unified advertising data package system based on this information consists of two stages.
The first step involves aggregating mid-level tasks. A hypothesis is formulated about possible top-level goals that, when disclosed in four perspectives, could lead to the current results of individual units. Then the corresponding indicators are established. It is important to check the resulting top-level metrics and compare them with the results of the units in order to eliminate contradictions and ensure the completeness of the system. If cascading of goals has not been performed previously and this is not planned in the future, then proceed to the next stage.
The second stage involves cascading mid-level indicators downwards. This allows you to remove metrics from the motivation system that are not related to any of the goals.
Correcting existing managerial methodological errors requires more time and resources than the initial logical design of the system from the bottom up. However, in practice, aggregating goals and indicators, as well as their subsequent cascading down to the departmental level, are quite common measures.
This method is usually used to automate an existing system of indicators and motivation. In addition, it is used when switching to another scheme. In the process of automation, "blank spots" that arose as a result of previous organizational changes can be discovered. When aggregating, it is possible to find projects in which employees independently set tasks for themselves, perform them themselves and control them. In addition, secondary goals and indicators that do not correspond to current tasks, but are regularly used, can be identified.
Read also!
"Company Marketing Plan: Short and Detailed Versions"
Read more
Examples of KPIs for managers
Calculation of KPI for managers depends on the specifics of the business and position. For each position, appropriate metrics are selected. Let's consider the definition of KPI for key management positions.
KPI of the executive director
This employee carries out operational management to achieve specific objectives. His area of responsibility includes tactical issues of implementing the strategy developed by the CEO or founders of the enterprise.
Let's look at some examples of KPIs for a CEO at a sportswear company:
Increase profitability by 10%.
Reduction of logistics costs by 15%.
Reduction in the number of customer complaints about clothing quality by 10%.
Expansion of production capacity by 11%.
Increase in the volume of investments in the organization by 7%.
KPI of the executive director
Source: shutterstock.com
The salary calculation for the CEO and other managers can be done using the formula that was used in the CEO example:
Salary = Salary + Bonus (Base x KPI Coefficient)
Let's assume that the executive director has a salary of 160,000 rubles (40%), and the maximum bonus is 240,000 rubles (60%).
If the KPI reaches 86%, then his salary will be as follows:
160,000 + (240,000 x 86/100) = 366,400 rubles.