Economic stability cannot be taken as guaranteed in any business scenario and managing the performance during a financial crisis becomes even more difficult without any pre-defined framework in place. An organization going through a financial crisis has to draw out various measures to effectively cope up with the problems.
In such a tiring situation the KPI's can be called upon to assist the organization in effectively measuring performance and meeting the challenges of the financial downturn.
KPIs for performance management during a financial crisis can be categorized under four basic perspectives- financial perspective, business development perspective, operational perspective and workforce management perspective. Financial Perspective includes KPIs such as % increase in credit days, % decrease in debtor days, liquidity ratio, etc. Business Development Perspective comprises of KPIs such as number of new long-term contracts initiated, response level, etc. KPIs like % reduction in decision-making and lead time, % decrease in cycle time to resolve adjustments, identification of negative patterns, etc are the part of Operational Perspective. Workforce Management consists of KPIs in the form of % decrease in staff turnover rate, training uptake, % decrease in sickness/absence level, etc.
The foremost challenge that an organization faces during financial crisis is of a liquidity crunch. Organizations suddenly find themselves in a situation where cash funds start drying up and the bad debts start climbing. Another important challenge during financial crisis is of cost cutting measure to be adopted by an organization. The cost cutting measures require a proper scrutiny of present and expected conditions. What cost cutting measure is to be used extensively, which areas are to be prioritized for cost cutting, are some of questions that an organization has to deal with during financial crisis. Managing human resources effectively at the time of financial crisis is another situation a business has to confront with. Keeping up the motivational level and potential power of the employees is quite challenging task in the event of financial crisis. As nobody wishes to be a part of a sinking ship, the panic that gets created can be a tough nut to crack.
The need of the hour is communicating things precisely and speedily, to avoid staff-turnover from mounting to dangerously high levels. Arranging proper training sessions to boost up the morale of the employees in the crunch situation can be prove to be a smart measure. With the constant eye on the liquidity ratio, an idea of the credit position of the organization can be had. Any deviations can be taken care of there and then, to avoid the carrying forward of the prevailing problems.
The Key Performance Indicators arranged on a Balanced Scorecard can go a long way in quantifying performance in critical areas during a financial crisis and can open up bottlenecks in the system. In a nutshell, KPIs give a clear understanding to the management about what to achieve and how to achieve in the event of financial crisis.