Brewery owners and operators are always on the lookout for new ways to reward and motivate employees. One cool way to do this is to use Key Performance Indicators (KPI’s).
KPI’s are used to quantify brewery results. Examples include brewing and packaging labor hours per barrel, beer loss during production, and inventory physical count accuracy.
These KPI’s can also include non-financial results such as conducting employee evaluations, or maintaining safety and quality standards.
The best part about using KPI’s to reward employees is that KPI’s connect the actions of the employee to the results of the brewery. Moreover, KPI’s show employees how to make a real difference in the financial and operational results of the business.
This post will give you an overview of Key Performance Indicators and provide tips on how to choose the right ones for your brewery. And of course, we’ll have spreadsheet templates that you can download and use to help manage and reward your employees.
Overview: Key Performance Indicators
The term Key Performance Indicator goes by many names: Critical numbers, benchmarks, and key metrics, to name a few.
Key Performance Indicators can be used to measure financial or non-financial information. However, the primary objective of KPI’s is to use them to improve results in your brewery.
If you can improve results and reward employees in the process, that is a win-win.
The goal of using KPI’s is to quantify the outcome you want to achieve and then measure against actual results.
For example, let’s say you want to decrease brewing labor hours per BBL by 5% over the remainder of the year. The KPI is quantified, and now it’s a matter of measuring actual labor hours against BBLs brewed.
Once you determine the outcome you want, use this three-step process to implement the KPI’s:
- Teach employees how calculation works
- Show them how they can make a difference
- Give them regular updates on the score (the results of the KPIs)
In some cases, employees themselves can measure and compare the KPI goal to actual results (instead of waiting for someone in the office to run the numbers). This allows employees to see, in real time, where they stand in relation to the KPI goal.
Unlike subjective measurements that may be found in a traditional employee review – such as communication skills or ability to work with others – KPI’s are objective and emotionless.KPI’s are all about the numbers.
Tying KPI’s to Compensation
The next step is to tie the achievement of the KPI goal to an employee payment. They achieved the goal, now it’s time to reward them.
How much to pay the employee depends on a number of factors: How important is the KPI to the brewery? Does achievement of the KPI help increase sales or reduce costs?Is there a precedent set with previous KPI payouts?
Ultimately, the KPI payout should be enough to be meaningful, but not so much that the employee loses focus on non-KPI job duties. Typically, a KPI of 5% to 10% of compensation is a reasonable target.
When to pay out the reward depends on the KPI measurement period, and your philosophy on incentive programs. Generally speaking, a more frequent payout (weekly or monthly) leads to better results. The employee sees their accomplishment and they get an immediate reward. It’s a quick feedback loop, and reinforces the good work.
KPI Spreadsheet Templates
With complex software systems it is now easier than ever to measure just about anything in the brewery. But just because we can measure something, doesn’t mean we should.
In my opinion, KPI measurements should be kept as simple as possible. Simple is easier for the employee to understand and easier for you to run the calculations. Click here to download the KPI Spreadsheet.
Wrap Up + Action Items
Key Performance Indicators are used to measure the most important things in your business. Identify what is most important, figure out how to measure it, then reward your employees for achieving the desired result.
Use the 3-step process to implement the KPI program: Teach employees how the KPI calculation works, show employees how their achievement of the KPI makes a difference to the brewery, and give regular updates on KPI results.
Use the KPI spreadsheet templates above or create your own. Keep the measurements as simple as possible for ease of understanding and calculating results.
KPI’s can be a great way to improve brewery performance and reward employees for a job well done. The measurements quantify the good work your employees do every day, and allow them to share in the financial fruit of their labor. Now that is a win for everyone.