Typically, several KPI (key performance indicator) values are defined for the production manager.
KPI1 = the amount of profit or financial resources for a certain time interval.
KPI2 = achievement of production targets.
KPI3 = share of new products in the assortment.
KPI4 = implementation of the office 365 database production budget (has various forms, including cost reduction with unchanged product quality).
KPI5 = the volume of fixed production costs in the total volume of costs (similar to the previous indicator, but the main focus here is on improving the quality of business processes and organizing the work of personnel).
The influence of each of these indicators depends on the stage of the enterprise life cycle, market conditions, and external operating conditions.
KPI indicators are calculated taking into account planned and actual production results, they should be linked to the top management motivation system based on several principles.
The indicators are recorded by a properly constructed accounting system.
The results of the production manager's work must contain the results of his subordinates' work. At the same time, the number of indicators used must not exceed five.
The value of the indicator corresponds to the share in the bonus fund.
For all indicators there are maximum values, exceeding which does not entail encouragement.
Often, a so-called stop factor is set – a minimum value of a particular indicator. If the minimum bar is not met for at least one of the KPI indicators, then the incentive is either reduced or cancelled completely.
It is possible that the motivating effect for an employee is provided by the production process itself. For example, this concerns enterprises where products are made by hand. Employees put their soul into their products, the opportunity to demonstrate their creative abilities, to express themselves in the company's products is important to them.
KPI and salary of a production manager
There is an opinion that the production manager's salary should be paid in a fixed amount. It is possible to establish incentive measures depending on KPI indicators, but the numbers on paper do not always mean a real improvement in the quality of production processes. To maintain motivation, it is better to increase the salary of the production director by 5-10% at least twice a year. The bonus can be paid upon completion of a project.
It should be noted that the use of monetary penalties against specialists at the level of production director is a measure of little use. In the event of serious failures in the production cycle, failure of the manager to fulfill the duties assigned to him, it is more appropriate to immediately consider the issue of dismissal.
In the Moscow region, the average salary of a production manager is approximately $3,300. This figure may vary depending on the industry. In light industry companies, the salary is lower - about $3,200, and in mechanical engineering, on the contrary, it is higher - $3,700.
In other regions, salaries are usually lower than the Moscow average. Thus, in Novosibirsk and Yekaterinburg, a production manager can expect a salary of about $2,000 per month.