KPIs are a specific representation of a goal that can be measured and are set for the organization at the same time as the goal is formulated. All KPIs can be divided into three subsystems:
Indicators of principle - they inform about how the accepted norms and principles of work are observed. Metrics of means of obtaining the result - indicators that establish the boundaries of the field of activity.
Performance indicators - they determine the achieved email database lists australia socio-economic parameters - the company's profit, its value, place in the ranking, production, and so on.
Indicators of condition (or efficiency) - they contribute to the distribution of places in ratings, are the basis for calculating the value of the enterprise, characterize its condition, potential opportunities, efficiency.
Thus, all three of the above-mentioned KPI subsystems must be used already at the moment of setting the enterprise's goal, and then all employees in each structural division of the organization must be familiar with them. In other words, the task is set in the form of a system of indicators of the enterprise's performance, and not only the goal itself, but also the planned indicators of its achievement (both guiding and limiting) are communicated to all departments and employees. That is, the indicators of each structure and employee are not set arbitrarily, but are based on the company's data.
These three subsystems of key indicators are decisive in making management decisions, developing strategies and calculating the results that the enterprise receives and will receive in the future.
In this case, the first decision in terms of management is the idea of what area the enterprise will work in, what it will produce and sell, what indicators these products will have. This is where the fourth subsystem comes from:
Product indicators - characterize the goods, outline a specific field and determine the subject of activity. This also includes indicators of each subject of activity.
The scope of activity and types of manufactured goods are determined by the owner of the company, and the main indicators of economic efficiency of the activity are determined by the enterprise. It is worth noting that the product itself is not yet a result, since it is not a fact that it will be sold. The result of the activity will be what the enterprise receives from its sale.
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The actual functioning of a company is determined not by its goal and strategy, but by the way the main task is presented to the structural divisions and personnel of the enterprise in the form of KPI. At the same time, for effective work, the "Goal" must exist outside the enterprise, and it must be given specific KPIs (measurable indicators), on the basis of which it is necessary to develop a strategy for achieving results. In the form of KPIs, specific tasks must be set and plans for their achievement must be developed for all departments and specific employees:
Measurable goal of the organization (KPI) >> Strategy >> Measurable goals and plans (KPI) of structural divisions and employees.
If the priorities noted above are not taken into account, the presented KPI subsystems are contradictory in nature, and their incorrect arrangement leads to negative results.
Performance indicators of the enterprise's material and production activities
The main performance indicators of the enterprise include the following.
Material consumption
This indicator reflects the level of efficiency of the enterprise's use of each unit of raw materials and shows what gross profit is obtained from each ruble of spent stocks. The coefficient is defined as the ratio of material costs for the manufacture of products to the volume of goods produced:
Me = Material costs / Volume of production of this type of goods
The calculated coefficient of material intensity is assessed in comparison with the standard indicator. If the calculation result is greater than 1, it means that there is an overexpenditure of materials and raw materials. If the indicator is less than 1, it means that there is a saving of raw materials in production.
Cost per unit of production
It is defined as the ratio of material costs and the cost of the resulting product and allows for an analysis of the cost of the product. If the coefficient exceeds 1, then production is causing losses. In this case, it is necessary to either increase the cost of the product or reduce the total costs of its manufacture. This indicator can be used in any manufacturing industry, as it directly shows the relationship between profit and the cost of the product.
Performance indicators of the enterprise's material and production activities
Source: freepik.com
When setting the retail price of a product for the end consumer, it is necessary to take into account not only all the costs that the enterprise incurs in the production process (from the cost of purchasing raw materials to paying taxes on income received from sales), but also the fact that the entrepreneur needs to receive income from the sale of each unit of goods.
However, in this concept we take into account only the first category of sources, i.e. expenses directly related to production and related processes. If the actual cost is calculated incorrectly, then the efficiency of the enterprise will decrease (in case of underestimation of the cost). If the enterprise spends more money on production than was included in the price of the goods, then a loss will arise, which will increase in parallel with the growth of sales volume.