CAT / FIA FMA Syllabus F. Performance Measurement - Critical success factors and key performance indicators - Notes ^{9 / 15}

Critical Success Factors (CSFs)

are performance requirements which are fundamental to an organisation's success

It is what the customer really values in the products, it is what the company must excel in - if it wants to beat the competition.

(for example innovation in a consumer electronics company) and can usually be identified from an organisation's mission statement, objectives and strategy.

Key Performance Indicators (KPIs)

are measurements of achievement of the chosen critical success factors. Key performance indicators should be:

specific
measurable
(i.e. be capable of having a measure placed upon it, for example, number of customer complaints rather than the 'level of customer satisfaction')
relevant
in that they measure achievement of a critical success factor.

The following table demonstrates critical success factors and key performance indicators of a college training ACCA students.

perspective	critical success factor	key performance indicators
financial success	shareholder wealth	dividend yield; % increase in share price
	cashflow	actual vs budget debtor days
customer satisfaction	exam success	college pass rate vs national average premier college status tutor grading by students
	flexibility	average number of course variants per subject (eg full-time, day release, evening)
process efficiency	resource utilisation	% room occupancy average class size average tutor teaching load (days)
growth	innovation products information technology	% of sales from < 1 year old number of online enrolments

The main difficulty with the balanced scorecard approach is setting standards for each of the KPIs.

This can prove difficult where the organisation has no previous experience of performance measurement.

Benchmarking with other organisations is a possible solution to this problem. It is the comparison of a service, practice or process against one or more similar activities.