Source: talk about data
01 What is the indicator system?
In fact, the biggest difference in management methods between modern enterprises and business gangs in feudal society (Qiao Family Courtyard Era) is the introduction of statistics (others such as systems, equity, professional manager systems, etc. actually existed in ancient business gangs, Qiao Zhiyong distributed shares to his employees).
When it comes to indicators, we always think of the famous management guru Peter Drucker's famous saying: "If you can't measure, you can't manage." Of course, it cannot be said that there was no statistics in ancient enterprise management, at least there were statistics, otherwise how would you know how many taels of silver you earned each year.
With the advancement of enterprise management knowledge, more data and statistics are applied to enterprise management. From marketing to after-sales sales, from customer research to CRM management, from R&D to logistics.
In the past, statistics were mainly used (such as doing a lot of sampling surveys) to draw conclusions based on probability distributions.
Now in the era of big data, we can easily count the browsing, ordering, and commenting behaviors of hundreds of millions of users, and then draw conclusions.
Therefore, the so-called index is a kind of quantitative statistics of the observed things. As large as the income and profit of the enterprise, as small as the daily customer visits and orders of each front-line salesperson.
So, what is a system?
A system is to use a set of logic to connect a lot of things. For example, the human life system includes the brain, heart, blood, various organs, etc. Each component has its own unique function in this system and is an indispensable part of this system.
The index system of an enterprise is to be able to connect individual indicators ranging from the total revenue and profit of the enterprise to the transaction volume of each salesperson with a set of logic (see the figure below).
In this logic, you can see the whole from the part, and divide from the whole to the part.
For example, if you have a headache (overall), the doctor can check one by one according to the human life system until you find that your upper respiratory tract is abnormal and infected (partial); it can also be punctured from your hand (partial), if the wound is not treated in time , probably lost life (overall) due to infection.
The same is true for enterprises. Through the enterprise's index system, it can also be seen that the enterprise's profits have not been achieved, which department (individual) has problems, and the overall situation of the company can also be inferred from the performance of a salesperson.
It can be seen from this that the most important aspects of the indicator system are "indicators" and "logic".
02 How to build the indicator system?
Then, if we want to build a complete indicator system, we must have a lot of indicators to measure the health of the enterprise, and there must be a set of logic to organically connect the various indicators of the enterprise.
Although "indicators" and "logic" are two components of the indicator system, the process of constructing "indicators" and "logic" is the same process, that is, "top-down, from big to small", layer by layer Dismantling and subdividing step by step (the process of setting performance goals may be reversed).
First of all, each company has its own overall goal for each year, which is generally revenue, profit, or sales.
The problem with this big indicator is that it cannot place the responsibility on a specific person or department (the CEO is not counted, because the entire indicator system is a management tool for him to achieve the big indicator, and he cannot do all the work of the company by himself. ), so it is necessary to disassemble this large indicator until the responsibility can be assigned to each department (individual).
Secondly, how to disassemble the corporate goals, this step is crucial. Generally speaking, the indicator system is disassembled according to the business process of the enterprise.
So what is a business process? It refers to the dismantling of all the steps you go through to receive money from consumers (or customers) (some people say that it is disassembled according to the consumer's consumption path, personally think it is mainly a business process, because generally The company's department is set according to the business process).
For example, if a car manufacturing company wants to receive car purchase money from customers, it generally needs to go through the process of car manufacturing --> marketing --> logistics --> sales. Then how to decompose the annual income of the enterprise in these links, at this time, it may be necessary to "abstract the business process into a mathematical formula", because the indicators are still data in essence, so the disassembly of the indicators is of course inseparable from mathematics.
The above business process of car sales is expressed by mathematical formula as follows:
Sales revenue of automobile factory=Max{Number of vehicles manufactured, number of sales leads generated by marketing✖️Sales conversion rate✖️Number of stores}✖️Bicycle profit
Therefore, to achieve operating profit, the sub-indicator is the number of vehicles sold, and the sub-indicators of the number of vehicles sold are the number of vehicles manufactured, the number of sales leads, and the sales conversion rate.
This is a first-level dismantling of large indicators, and it is generally recommended that a specific responsible department be found for sub-indicators. Because to say the same thing, an enterprise is composed of various departments, whether it is a traditional enterprise or an Internet company, except for the group of course, we are mainly talking about a certain sector of business here.
The advantage of this dismantling is that although this department cannot fully control the large indicators of the entire company, it can always control the sub-indicators of the department.
For example, the marketing department may not be responsible for the sales revenue of the entire company. After all, if your car is poorly built, or the salesperson does not work hard, even if I blow the product to the sky, consumers will actually come to the store to test drive it, and they will still not buy it. . However, how many people read the advertisement, and how many people are willing to test drive (sales leads) after reading the advertisement, you can’t blame it.
The third is to dismantle the target of each business process at the sub-process level of this process again (see the figure below).
For example, the marketing department is responsible for the number of sales leads, but you may advertise on many media, such as TV, portal websites, mobile apps, etc., so you must have a statistical indicator for the number of sales leads on each medium, right? Or each medium has a specific person in charge, then the sub-indicator of "number of sales leads" is subdivided into "number of sales leads generated by XX media".
In this way, we can see the performance of this media throughout the year. If the responsibility is assigned to someone, we can directly look at the performance of the person responsible for the media delivery, and then use this sub-indicator to see its impact on the entire operating income (the company's major indicators )Impact.
In fact, there is no good method for this. Many people on the Internet are advocating the "OSM model". O is Objective, S is Strategy, and M is Measurement. In fact, it refers more to a conceptual framework, and it is highly abstract. The simple kind, and the meaning that can be referred to in real applications is limited (just like SWOT analysis).
Therefore, the best way is that you have a good understanding of the business process, which is why the HR department cannot set up a good indicator system in reality, because they generally have very little understanding of the business process. Therefore, the dismantling of indicators (the establishment of an indicator system) is actually a very expert thing.
The fourth is to add indicators of some functional departments and support indicators of business departments.
If the KPI is disassembled according to the above method, basically there are only the indicators of the main business departments such as the sales department, marketing department, and production department, but the problem is that the operation of the entire company is not only the business department, but also many functional departments. The work of these functional departments They are also very important, because they are the basic environment to ensure the healthy operation of the entire company, that is, the indicators of the above business departments can be achieved (see Porter's value chain).
For example, if the financial department does not work well, resulting in a financial loophole, then the entire company's revenue estimates for several years will be included, so how can we talk about the realization of the one-year goal?
How to disassemble the indicators of these functional departments?
First of all, you must understand their main work content, work goals, and work processes. For example, in the financial department, the main indicators may be the timeliness and accuracy of financial reports, and whether the budget management is good or bad, all of which can be quantified.
In addition, the data analysis department may be mainly a support department. The goal is to timely and accurately support the data needs of the business department, report development, and in-depth analysis reports to the management. These services can be scored by each business department, so you can Indicators of the data analysis department can be set such as "data provision satisfaction", "data analysis report satisfaction" and so on.
In addition, business departments also have guarantee indicators. For example, the indicators of the production department must not only produce qualified products, but also produce qualified products within a certain period of time, according to a certain cost, and according to a certain yield rate, so the indicators of this department (business) are not only the production of qualified products. The number of products, as well as the guarantee indicators mentioned above.
Through the previously established business indicator system (total indicator —> subdivision —> subdivision —>…), plus the support indicators of functional (support) departments such as risk management, finance, and personnel, as well as the business department’s Business support indicators, an indicator system covering the entire company has been established.
This system as a whole is like a huge number, but its internal structure is related to each other. For example, the budget of each department can only be controlled well if the budget of the whole finance is well controlled; or the data department must provide useful reports. It is also necessary for the development department to develop a useful report suite. After all, the departments are interconnected, and the company as a whole is an "organic" whole (below).
03 Five key points for attention in the establishment of the indicator system
First, the person who builds the indicator system must be very familiar with the business and business processes of the entire company. In other words, the process of building the indicator system should be the joint participation of all departments, not just a matter of a certain department.
A good indicator system is by no means simply applying the templates of certain industries/companies, because a good indicator system must be deeply bound to your business characteristics, business processes, and business strategies, such as indicators for opening hot pot restaurants and western food The system is definitely different, and the indicator system for opening western restaurants in China World Trade Center is also different from that in railway stations, so it is definitely not enough to recruit a data analyst alone.
Second, a good indicator system should be such that various departments check and influence each other, and the department responsible for indicators and the assessment department for indicators should be independent.
If the production department or product development department only focuses on the production of vehicles, regardless of the quality of the vehicles, market fit, etc., you will let the sales department memorize the sales indicators by force, which will only lead to a soaring turnover rate of sales personnel, because the product is not good, even if you If it is sold, can your return rate and warranty rate not be high?
Therefore, a good index system should be that the sales department and after-sales department are responsible for the assessment of the "product satisfaction" index. In this way, the effect of "you say my sales are not good, and I say your product is not good" is achieved. This kind of mutual quarrel effect is needed in real business management.
Third, a good indicator system should be tested by someone from a neutral perspective.
As I said before, to build a good indicator system, you must first have a good understanding of the business of the entire company.
In reality, many data departments/departments responsible for the establishment of the indicator system do not understand the business, so how do they build the indicator system? It is to rely on various departments to actively submit indicators.
However, the pitfall here is that the indicators submitted by various departments must be beneficial to themselves, not to the company. For example, the marketing department will definitely report the number of registered users, but it will not report the retention rate of registered users for the next month. In this way, if no expert looks at it from a neutral point of view, the final conversion rate indicator must be the same as the sales department and the marketing department. Limit the process of wrangling, and the number of registered users can be easily increased.
Fourth, when the indicator system is used for assessment, there must be "common indicators", which is similar to the second point.
A good assessment system must be such as "sales revenue", which is a major indicator that involves the company's safety and security, and is shared by all departments. The advantage of this is that it avoids that some departments have rich bonuses at the end of the year and some departments have no bonuses. Bad sales and a company atmosphere where everyone is responsible. Of course, there are some indicators in specific fields, such as user retention rate, which are best shared by the new recruiting department and the operation department.
Finally, a good indicator system must have a clear statistical caliber for each indicator.
Needless to say, everyone should be able to understand this point. Most of the time, when we see that we will not be able to complete the tasks at the end of the year, we will modify the indicator caliber and statistical methods in various ways. In this way, it will affect the whole body and hurt the entire indicator system If the caliber is changed at will, the indicator will lose its deterrent effect, and once it loses its deterrent effect, it will lose all its functions.
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