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bla5204.tmp THE USE OF KEY PERFORMANCEAREAS by Lewis F. Norwood IN DECISIONMAKING Extension Service - U.S. Department of Agriculture Washington, D.C. Outlines relevant variables to be considered in measuring and setting standards for business performance. The most effective control occurs when major attention is given to those business performance areas which are vital to the survival of the company. It is not possible for an executive for follow every detail...or all of the various phases of performance...he must know how well plans are being carried out so’that desired objectives will be achieved. To do this, he must concentrate his attention on those performance factors which indicate whether important deviations have or are about to occur. The number of key performance areas will vary...according to consequences of deviation, nature of industry, require- ments of firms for evaluating performance. KPA’s (examples)-- -- Raw Product Procurement -- Plant Production and Operations -- Store Operations -- Organizational structure and Key Personnel -- Customer and Stockholder Relations -- Market Standing and Sales -- Public and Government Relations -- Policies and Objectives -- Finance After identifying the key perfor- mance area (KPA), it next is necessary to identify what standards of performance to establish for each KPA. Business fail- ures often occur when management is un- aware that results with KPA’s are dan- gerously off standard. Key Indicators Management must know what to look for in each key area. There may be one or more key indicators (KI’s)which alert the board and executive to pending trouble. KI’s may be a number, a ratio, a percentage, or a qualitative statement of condition. KI’s should be: -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Relevant...having a close logical relationship Reliable...will do what’s expected or required Valid...conforms to law, logic, and facts Objective-oriented...reflect desired stand

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