THE CONCEPT OF PROFIT PERFORMANCE

THE CONCEPT OF PROFIT PERFORMANCE

There are various measures or means of attaining profit maximization. Embedded in them are concepts that boost the goal of profit performance. Key performance indicators (KPI) are one of the essential measures through which an organization define and measure progress toward organizational goals. Key performance indicators are quantifiable measurements agreed beforehand that reflect the critical success factors of an organization. They will differ depending on the organization.

A business may have as one of its key performance indicators the percentage of its income that comes from customers return. A school may focus its key performance indicators on graduation rates of students. Also a customer service department may have as one of its key performance indicators, in line with overall company‟s KPIs, percentage of customers calls answered in the first minute. Whatever key performance selected they must reflect the organizations goals, they must be key to its success, and they must be quantifiable (measurable). Key performers indicators usually are long term consideration the definition of what they are and how they are measured do not change often. The goals for a particular key performance indicator may change as the organizations goal changes, or as it gets closer to achieving its goal.

An organization that has as one of its goals to be the most profitable company or industry will have key performance indicators that measure pre tax profit and shareholders equity will be among them. However, if a key performance indicator is going to be of any value, there must be a way to accurately define and measure it. It is important to define the key performance indicators and stay with the same definition from year to year. for a key performance indicator to increase its sales, you need to address considerations like whether to measure by units sold or by naira value of sales.

Will returns be deducted from sales in the month of the return? Will sales be recorded for KPI at a list price or at the actual sales price?

Thus, if a company‟s‟ key performance indicator is increased consumer satisfaction? That KPI will be focused differently in different departments.

The manufacturing department may have a KPI of number of units rejected by quality inspection, while the sales department has a KPI of minutes a customer is on hold before a sales representative answers: success by the sales and manufacturing departments in meeting their respective departmental key performance indicators will help the company meet its overall KPI which is to enhance the company‟s profit performances.

Finally, Key performances indicators can be used as performance management tool, but also as a carrot. KPIs gives everyone in the organization a clear picture of what is important, of what they need to make to make happen. You use that to manage performances and maximize the organizations profit as well. And also that everything the people in your organization do is focused on meeting or exceeding those key performances indicators.

Furthermore, Walter Johnson and Demand media (2005) stipulated that maximizing corporate or organization profit, as an idea seems straight forward, simple and obvious. In terms of basic managerial policy, however, it is anything but maximizing corporate profit at first blush seems to negate the maximization of less tangible assets such as public welfare, efficiency, labour, loyalty, managerial accountability or work place satisfaction. In free market economy, however this is rarely the case.

He argued that the foundation of maximizing organizations profit means that the value of goods and services created and sold in the open market is greater than the costs of creating this value. More specifically to maximize profit is to squeeze as much value out of the resources, machines and labour as possible so that the surplus value will go to the firm owners. The conceptual problem is how this goal of profit maximization relates to other genuine business assets in the market place. Therefore, other variables such as social welfare or marketing share cannot be terminated totally since all of these assist in the development of profit performances.