Critical Success Factors and Key Performance Indicators

ACCA Director Author

Critical Success Factors and Key Performance Indicators

2.1 Terminologies:

Performance:

Performance can be described as the degree of effectiveness with which a task or operation is carried out.

Objectives:

Objectives refer to the specific targets that an organization aims to accomplish.

Critical Success Factors:

A critical success factor (CSF) is a fundamental area in which an organization must excel to ensure its success.

Performance Indicators(Metrics or Measures) and Key Performance Indicators:

Performance indicators, also known as performance measures, are techniques utilized to evaluate performance.

2.2 Example of CSF and KPIs based on:

Structure of the Industry
Competitive Strategy, Position, & Location
Environmental Factors
Temporary Factors
Functional Managerial Position

Critical Success Factor (CSF)	Key Performance Indicators (KPI)
1. Structure of the Industry:
Car Industry: Efficient dealer network organization	- Number of active dealerships - Dealer satisfaction scores
Food Processing: Continual new product development	- Number of new products launched annually - Revenue from new products
Banking: Regulatory compliance and cybersecurity	- Number of compliance breaches - Frequency of cybersecurity audits
E-commerce: Robust platforms & user experience	- Website uptime percentage - User satisfaction scores
Pharma: Continuous R&D for new drug development	- Number of patents filed - R&D expenditure as % of revenue
Tourism: Customer service & experiences	- Customer satisfaction ratings - Repeat bookings percentage
Real Estate: Location and property valuation	- Average property turnover time - Accuracy of property valuations
Agriculture: Crop rotation & sustainable farming	- Crop yield per hectare - Percentage of sustainable farming practices
2. Competitive Strategy, Position, & Location:
Differentiation: Unique product/service features	- Customer perceived value scores - Product return rates
Cost Leadership: Economies of scale	- Production cost per unit - Gross margin percentage
Industry Position: Focus on niche markets	- Market share in niche segments - Customer loyalty scores in niche
Geographic Location: Efficient logistics	- Average delivery time - Logistics cost as % of sales
3. Environmental Factors:
Fuel-Dependent: Adapting to global oil prices	- Fuel expenditure as % of revenue - Fuel efficiency metrics
Digital Age: Adjusting to digital tech advancements	- Technology adoption rate - IT infrastructure uptime
Fast Fashion: Ethically produced clothing	- Percentage of ethically sourced materials - Supplier audit results
Air Travel: Meeting international aviation standards	- Compliance with aviation standards - Fuel efficiency of fleet
Packaging: Sustainable packaging solutions	- Percentage of recyclable packaging - Waste reduction rate
Manufacturing: Advanced manufacturing technologies	- Production efficiency metrics - Downtime due to tech failures
4. Temporary Factors:
Product Recalls: Stringent quality checks	- Number of products recalled - Quality assurance pass rate
Market Anomalies: Rapid scaling of production	- Time to scale production - Meeting demand-to-supply ratio
5. Functional Managerial Position:
Production Managers: Emphasis on product quality	- Defect rate in products - Quality check pass rate
Marketing Managers: Brand visibility	- Brand recognition scores - ROI on marketing campaigns
Finance Managers: Ensuring liquidity	- Current ratio - Days sales outstanding

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Categories: : Advanced Performance Management (APM)