Question

Explainakeyperformanceindicator(KPI)framework,givinganaccountofthe most common reasons for organisations to develop KPIs. What are the links between an organisation’s critical success factors (CSFs) and key performance indicators (KPIs) and performance management? Explain.

Answer 1

A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes in departments such as sales, marketing or a call center.

Key performance indicators (KPI) are a set of quantifiable measures that a company uses to gauge its performance over time. These metrics are used to determine a company's progress in achieving its strategic and operational goals, and also to compare a company's finances and performance against other businesses within its industry.

Some of the most common KPIs revolve around revenue and profit margins. The most basic profit-based metric is net profit. Also known as the bottom line, net profit represents the amount of revenue that remains as profit for a given period after accounting for all the company's expenses, taxes and interest payments for the same period. Since net profit is calculated as a dollar amount, it must be converted into a percentage of revenue, or profit margin, to be used in comparative analysis.
The current ratio is a common financial KPI and is calculated by dividing a company's current assets by its current debts. A financially healthy company typically has more than enough cash and cash equivalents on hand to meet all its financial obligations for the current 12-month period. However, different industries use different amounts of debt financing, so comparing a company's current ratio to those of other businesses within the same industry is a good way to establish whether the business' cash flow is in line with industry standards.

Not all KPI metrics are related directly to a company's cash flow. A business' success depends on more than its balance of cash and debt; it depends on its relationship with its customers and employees. Some common nonfinancial KPIs include measures of foot traffic YOY or month over month, employee turnover, the number of repeat customers versus new customers, and various quality metrics.

above is the information related to KPI'S