How are key performance indicators (KPIs) used in Romanian companies EXECUTIVE SUMMARY Strategic, operational, team or individual performance represents a major objective for any company. To appreciate the extent to which organizational objectives are achieved and business strategies are efficient, it is absolutely necessary to define an integrated system of performance indicators capable, at any given moment, to tell us whether the business is going in the right direction or not. Moreover, any managerial decision should be based on a thorough knowledge of the current state of the business, which is impossible in the absence of a performance measurement system capable of informing the management about the results obtained in all activities and key processes of the company. Given the importance of performance measurement systems for the success of a business, Ensight Management Consulting has conducted in the second half of 2010 an extensive study on the use of key performance indicators (KPIs) in Romanian companies. The main objective of the study was to identify the proportion of companies which define, implement and use a performance management system, in order to benefit from a managerial tool used in decisionmaking. Also, the following aspects were taken into consideration: 1. Comparison between the practices used in performance measurement projects within Romanian companies 2. Identifying the most important difficulties encountered during KPI projects 3. Presenting the key success factors in KPI projects 4. Transferring perspectives and experience by launching a dialogue between companies interested in performance measurement systems The results of the study have a high relevance for the local business environment due to the diversity of respondents in terms of the industry they belong to and company size. Thus, responses were collected from companies from various fields such as: retail, manufacturing, energy and utilities, financial services, pharmaceuticals, professional services, food industry, IT&C, construction, engineering, advertising, etc. 73% of respondent companies recorded a turnover of over RON 10 million, and 77% have more than 100 employees. Overall, the surveyed companies generated in 2009 a turnover of approximately EUR 4 billion and have over 40,000 employees. 80% of respondents are part of the management, which means that their views are representative. Data analysis was carried out exclusively by Ensight consultants, based on online questionnaires.

RESULTS The results of the study confirm the companies’ interest in defining, implementing and using KPIs, as well as the benefits that derive from the existence of a performance measurement system. Nevertheless, some inconsistencies were

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identified in the manner in which KPIs are defined and tracked, which leaves room for improvement.

Defining and using KPIs


81% of respondent companies are already using KPIs, and another 9% are planning to use KPIs in the near future




KPIs were adopted in order to understand the level of fulfilment of strategic objectives (75% of respondents), reporting and transparency of results, and asses individuals’ and departments’ performance




66% of companies have a top-down approach in defining KPIs, starting from defining strategic objectives and cascading them to the division/department/team/employee level. 30% have a bottom-up approach, based on the necessity to monitor the development of daily operational tasks.




57% of companies established KPIs by using exclusively their personnel and 43% by using exclusively or partially external consultants.




Over 75% of companies correlate partially or not at all relevant indicators from different areas of the company. This aspect is one of the main concerns for future optimization that management must take into consideration




Only 31% of respondent companies use KPIs in all departments, which indicates an uneven distribution within departments and which makes it difficult to correlate inter-departmental performance for the identification of business growth engines and diagnosis of dysfunctional areas. The departments which use KPIs most often are sales (58%), manufacturing (39%), and human resources (32%).




Regarding the types of KPIs employed, individual performance indicators are predominant (74% of surveyed companies). Only 22% of companies have KPIs defined for all levels: company, division, department, team, individual. Although respondents are focused on measuring company or division performance related aspects, there is a lower preference for measuring such indicators for intermediary levels - department or team.

Implementing and monitoring KPI


94% of the surveyed companies have already implemented KPI systems and monitor on a regular basis performance indicators, which reflects their high degree of utility, as well as the massive interest for performance evaluation.




Only 9% of companies use the balanced scorecard, which shows that only a few of the respondent companies employ integrated professional systems to define and monitor performance indicators. 53% of companies use a consolidated summary report for monitoring KPIs, and 38% monitor performance indicators individually.




The responsibility for initiating and monitoring the KPI analysis process belongs to the head of the department in more than 50% of respondent

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companies. Other people responsible with monitoring KPIs: the general manager (2%), head of division (2%), analyst (17%).


The support of the management as well as the availability and quality of primary data are essential to efficiently measure KPIs. The fact that it is absolutely necessary to have management support in order to efficiently measure KPIs reflects the internal connections needed for obtaining a quality result. Also, the respondents underlined the importance of availability and quality of data which reflects a major risk which needs to be taken into account, as strategic decisions at company levels are based on KPI values.




Over 40% of surveyed companies use an ERP source, as well as Excel for determining their KPIs. 36% calculate KPIs exclusively in Excel, while 14% use a Business Intelligence type of software. This area presents a significant potential for improvement, as switching from Excel to ERP and BI systems is a natural step in professionalizing KPI monitoring processes, in relation to the size and complexity of companies.




Respondent companies use reference values to determine their performance. Most surveyed companies (78%) use regularly / sometimes benchmarking with another team from their company. 71% of respondent companies compare regularly / sometimes their results with the reference values of another relevant company. Only 25% of surveyed companies regularly compare standard KPIs with reference values of other companies in the same industry.




80% of respondent companies have set KPI target values based on strategic objectives (totally or partially). Support initiatives for achieving the target values are employed by most companies (79%), which proves their determination to reach company’s goals.




In 90% of the cases, respondents correlate totally or partially KPIs with the reward and bonuses system. This means that KPI implementation and monitoring are properly done - thus, employees become responsible since their individual rewards are linked to KPI values. This leverage creates a discipline that can help in dividing strategic objectives for each department, team, individual and guiding the effort in achieving them. However, this practice is not sufficient for ensuring the correlation of the indicators between departments and for stimulating internal cooperation.

Utility and benefits of KPI


76% of respondent companies consider that performance indicators measure what they are supposed to measure and are properly evaluated, which shows that there is a high degree of confidence among respondents regarding the definition and use of KPIs. Only 16% of respondents show a total lack of confidence in the indicators.




Although in some cases KPIs only measure what they are supposed to (3%), or they only are properly measured (5%), failure to meet both conditions leads to a similar lack of KPI utility in certain organizations. Nevertheless, these values reflect the respondents’ perception, which means that solely revising the selection of indicators, data collection and

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analysis are not enough, but a better communication within the company regarding the impact of KPIs in decision-making should be enforced.


Most companies admit the utility of implementing and tracking KPIs, by highlighting the benefits in improving the decision-making process (55%), followed by reducing operational costs and increasing customer satisfaction.




Especially during the economic crisis, the main advantages of using KPIs are the identification of corrective actions and the facilitation of a more realistic perspective on the situation of the company.




In most cases (90%), managers react to KPI deviations from target values. In almost all cases, or at least frequently (78%), managers initiate corrective measures in case of KPI deviation from target values. The modification of calculation premises is present in only 10% of the cases, which shows that the performance measurement system is consistent. However, in some cases - 28%, KPI target values are adjusted. In our opinion, these adjustments are justified as long as they are in line with the fluctuations of the market or after a period of “running” and assessing KPIs.

Consultants’ contribution in defining and implementing KPIs


Most respondents (70%) consider it is appropriate to seek the support of external consultants in defining and implementing KPIs, due to their knowhow, objective perspective, experience in similar projects and their role as facilitators.




Companies are reluctant to request the help of consultants due to the existence of a performance measurement system, the fact that KPIs implementation is not considered to be a priority, the preference for internal resources, the need to obtain the necessary budget for such a project.




Respondents are open to collaborate with external consultants, which confirms the need for sharing know-how and experience in KPI implementation.

About us Ensight Management Consulting is a management company continously evolving since 2000. Currently, we are the largest management consultancy company in Romania, both in terms of turnover and number of employees. The 10 years of experience in transforming Romanian companies represent the guarantee of the quality of services offered by Ensight Management Consulting. Due to the multidisciplinarity and solid experience of our team we are able to offer integrated business solutions in the following areas: Strategy, Operations, Human Resources, Technology. Ensight consultants offer support both in defining as well as implementing KPI processes:

© 2000 - 2010, Ensight Management Consulting. All rights reserved.

For more details regarding the study made by Ensight on performace measurement indicators, please contact us: Sorin Buga Principal [email protected] Ileana Ionescu Manager [email protected]

© 2000 - 2010, Ensight Management Consulting. All rights reserved.