In the previous two chapters we were looking at measures of financial performance. However, as we stated, it is important to have a range of performance measures considering non-financial as well as financial matters.
In general, financial performance is easy to measure (earning per share, profit, dividends, EVA etc) but these measurements do not tell managers why financial performance has improved. For example, sales might have increased either because prices has been lowered or the company has spent money developing a new, innovative product. In this chapter we will consider the various areas where performance measures are likely to be needed.
Note that although we might all like to think that, for example, customer service is a foundation for company success, it is not necessarily so. Some low-cost airlines have been very successful despite giving poor customer service. Good customer service, and the other non-financial qualities which are mentioned about below are not ends in themselves. They become important in profit seeking organisations only if the enable financial success.
In not-for-profit organisations, non-financial measures can be ends in themselves. For example, in a hospital patient service is likely to be a fundamental part of its mission.
Various authors have summarised the areas in different ways and the main approaches are summarised in this chapter.