Supplier rewards. Key performance indicators for the supply chain Motivation of employees of the supply department
Good, ladies and men! Today's surprise, which we will win, sounds like this: "How to motivate the employees of the Purchasing Department to achieve the result the company needs, and what kind of result they should actually achieve."
From the title it becomes clear that enjoy reading this post makes sense only to those who have goods, warehouses and buyers , to everyone else according to their mood as an elective.
By the way, what I will tell you about now is a unique author's development of our team, which we are giving public access for the first time. However, our clients have been using this technique for a long time, because it allows them to keep a minimum inventory at a 95% service level, and, most importantly, their Buyers clearly know how to get the maximum bonus, working legally 8 hours a day without nerves, psychos and stress .
Well, now to the point.
Purchasing Department Motivation Indicators
Let's think about what is global task Purchasing department?
Probably in that every client who applied to your company could buy the goods he needs. It can be said in another way: “You should always have goods in the right quantity at the lowest possible prices in your warehouse or in your showcase”. The question is, what should the Buyer do to accomplish this task? Everything is correct. The Buyer must procure the correct quantity of goods from its Suppliers on time.
Based on this, we can formulate the first motivator, for which the Procurement Department is responsible.
It - Zeroing the balance . That is, if you have zero pieces of the goods needed by the client on the balance, then this is for any flight. Zero on the balance is not only a loss of money due to lost sales, but also a chance to say goodbye to your client, who will cheerfully gallop away for this product to your competitor.
The second motivator, for which every self-respecting buyer is responsible, is called dead stock or illiquid, or hanging, as you like.
The fact is that if “Zero Remaining” is a hammer, then “Dead Stock” is an anvil on which the average buyer spins 90% of his working time.
Judge for yourself if you insert only one task into the buyer's motivation: "No zeroing out balances", then he will cry with happiness, because bringing an annual supply of each item to the warehouse, and then sitting all year on the priest evenly and cutting into tanks is best job in the world.
So here it is Index Dead stock is a 100% MEGA motivator to purchase the optimal amount of goods.
Because dead stock is:
- Plost money , which you pay for the storage of unnecessary goods to anyone.
- Unreceived money in the amount of at least the Bank rate that you lose by freezing money in excess goods.
- Loss of liquidity companies, because it is rarely possible to quickly sell excess goods without a direct loss.
- Potential substandard and marriage , because from the fact that the goods are in the warehouse, they do not get any newer, neither morally nor physically.
In general, believe the stories of bankruptcy of many, many Russian companies. Dead stock is an evil no less, and sometimes even more evil, than zeroing.
The last indicator that we can credit or blame to the buyer is Reduced input costs .
This is a pure qualitative indicator and it is set to an employee only if he has the authority to negotiate with the supplier on the provision of special prices, discounts, bonuses, some kind of price or material donuts, for example, return of marriage, transport at the expense of the supplier, deferral and etc. etc.
Here the task is very simple - constantly strive to reduce input costs . And how to do it, everyone decides for himself. Ask, beg, threaten, argue, substantiate, blackmail - whatever your heart desires, as long as the Supplier gives you, gives and gives a lot and for free.
So, here is a list of all the motivators we need:
1. Resetting the balances.
2. Dead stock.
3. Reducing incoming costs.
We pass to the main thing. Now I will show how to use these motivators to build a simple and effective motivation system for buyers.
Let's assume that we have a certain employee of the Purchasing Department, whose name is Snabzhentsev Stepa. Its task is to analyze the receipt, consumption of goods in the warehouse, the current balance and correctly form an order to the supplier. At the same time, he has the authority to tilt his suppliers in any direction.
We gave him a salary of 30,000 rubles and determined the bonus part in the amount of 70,000 rubles.
First, we will consider an example of work not to order, but to a warehouse, which means that 70,000 rubles of the award must be divided into 3 parts .
How to do it.
Let's say the biggest financial sadness for us is zero on the balance.
Therefore, the motivator Residual zeroing
we will evaluate in 50% bonus, which is 35,000 rubles.
For the absence Dead stock let's pay 40% bonus. It will be 28,000 rubles.
Cost reduction
estimate in 10 percent
for this is a difficult, irregular, and thankless task.
So, we have divided the Stepan award into three parts, depending on the importance of each of the motivators.
Methodology for calculating motivation indicators
Now let's figure out how to calculate the indicators described above. Look, this is a sales chart of some conditional product. Let it be the simplest, well, let's say Salt. You imagine any running position from your assortment.
On this chart on the X scale are the days of the month , in our case, it is May. BUT on the scale Y is the most important performance indicator of the buyer, which is called Residue depth .
Residue depth — shows the number of days after which we will sell the current balance of the goods.
To count it you need to take the current balance in the warehouse and divide it by the average daily sales volume for the selected period. As a result, we will get the number of days after which we will have zero pieces of this position on the balance.
On the graph, the first point is 7. Where could such a result come from.
Suppose on May 1st there were 70 packs of salt left. At the same time, we have sold 300 packs in the last 30 days. If we divide sales of 300 packs by 30 days, we get an average daily sale of 10 packs per day.
Elementary. Now we divide our balance of 70 pieces by the average daily sale of 10 packs and as a result we get indicator Depth of balance on May 1 equal to 7 days of sales . And this means that in seven days we will be left with a zero balance if the rate of sales does not change.
That is, the numbers on this chart mean the actual "Depth of balances in days" for each day of the month.
Setting the standard of motivation
Now you need set a standard by indicator Residue depth , that is, decide how many days is good and how many days is bad.
For the indicator Residual zeroing the standard is simple, like a carrot, and is equal to the 1st day . That is, the stock of our goods should not fall by less than 1 day of sales. Although, as practice has shown, it is better to make this standard higher, laying in it some kind of safety stock. A safety stock is needed in order not to be left without a product during a sharp rise in sales.
Suppose, based on our calculation, for one day of trading we need 10 packs of salt, but suddenly tomorrow a client will appear who decides to take 20 or 30 pieces at once, because anything is possible. So, in order to insure against such unpredictable bursts of sales, we need to add 2-3 days from above.
Therefore, let's set the "Zero balances" standard equal to 3 days.
Now establish a standard for "dead stocks" . This is where things get a little more complicated, but not by much. To determine this standard, ask yourself the question: “In how many days will we bring a new batch of goods to our warehouse?”
Suppose that from the moment the goods are ordered to the supplier until they arrive at our warehouse, the maximum period is 14 days. That is, in 14 days we will bring a new batch of salty to our warehouse. So these 14 days will be the standard for the Remaining Depth, above which the stock will be considered dead.
Although here I am I recommend throwing 40-50 percent of the maximum period for a different force majeure . Therefore, in our example, we will set the upper bar not 14, but 20 days to take into account earthquakes, invasions of alien green men and other universal catastrophes.
And now ask yourself a logical question, that if we are guaranteed to bring the goods to the warehouse in 20 days, then what kind of water supply should we store in the warehouse more than for this period?
That is the maximum delivery time of the goods from the Supplier and will be your standard for "Dead Stock" . For clarity, we mark these standards on the graph with a red and black line.
Boys and girls, we've reached the finish line because now it is enough for us to count the number of non-compliance with the established standards to understand what award our Styopa will receive, and how efficiently the Purchasing Department works.
With such a problem, as you know, Winnie the Pooh will also cope. Look - in our example, the “Reset to zero” standard was not met for 7 days per month, and the “Dead stocks” standard was not met for 4 days.
So, if our Styopa traded only one position, then his premium in terms of Zeroing and Dead Stocks would be considered very simple.
For the "Reset to Zero" non-compliance with the standard was 7 days out of the 31st, that is, 23%. If we reduce 35,000 rubles by 23%, then we get 26,950 rubles. This will be Stepan's actual bonus for fulfilling the indicator "Reset to zero".
Similarly, we calculate the premium for "dead stocks". Its maximum amount is 28,000 rubles, non-fulfillment was 4 days out of the 31st, that is, 13%. We subtract 13% from 28,000, we get the actual amount of the premium 24,360 rubles.
Dear colleagues, now we have studied a rather complicated topic, and I really hope that you have understood the logic and methodology for calculating these indicators.
So here it is if you really understand all this, then you should inevitably have a legitimate question for me.
“Uncle, you have laid out everything here perfectly and in fact everything is correct, but damn, how do we calculate it in real life, if we have 6 buyers in the Department, each leads 3-4 suppliers and each has at least 500 positions in the price list”.
The question is correct and fair. For I bet 100500 to one that none of the programs that your purchasing department works with have the ability to generate such a report .
And the more pleasant and honorable it is for me to show you a report that can be generated in Information system "TopControl" .
Before you report with the calculation depth of balance for each position for each day of the month . And in the last column of the report we see the final implementation of our standards . These are the very secret percentages by which we adjusted the premium of our purchaser.
Only this is the percentage of compliance with the standard not for one item, as we examined on the chart, but for all commodity items at once, for which a specific buyer is responsible.
Naturally, this report has a huge number of different settings that allow you to subtly sharpen it to the specifics of your work .
Just imagine: 3 minutes will be enough for you to see the full picture of the efficiency of the Procurement Department. Shikardos, agree!
Moreover, by generating such a report daily, your Buyers will instantly see all their current and potential jambs, which means that they will respond in time and adjust orders to suppliers, avoiding zeroing and restocking the warehouse.
Yes, what is there to talk about at all, if the experience of our clients shows that after three weeks of working with this report, there is a twofold decrease in zero balances and a 30% decrease in stock.
Well, two moments for dessert.
- If you carry goods under the order, then you can not complicate your life by calculating these standards. Just take and divide the number of outstanding orders by total orders of customers for the reporting period, thus obtaining a "percentage of non-fulfillment of customer orders", by which the buyer's premium can be reduced.
- What% of the bonus to pay an employee for reducing incoming costs from the supplier. There will be no cleverness here. This is a purely personal matter for each Manager, because this indicator cannot be calculated or counted quantitatively. I recommend not to complicate anything. The buyer received some goodies from the supplier in a month, reward him with a 100% bonus for this indicator, he did not receive, sorry, there is no bonus.
That's all. There will be questions, write in a personal [email protected] I will definitely answer. Visit our website topcontrol.com . To all the good people have a good day, and personally to you good luck in business and big sales.
To be continued… VideoPost version
Top managers are always concerned about the question: does the logistics system really work effectively: do suppliers buy raw materials, materials and equipment at market prices, how high are the risks of stopping production due to the lack of the necessary nomenclature in the warehouse? In turn, suppliers have to constantly give explanations to various services about the reasons for rising prices and stocks. This leads to an increase in the number of reports, and the quality of these reports leaves much to be desired. In this article, we will explain how to build a system of key performance indicators (KPIs) in such a way as to ensure the preparation of a high-quality analytical report for management and shareholders, as well as to motivate suppliers to achieve corporate goals.
General principles for creating a KPI system
The first step in creating a KPI system is to clearly define the boundaries of the procurement process and the responsibilities of the various participants within this process. The logistics process starts from the moment the request is received by the Commercial Service (Procurement Department) and ends with the delivery of the ordered resources to the customer. As part of this process, such components as procurement planning (inventory management), supplier selection, maintenance of contracts with suppliers of material and technical resources, warehouse operations management and delivery to customers are considered. Separately, control, analysis and optimization of processes are singled out - it is within the framework of this process that planning and control of KPI deviations take place (Fig. 1).
Figure 1. Logistics process
It should be noted that when organizing logistics at Russian enterprises, as a rule, the least attention is paid to analytical work and the improvement of business processes. However, this process is necessary in order to ensure the flexibility of the system in today's ever-changing environment. The organization of control and analysis requires regulation, like all other supply processes.
The approximate set of KPIs for supply is about 27 indicators. The indicators are distributed among employees in accordance with the staffing table. At the end of the period, an integrated indicator is calculated for each employee, depending on the deviations of the actual values from the planned ones. An example of calculating an integrated indicator for a supply system employee is shown in Figure 2.
Figure 2. Evaluation of the performance of a supply chain employee
The main indicators for the supply system: the level of fulfillment of requests, inventory turnover, the quality of material and technical resources, the optimization of the cost of purchases, the optimization of costs for the organization of supply. These four to five indicators in various combinations are present in all employees of the supply system in order to motivate all personnel to achieve common goals. It is these indicators that characterize the effectiveness of the logistics process as a whole.
In our opinion, the main indicator for the supply chain is the level of fulfillment of requests for collateral, and it is this indicator that is present in the set of indicators for each worker in the supply chain.
The set of indicators for each supplier contains both the main indicators and indicators that characterize its individual tasks. Thus, the formulation of KPIs allows you to create a transparent system of motivation for each employee, whose goals during the period are clearly defined by a given set of KPIs.
The entire list of indicators for the supply system can be divided into six major blocks:
1) KPI for the procurement process as a whole (key indicators)
2) KPI for procurement planning
3) KPI for supplier selection
4) KPI for maintaining contracts with suppliers
5) KPIs for warehousing and delivery to customers
6) KPI for control, analysis and improvement of business processes.
Methodology for calculating key indicators
Procurement Cost Optimization Assessment
The reasons for the increase in purchase prices is one of the main questions that suppliers have to constantly answer. As a rule, control over purchase prices is carried out within the framework of the purchase budget. Standard articles are defined: raw materials, materials, equipment, transport. Planned values are formed according to these articles. Moreover, it is often heard from suppliers that the planned values are set simply on the premise that it is necessary to obtain savings this year compared to the previous one. The actual cost is then compared with the planned value. However, this approach does not allow determining the role of suppliers in budget deviations.
We propose the following solution: to use a factorial analysis of the procurement budget for materials and equipment and, at the end of the planned period, analyze deviations in quantity, price, inflation component, which makes it possible to clearly identify the responsibility of the supply system for the dynamics of budget indicators.
In order to analyze the deviations of the procurement budget compared to the previous period, four factors are distinguished:
- inflation rate;
- change in the price level (the main indicator for the supply chain);
- change in the number of supplied materials and equipment;
- changes in the structure of purchased materials and equipment.
Of these four components, the deviation in the cost of purchases of the current period compared to the previous one is formed.
The inflation rate is a planned deflator for groups or subgroups of MTR, determined on the basis of the forecast of the inflation rate and price dynamics in the MTR markets. Planned deflators are determined before the beginning of the planned year and are agreed upon by economic services. When analyzing the results, the planned deflators can be adjusted in accordance with the official published data on the inflation rate.
Component "deviation due to price" is just one of the main key performance indicators for the supply chain. This value is determined at the beginning of the planning period as a commitment by the Purchasing Director: for example, a supply chain can commit itself to reducing purchase prices (adjusted for inflation) by 1%. That is, the planned value is taken equal to -1%.
The downward deviation due to the price positively characterizes the operation of the supply system and may be the result of negotiations with counterparties, the search for new counterparties, and more efficient supplier selection procedures.
The deviation due to the quantity is explained by the change in the needs of customer departments due to a change in the production program, the commissioning of new production facilities, etc.
Deviation due to a change in the structure of purchased materials and equipment is determined by a change in the production needs of customer departments due to a change in technical policy or the use of new equipment. This component shows how much the list of purchased stock items has changed compared to the previous period.
Figure 3. Analysis of budget variances for equipment purchases
Let's look at the results of the analysis of the deviation in the cost of purchases using the example of calculations carried out for one of the largest Russian metallurgical plants in terms of technological equipment(Fig. 3). The overall increase in purchases amounted to 100 million rubles, that is, there was an increase in the cost of purchases by 32% compared to the previous year. At the same time, the deviation due to inflation is 8%, the deviation in quantity is 6%, the deviation due to changes in the structure of purchases reaches 20%. As for the main indicator of the supply system - changes in the cost of purchases due to changes in the inflation-adjusted price index, it is -2% for this nomenclature, which indicates the efficient work of suppliers in terms of negotiating and selecting suppliers. Therefore, if the company's management has questions about increasing the procurement budget compared to the previous period, additional analysis should be carried out not in relation to the operation of the supply system, but as part of production planning and the formation of a need for the purchase of equipment.
It should be noted that when determining KPIs for optimizing the cost of purchases, it is possible to analyze price dynamics not only in comparison with previous periods, but also with published price indices.
Assessment of the level of customer requests
As I said above, the indicator of the level of application fulfillment is the main one for the supply system and is part of the motivation system for each employee - from an ordinary economist to the Purchasing Director. This indicator is calculated as the percentage of completed applications in the total volume of declared material and technical resources.
The application is considered completed if the ordered materials and equipment are delivered to the customer within the time specified in the application. In order for this indicator to be realistically measured, the holding of a bid campaign and the filing of corrective bids should be clearly regulated.
As a rule, until the moment when the enterprise begins to really control this indicator, especially if there was no information system, any supplier says that the level of application fulfillment is 100%. When an objective tool for measurement appears, the picture turns out to be rather sad. So, at the beginning of the implementation of the KPI system and the implementation of systemic transformations, the level of application fulfillment is less than 50%. As a rule, during implementation (somewhere around 12-18 months), the level of implementation of the indicator reaches more than 80%, and the next target value is set at the level of 85%.
Organization of the implementation of the KPI system
In order for the KPI system in the company to work effectively, the requirements for the supply system and the responsibility of the participants must be clearly formulated within the company. For the normal operation of the supply system, the regulation of the following processes is necessary: the formation of production needs, procurement planning, selection of suppliers, maintenance of contracts with suppliers, organization of warehouse operations and delivery to customers.
In addition to the above regulations, the process of monitoring, analyzing and improving business processes should also be regulated in detail. For this, the following regulatory documents are being developed: a regulation on the procedure for monitoring and forming KPIs, a list of KPIs, the distribution of KPIs by employees, instructions for calculating KPIs, the procedure for determining scoring by indicators, instructions for calculating integral indicators.
These documents, and then the planned and actual values of indicators, are approved by the management of the supply chain and agreed upon by the economic services and the personnel department, and only then are submitted to the management of the company for consideration.
In the organizational structure of the supply system, there must be a place for a unit involved in analytical work, incl. planning KPI values and then tracking actual values.
The development of the KPI system also allows you to create a regular analytical report for the company's management and shareholders. The report contains information on the execution of the planned value of each indicator, the information is presented in graphical and tabular form. In the event that the deviation is more than 5%, comments are given. The presence of clear instructions for calculating indicators allows you to obtain high-quality management reporting that supports management decision-making.
How is the KPI system automated? At the first stage of the project, all the necessary regulations, tools in Excel for calculating integral indicators and an analytical report for the manager are developed. At this time, implementation specialists software are simply members of the project working group. Then, at the second stage, the calculation of a limited set of indicators is automated (based on previously developed calculation instructions). Pilot operation of the process begins (analytical report and personnel assessment are still carried out in Excel).
After pilot operation, some changes may be made to the regulatory documents. Then other indicators are automated, the system operates in industrial mode. Subsequently, a report for the manager and the process of assessing integrated indicators for personnel can be automated; almost all ERP systems have the corresponding capabilities.
In our opinion, many companies implementing the KPI system make the following typical mistakes:
- The project to create a KPI system begins without a preliminary detailed analysis of business processes, which makes it difficult to formulate KPIs and share responsibility between departments.
- Very often, management instructs departments to independently develop KPIs for themselves. As a result, there are a lot of indicators, they are not interconnected in any way, and there can be no question of any correspondence to the corporate strategy. In addition, the number of management reports required for KPI calculation and analysis is growing very rapidly.
- Another mistake is to create a KPI system without clear calculation instructions. As a result, analytical departments spend a lot of time calculating actual values, again the number of reports increases, and the results of the KPI analysis turn out to be incorrect.
A systematic approach that involves the regulation of processes, the development organizational structure, preparation of clear instructions for the calculation, helps to create a transparent and efficient KPI system and implement automation at the lowest cost.
"They do not want to work. I give them everything, and they stab me in the back,” are the classic words of the owner of the company.
And we in marketing consulting have long realized that it is impossible to achieve high results by working only with clients.
In this article, we will talk in detail about the motivation of sales managers.
I am not him. They are not us
The owner always compares the manager to himself. This is the very first and biggest mistake when creating motivation for staff.
And before we move on to ready-made solutions, I want to open this issue more fully.
After all, it is the foundation of a positive result. Not everyone needs money. Dot. In our article, we raised this issue.
But the owners cannot put this thought into their heads. You think that there is only one meaning of work - it is money. This is the big difference between an owner and a manager.
An entrepreneur and an employee are different people. And it's not just about money. Values, ideas, plans - all this is also different.
The employees are also different. They are all at work for different reasons. Again, it's not just about money.
Long term motivation
For you, this means that the usual approach “Salary +%”, in the classical implementation, will not work as effectively as a complex implementation.
Therefore, even if in this article we will measure everything in money, you should also understand that the usual free cookies in the office for employees also affect the motivation of sales managers. Unnoticeable, but important.
Cookies!
This type of motivation is called “long-term motivation”. It also includes such elements as formal employment, insurance, social assistance, workplace and other obvious elements of work.
It is not necessary that all this be at a height, at least it should be within normal / comfort limits.
Non-material motivation
To long-term motivation, for the integrity of the picture, you need to add more “ non-material motivation”, also known as “short-term motivation”.
This brings us back to the topic of the importance and primacy of money. In addition to the amount of bank card, people want to receive respect, status, power, recreation and other privileges for their efforts.
Thus, as you read further examples of motivational schemes, periodically think about how you can replace money with intangible bonuses.
Such bonuses include: an extra day off, the softest chair in the office, or a family trip to a restaurant. You will find more such examples in the article.
Sales program
Like the average person, there are topics that make me nervous. One of these topics is a sales plan, or rather the phrase - “It is impossible for us to set a sales plan. Everything is very specific for us.” Stop! You should have seen my face now...
So stop! How is that impossible?! A sales plan can and should be set in all businesses. First, you, as the owner, must understand where you are going.
And if you do not understand what you are going for, then your employees, all the more so, do not know it. Secondly, without a sales plan, you will NEVER make a normal motivational scheme.
We created ingenious motivational schemes, but without a sales plan, they collapsed like ships on rocks and glaciers.
Therefore, if you do not have a plan and you are not going to set it, then you can close this article. Since even those chips that you take from here will not improve the situation, and we will be to blame for giving you such a bad scheme.
We share and drink
We finish with general words and move on to the most motivational scheme for sales managers.
It is like the human body: complex and consists of several parts. Each part performs its function, without which it is impossible to obtain the desired result.
Below I will describe the motivation of each employee individually. You can find out how to motivate them in a group/department in our article.
fixed part
I personally tried several times in my company to implement work only for a percentage.
All these thoughts appeared against the background of other businesses that have already implemented this and boasted of the results. But my personal opinion is that the employee should have a salary. This is important for you and for him.
Let's be honest. Not everything depends on your manager active sales. Your pricing, your product, your marketing, your management and more is up to you.
The manager influences this, but cannot radically change the situation. This means that it is unreasonable to demand work from him for%.
Therefore, we must make a fixed part that a person will definitely receive, even if he does not sell anything.
This is his guarantee that even if he does everything as you say, he will receive the money.
Otherwise, if every man is for himself, he will do what he considers right and pecuniary for him. The result is a lack of control and chaos in the company.
Wages should be done on average in the market. Too high a salary will attract lazy people and will not give an opportunity to open up. Too low a salary will repel the candidate and show (at first glance) that you are a very dodgy company.
Important. When looking for a job, after studying the final salary, managers go to study your salary. Not a percentage, not a motivation system, not bonuses, but a salary. Keep this in mind when hiring employees.
floating part
The most interesting part of the salary. After all, if we pay the fixed part for the performance of basic duties, then we pay the floating part for the result. What a nice word - the result ... Straight balm for the soul. But back to business.
The floating part is called for a reason. This is not only a percentage, as many people think.
It consists of different points, each of which has its own calculation scheme. Ideally, use all the ingredients, but separate the flies from the cutlets so that the employee understands what he is responsible for.
KPI (key performance indicators)
In companies where the salary is too high (according to the market), we take part of the money for KPI. These are indicators that for business are intermediate between a manager and money.
That is, it is not the money itself, but the actions that lead to this money.
In a wholesale company aimed at incoming calls, this is the conversion from a lead to a purchase.
In an active service sales department, this could be the number of outgoing calls. Everything is individual. But here is a list of typical and most popular criteria:
- Lead-to-customer conversion;
- Number of outgoing calls to new customers;
- Number of meetings with new clients;
- Number of calls to old customers;
- Amount of accounts receivable;
- The number of sent .
All of these items can be measured. This is a key factor in setting KPIs. Everything that is not measured goes into the “Bonuses” section, but we will talk about it later.
Now about the performance indicators for which you must allocate a specific amount.
As a rule, there should be no more than 5 such indicators (better than 3), and they are set for every day or week.
That is, it becomes a kind of indicator of the employee's performance over this period.
You can pay according to the principle of did/didn't do (received/didn't receive money), or you can pay in direct proportion to how much you did.
Case from practice. In working with the auto center, we set KPI to . The call center called customers and asked how satisfied they were with the work of the employee. The more positive reviews he received, the more he earned.
Progressive percentage
For us and sellers to receive a percentage of sales is the norm. And, most of the money depends on it.
So it was, is and ... This approach is correct and is mandatory when working as a salesperson. But it can also be improved, made perfect.
Now we need your sales plan. Because now we will pay the employee not just a fixed percentage of sales, but it will be progressive.
It will vary, depending on what stage of the plan the employee is at.
Imagine a situation where you have a plan of 5 million rubles per employee.
The plan is good, which means that it is not so easy to complete it, especially when, on average, an employee completes it by 80%, and then gives up, because he considers further actions difficult and, most importantly, not rational in terms of money.
Therefore, we make a knight's move and divide our sales plan into steps of 5%. And for each step we set the corresponding income:
- up to 70% - 5,000 rubles. (2%)
- 70-75% - 6,000 rubles. (2.2%)
- 75-80% - 7,000 rubles. (2.5%)
- 80-85% - 8,000 rubles (2.8%)
- 85-90% - 10,000 rubles. (3.2%)
- 90-95% - 14,000 rubles. (four%)
- 95-100% - 18,000 rubles. (4.5%)
- 100+% - 24,000 rubles. (6%)
As a result, we get a motivated employee who clearly understands how much he will receive if he makes a little more effort.
Thus, we show him that the game is worth the candle, and break through his financial ceiling, because greed takes over (in a good way).
Note. In the example above, you can pay an employee a percentage of sales, or you can pay a fixed amount from month to month to remove the jumps and settle the average monthly amount.
Fixed percentage
Now we are not talking about the standard percentage for the general sale, but about the reward for the sale of “special” goods.
All companies have different "special" products. Therefore, you need to select them yourself. But to better understand what I'm talking about, here is a list of the most popular:
- Discounted goods;
- Goods of a certain brand;
- Upsell goods;
- Promotional goods.
You define groups of products and tell your employees that they will receive an increased percentage of these sales.
We do this in order to focus the attention of employees on something specific. As a rule, a fixed percentage product is changed once a month or a season, as the priorities of the company also change.
WE ARE ALREADY MORE THAN 29,000 people.
TURN ON
Bonuses
In addition to direct actions that affect sales, there are many secondary, but no less important ones. For example, reporting.
On the one hand, this is the duty of the employee, but in reality this is an additional option, which many employees speak badly of, as they are not used to doing this.
Therefore, in bonuses we place important actions for us that benefit both the business and the employee.
To make it clearer, I will give a few typical ones that we most often use in motivation systems for managers with our clients:
- Maintenance (start with Bitrix24, this is the TOP for Russia);
- Accounting for your actions in the program;
- Work on ;
- order in the workplace;
- Reporting.
You may have other items. You set them based on what is important for the business and for you as a leader.
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Each bonus is paid separately. Usually an employee loses it when he breaks the rules 2-3 times. If you are a hardcore lover, you can deprive the bonus immediately.
Interesting. The pleasant moment of bonuses is that they are perceived not as a penalty, but as an opportunity to earn more money. When it is lost, the employee blames only himself, as he himself missed the opportunity.
Super bonus
In order for the result to not stop after 100 percent of the plan is completed, you need to encourage the manager to continue hard work (hard work).
To do this, we use a super-bonus. The payment scheme can be implemented in the following form:
- We pay an employee for each + 5% in the plan an additional 1,000 rubles.
- Upon reaching 110-130% and 130-150%, the percentage of profit increases
In this case, the employee will be motivated to move even for every 5 percent and there will be a desire to complete the percentage step (110-130 and 130-150) as soon as possible, because there is super-speed.
Just do not be greedy, super-speed means a very high percentage. To make it easier to bully him, you think how much a person will bring you money if he overfulfills the plan, and then the value of his act instantly grows.
Such an over-bonus, like floating interest, helps individuals to show themselves.
And against their background, others also begin to try better, because they do not want to be the worst in the team. And what about the worst? Right! They are fired.
By the way, you can set a rule that the worst employee in six months will be fired. Not bad stimulation for the lagging behind, I'll tell you.
Bonus deduction
I am not a fan of fines. I'm sure you don't like them either. It's like taking a gift from a birthday boy. Nasty feelings.
But without them sometimes nowhere. Therefore, in order for your managers to understand that they will receive a fine for committing, you need to make a de-bonus sheet.
This does not directly apply to the motivation scheme of managers, but until employees know that there is a stick in addition to the carrot, they will score on some actions that are very important to you.
We combine motivation and penalties - we get an insane cocktail of top managers focused on results.
Each owner draws up his own list of bonus deductions, usually it fits on an A4 sheet, although initially everyone says that he will now write War and Peace.
There aren't many really important ones. Here are some typical solutions:
- A transaction was not created in CRM during the sale;
- Not submitted a report at the end of the working day;
- There is no compliance with the corporate style of clothing;
- Mess in the workplace;
- Naming a phrase from the stop-list of words;
- being late for work;
- The reason for the delay in the execution of the task until the end of the deadline is not written;
- The task set by the management was not completed on time.
As usual, you will have your own list. Each item will have its own penalty amount. If there are intersecting points with “Bonuses”, then if the bonus is lost, the employee will still be fined.
And then we saw cases when an employee indicatively lost a bonus and continued to do nothing.
Briefly about the main
In order for the system of motivation of managers to work, it is necessary to approach it comprehensively.
The formula for success is as follows: use all the points from our approach (adapted for yourself) + long-term motivation + non-material motivation.
We take everything from this only the most important, so that the manager does not get confused in the scheme.
Any scheme requires verification and adaptation to your area. I don't like to say it, but every business is specific and has its own characteristics.
In general, creating a motivational scheme is not difficult when you have our example of calculating the motivation of a sales manager.
It's hard to make it work. Therefore, be patient, get ready for the fact that employees need to instill the habit of counting their earnings.
This issue is resolved through or boards / tables of salaries (online and offline).
P.S. We know how difficult it is to create motivation for sales managers for the first time, so if you have any questions, ask them in the comments, we will help you with advice for free.
Motivation - creating an incentive for employees of the enterprise to act to achieve the goals of the organization in accordance with the duties delegated to them and in accordance with the general plan of the enterprise. Motivation is divided into positive (“carrot”) and negative (“stick”). However, due to the low effectiveness of the “stick” without the “carrot” and vice versa, motivation is usually called the composition of both positive and negative motivations. Moreover, the “whip” is usually used to prohibit wrong actions, and the “carrot” is used to create an incentive for right actions. Therefore, a motivational system consisting of fines alone is not a motivational system, since it does not create any incentives.
At the same time, the creation of a motivation system must be approached very responsibly: by making a mistake the first time, you can cause serious damage to all subsequent attempts.
- Any motivational scheme must have a purpose! A motivational scheme for its own sake is not. If you do not have a goal, then you will not be able to understand whether you achieved it thanks to innovation or not, which means you will not know whether this approach should be changed or left.
- In the motivation scheme, the employee should be responsible only for those results that he and only he directly influences (other influencing factors should either depend on this employee, or be much less than the influence exerted by this employee).
- Employees must know and understand the motivation scheme, otherwise it becomes just a bonus.
- Based on the results of the work, it is impossible to revise the formulas of the motivational scheme downwards before the calculation! At the same time, one must be very careful when revising the formula upwards, when important factors influencing the result are revealed in the process of work. In this case, a balance must be struck so as not to demotivate those who tried, either by lowering their bonuses due to these factors, or by inflating the bonuses of their colleagues who clearly did not try.
Promise a person something and do not pay when he does it - after that you can promise anything, it will not affect his work in any way ...
Motivation of employees of the purchasing department
When creating a motivational scheme for employees of the purchasing department, any manager is faced with the problem of isolating the contribution of these employees from the overall successes and failures of the company. Let's look at the application first general provisions, described above, to the field of procurement, and then - specific examples of motivational schemes.
Any motivational scheme must have a purpose!
Some executives, inspired by how well an incentive scheme has worked in one of the departments - usually in the sales department or in the transportation department - begin to try to introduce various motivational schemes in all other departments. And since it is quite difficult to adjust the work of the purchasing department to a general view, usually in such cases it is offered to the head of the purchasing department to come up with a motivation scheme. Since he does not set a specific goal to be achieved as a result of the introduction of the motivational system, the development of a miracle formula begins, which can take into account all the nuances of this difficult matter. However, such a miracle formula does not exist: in one case, one factor is more important, in another - another, an attempt to balance them only leads to cluttering up with calculations, in which the inventors themselves begin to get confused over time. The introduction of this system begins to be delayed, as the head of the department subconsciously feels that such a formula carries more dangers than opportunities.
If the salary of an employee depends on a factor that he can only influence indirectly, then such a motivational scheme, in the worst case, will cause the employee to become embittered, because he will lose money because of other people ...
Top management believes that the delay in the emergence of a working formula for employee motivation for such a long time is an unwillingness to change in accordance with the competitive requirements of recent times and an attempt to leave everything as it is. At best, it ends with nothing, except, of course, for a lot of wasted nerves and time. A motivational scheme, including for the purchasing department, should be invented only when there is a goal! This may be a reduction in the cost of delivery from suppliers, an increase in turnover, or anything else, but a specific goal, for the achievement of which it is already possible to create working conditions, mechanisms for interaction between departments, including a motivational scheme for responsible employees.
By the way, while consulting companies on the motivation system, I just at this stage many times came across a situation where it turned out that it was impossible to achieve the required goal using the motivation system, since employees simply do not have the tools for this!..
- In the motivation scheme, the employee should be responsible only for those results that are directly affected by him and only him. When an employee can really influence the results on which his salary depends, he will do it. For example, the full implementation of the procurement plan is a task that lies in the field of responsibility of the procurement officer. Of course, the accounting department still has to pay the suppliers, and the transport department still needs to deliver the goods, but in case of problems at these stages, the purchasing manager must inform the management in a timely manner so that the situation can be corrected. If the salary of an employee depends on a factor that he can only influence indirectly, then such a motivational scheme will not work at best, and at worst, it will cause the employee to become angry, because he will lose money because of other people.
- Employees must know and understand the motivation scheme, otherwise it becomes just a bonus. You can come up with the best motivation scheme - it will have a realistically achievable goal and calculation based on a factor that will be completely within the jurisdiction of the purchasing officer. But it will never work if you forget about one more of its obligatory components - this is the employee himself, for whom it was created. The introduction of each motivational scheme should end with the announcement and explanation of it to the employee. He should not be left with a single ambiguity about this scheme. Moreover, don't think that because you're paying more money, you don't have to do anything else about it. For example, a simple campaign poster, well-designed, albeit printed on a regular office printer, and hung on the wall next to an employee's workplace, will make your motivation scheme work better. And in a standard automated system that a purchasing manager works with, you can, for example, change the text in the window that appears when you exit it - instead of: “Are you sure you want to exit?” write: “Did you complete the purchase plan?”. And the standard answers "yes" and "no" with the corresponding actions when they are pressed: yes - the program is exited, no - it is not carried out.
- According to the results of the work, it is impossible to revise the formulas of the motivational scheme before the calculation and payment of bonuses! Promise a person money for, the completion of a special task, the final implementation of a project or something else and do not pay when he does it - after that you can promise anything, this will not affect his work in any way. Sometimes it happens that an employee, inspired by a motivational scheme, significantly exceeds the norm planned by management and, according to the previously approved bonus calculation formula, should receive too large an increase in salary - for example, commensurate with the salary of his boss. Some managers in this case revise the formulas of the motivational scheme and pay a smaller bonus according to the new formulas. After such a turn of events, all the enthusiasm of the employees who received less than agreed evaporates, and then you no longer encourage them to repeat the feat with any mountains of gold. Formulas can and should be reviewed - your motivational scheme should be lively and flexible, respond to new challenges and problems; by the way, in this way it is just possible to gradually introduce a very complex calculation formula: break it into terms and enter them one at a time, adding to the previous ones that have already worked. But at the same time, always remain honest with your employees: agreed on a certain level of compensation - do not be greedy. If an employee exceeded the plans so significantly, then this good employee, and you will be able to motivate him to act in the direction you need more than once. By the way, if you want to reduce the bonus, it is better to either replace the formula of the motivational scheme, or add a penalty element there - a term with a minus sign - so that the employee does not have the feeling that they are simply trying to squeeze him out as much as possible for minimal money. Moreover, if you add a fine, then this should be a real need for the company, and not just a way to pay less, and this must also be explained to the employee. When introducing any penalties, follow two main rules: meaningfulness and fairness.
- The simpler the motivation scheme, the better it is. To see how this assertion follows from the previous ones, let us consider it successively in the light of each.
- Real purpose. An overly complex motivational system usually serves as an excuse for paying too much for its creator. This, unfortunately, is a common problem for developers of motivation and leadership systems: it is often the leader who rejects a simple, but at the same time good, working motivational scheme with the words: “I could come up with this! Why should I hire a specialist? Usually, the real problems that motivation schemes solve are the direct action of factors that are influenced by specific employees. And the relationship between problems and factors, which is embedded in the motivational scheme, cannot be very complex. Therefore, when developing a motivational scheme, it is worth emphasizing the study of the real root causes of problems and the main calculations are not around formulas for calculating bonuses and fines, but to describe implementation options and a clear regulation of interaction within the motivational system.
- Personal responsibility. The more diverse parameters the motivation system includes, the more employees influence them in one way or another, and the more difficult it is to isolate and evaluate the influence of a particular employee. And the fewer parameters there are, the simpler, therefore, will be the motivational scheme that unites them.
- Trust and understanding of employees. When a person is offered something simple and clear, it is in any case more credible than something complex and incomprehensible. The first reaction of any person to something too complicated is misunderstanding, and this always breeds distrust. Therefore, the simpler the scheme, the more it will inspire confidence, giving the management the same necessary element, without which the motivation scheme will not work. The heap of formulas, the complex relationship of causes and effects will make it difficult for employees to understand their personal benefit from achieving results. If, however, it will be necessary to simultaneously solve many tasks, on which earnings will depend on some tricky formula for a bunch of parameters, then, most likely, motivation will not affect the work of this employee in any way. And the scheme from motivational will gradually become premium with approximately the same values from month to month.
- Required complexity. The main essence of the idea of a simple motivational scheme is that there is no need to specially complicate the formula or introduce into it dependencies on factors that have very little effect on the final result. And if you want to achieve a set of independent goals, it is better to introduce them into the motivational scheme gradually, after testing the effectiveness of the already implemented elements in practice.
Examples of a motivational scheme for employees of the purchasing department:
The company is already doing well, there are no complaints about the purchasing department, but the management wants to introduce motivational schemes for rewarding employees based on the results of their work throughout the company. Sellers get their percentage of what they earn on their sales, drivers from each cart, but the purchasing department does not lend itself to such simple mathematics ...
The simplest and, most importantly, effective motivation scheme is the allocation to the head of the purchasing department of a monthly bonus fund, which he distributes according to his subjective opinion about the work of his subordinates over the past month. If the head of the purchasing department treats this initiative correctly, then the whole department will work better, in addition, the overall discipline in the department will increase. Otherwise, this is a bad head of the department, and it is better to replace him.
EXAMPLE 2a
Due to the slow delivery of custom items to the company's warehouse, some customers left and never returned. After analyzing the reasons, it turned out that purchasing managers simply made an order and “forgot” about it, without “tugging” at either the accounting department, or suppliers, or transport workers, without tracking at what stage this order is now and whether it is possible to influence the acceleration of its passage.
To solve this problem, a table of suppliers was compiled, which indicated the minimum and maximum time required for the manufacture of custom items from them, and the maximum and minimum delivery time from these suppliers to the company's warehouse. By the way, in the future, this information was needed when automating purchases. As a result, the management came up with the following bonus scheme for the purchasing department employees, which was supposed to motivate them to complete orders through all stages as quickly as possible:
For each month of work for each purchasing manager, the average K coefficient for all his orders is separately calculated and the bonus is calculated, which is obtained by simply multiplying by K the salary of this employee. Now:
A) if all the orders of the employee will be completed within the minimum time, then the SUM will be equal to the MIN, and, therefore:
accordingly, this employee will receive a bonus in the amount of salary;
B) if all orders of an employee will be completed within the maximum time, then SUM will be equal to MAX, and, therefore:
accordingly, this employee will not receive a bonus at all;
C) if all the orders of an employee are completed within a period exceeding the maximum, then the same formula will become a penalty. For example, if the time of production and delivery of orders of any employee will be on average equal to one and a half maximums, that is, SUM \u003d 1.5 X MAX, then:
This expression will always be less than zero, since the numerator is obviously negative, and the denominator is obviously positive. That is, instead of a bonus, the employee will be fined a part of his salary.
EXAMPLE 2b
After the introduction of the motivational scheme shown in example 2a in the company, the employees of the purchasing department “stirred”, so much so that by the end of the first month, some received almost two salaries thanks to the bonus. This came as a surprise to the management, as they expected a gradual transition to some average value between the minimum and maximum values, that is, the bonus would be no more than half of the employee's salary.
After analyzing the current situation, it was decided to add some additional penalty term to the calculation formula, which showed itself so well. However, it was necessary to find a real negative factor that most strongly affects the company's profit, and introduce an additional penalty term that would affect its reduction, and at the same time such an innovation would be fair. Quite quickly it was discovered that such a factor is the erroneous order of non-standard items manufactured by the supplier to order for a specific client of the company. Due to such errors, firstly, the time for manufacturing the required part increased (actually doubled), and secondly, the supplier had to pay for the wrong item already made, but it was almost impossible to sell the non-standard one. As a result, the company lost this money. It was this loss that was proposed to be shifted onto the shoulders of the employees of the purchasing department, guilty of the erroneous order. The final formula looks like this:
where NEPR is the amount in rubles of non-standard items incorrectly ordered by an employee of the procurement department.
This change allowed the premiums to be reduced to adequate ones, and the number of erroneous orders was significantly reduced.
The work between the employees of the purchasing department is divided by suppliers: some suppliers - to one, others - to another, still others - to the third, and so on. However, in the case of ordering the same positions - analogues, different in price, quality, brand, which, in principle, replace each other if one of them is not available from different suppliers - this practice did not always have a good effect on the results of the department. Collective responsibility actually equals universal irresponsibility and impunity.
- made it easy to see unallocated positions;
-facilitated the output of reports on the work of each manager;
- provided an opportunity for any interested person to quickly find out the purchasing manager responsible for the presence or absence of a particular position;
- made orderly transfer of cases in case of redistribution of positions between purchasing managers.
Separately, they left the possibility of rewarding an employee upon finding another supplier that is better than the current one in a number of indicators, or working with the current supplier, which led to qualitative changes for the better. For this type of premium, a list of necessary parameters was compiled to determine its value in each case separately:
- reliability and delivery time;
- prices;
- the quality of purchased commodity items;
- payment terms;
- the possibility of unscheduled deliveries.
All emerging errors that led to losses for the company began to be of an individual nature, and in each case a decision was made on penalties for a specific person. The errors themselves were systematized to take them into account when introducing work protocols that minimize the possibility of their occurrence in the future.
Valery Razgulyaev, information manager "Izbenka - VkusVill", for the magazine "Consultant"
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Industry-wide
sales staff
Monthly premium
Table 1
Table 1.
Estimated indicator | Number of points |
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Inventory | |||||||||||||
Price of purchased goods |
These are far from idle questions every leader asks himself. Someone, initially not trusting hired personnel, changes buyers every six months or a year, someone selects close relatives or employees “tested” by many years of impeccable service for this position, someone invents complex motivation systems and even more complex control systems. If we leave aside the moral and ethical aspect of the motivation of buyers, then the applied task will come to the fore - what system of motivation to apply to buyers in order to get the maximum return from them. Let us consider specific aspects of this task. To begin with, let's define the goals of introducing a motivation system in the direction of procurement. The motivation of the buyer can have the following main goals:
If we accept as an additional condition of the task that the buyer has a decent salary at the time of the introduction of the motivation system, then the maximum return can be obtained through additional incentives for employees involved in the procurement process. The most effective in this regard are the following methods of incentives, the final choice of which is made at the discretion of the company's management:
I would like to separately note that penitentiary methods (fines, deprivation of bonuses, disciplinary punishments, etc.) are not considered in this article, since the practice of their application in enterprises, as well as the theoretical research of personnel management specialists, proves their failure as tools for motivating employees . Brief description of methods of additional motivationMonthly premium The size of the monthly bonus often causes a lot of criticism from employees. The main reason for such dissatisfaction is the opacity or indistinctness of the logic for determining the amount of the premium (and very often its apparent subjectivity). It happens that the amount of the premium is bewildering, because it gives the impression of being unfairly understated or overstated. The manager himself sometimes cannot really explain exactly how he determined the specific percentage of the bonus for a particular employee. The “distribution of bonuses” is especially misunderstood in teams where there is a leak of such information and employees have the opportunity to compare the “bonuses” they received with the amounts of remuneration of their colleagues.
The proposed "point" method for evaluating the activities of the purchaser based on the results of the month ( Table 1) does not claim to be universal, but partly solves this problem, since any buyer has the opportunity to independently calculate the premium due to him. And, by the way, self-calculation of points with supporting documentation attached can be used as an additional means of motivating the buyer. Table 1. Point method for evaluating the activities of the purchaser based on the results of the month.
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