A business unit that is run with profit motive and is not under the direct control of state or the Government is designated as 'Private Sector Unit'. Organizations that are grouped in this category supply both tangible goods and intangible services, depending upon the customer segments they serve.
The profits earned by these entities are systematically put to different uses such as distributing dividends to shareholders, retaining some portion to expand the operations, and the like. These organizations are solely responsible for their operations to the shareholders and the client base they serve and therefore performance management can be considered a major issue among them. Effective performance management in a Private Sector Organization can be facilitated with the use of KPIs.
KPIs with reference to Private Sector Organizations can be arranged under four broad perspectives- financial, customer, internal processes and employee. Financial Perspective takes into account KPIs such as % increase in annual profits, % decrease in operational expenses, etc. Customer Perspective consists of KPIs like % increase in positive customer feedback, full and on time deliveries, error resolution time, etc. Internal Processes includes KPIs such as % improvement in output rates, number of production schedules met, % decrease in lost time from injuries, quality measures, etc. And lastly, Employee Perspective talks about KPIs like % reduction in absenteeism rate, average number of learning days per employee, training sessions, etc.
Among the many challenges these organizations combat include the fierce competition in the market, high labor turnover, consistent improvements in processes, to name a few. Competition has been increasing as Governments of many countries have either already or are purely liberalizing the industrial environment to loosen the constricted path provided earlier. This has made the industry packed with numerous competitors giving throat-cut competition to each other. Another challenge is providing satisfaction to the customers up to the desired level. Dynamicity in surroundings and tastes of clients has compelled businesses to keep a track of whether they have been successful in their attempts or not.
KPIs are the indicators used to reflect the movements of an organization. Since, an organization is a group that consists of numerous activities and factors, gauging can be comfortably done via four categories stated above. Financial motives can be fulfilled by penning down and following the measures which keep it financially alive. Also, customers can be kept happy by relying on carefully decided parameters, which project a dependable and caring image of the company.
To say it in a nut shell, performance tracking should not be ignored in any task. And the aspect becomes more crucial in case of Private Sector Organization as the entity is answerable to groups of people, working both behind and in-front the scenes to make possible the intentions of its stakeholders. This calls for a performance measurement and management system and BSC, with relevant and quantifiable KPIs, that 'fit the bill'.
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