Non-Financial Performance Measurement

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1 Introduction

In the previous chapter we looked at various measures of financial performance. However it is important to have a range of performance measures considering non-financial and well as financial matters. This is particularly important in the case of service businesses where such things as quality are of vital importance if the business is to grow in the long-term.

In this chapter we will consider the various areas where performance measures are likely to be needed.

Various authors have summarised the areas in different ways – two well-known ones are Fitzgerald and Moons Building Blocks, and Kaplan and Nortons Balance Scorecard. You will not be tested specifically on Fitzgerald and Moon, or on Kaplan and Norton, but you should be aware of the areas that they consider important and be able to suggest performance indicators under the various headings.

2 Fitzgerald and Moon

Fitzgerald and Moon focussed on performance measures for service businesses and suggested the following areas as needing performance indicators:

• Financial performance

• Competitive performance

• Quality

• Flexibility

• Resource utilisation

• Innovation

3 Kaplan and Nortons Balance Scorecard

Kaplan and Norton also stated the importance of having a range of perfomance measures and forming a balance between them. They grouped them under the following headings, which they called perspectives:

• Customer satisfaction perspective

• Process efficiency (or internal business) perspective

• Growth (or innovation and learning) perspective

• Financial perspective

4 Value for money

Of importance to all businesses, but especially for state organisations such as health care, is the concept of getting value for money.

To achieve value for money, three areas should be considered:

• Economy

Paying a ‚fair‘ price for resources

• Effectiveness

Being successful at what we are trying to achieve

• Efficiency

Using resources well – getting as much out as possible for what goes in