Non-financial performance measurement
1 Introduction
We have looked separately at measures of financial performance. However, it is important to have a range of performance measures considering non-financial as well as financial matters. This is particularly important in the case of service industries 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 summarized the areas in different ways – the two that you are expected to be aware of are Fitzgerald and Moon’s building blocks; and Kaplan and Norton’s Balanced Scorecard.
Both models are examined the same way: choose measures across every dimension or perspective rather than several from one, and then say what each figure means. Restating a figure you have just calculated earns nothing; the mark comes from judging it good or bad and giving a reason from the scenario.
2 Fitzgerald and Moon
Fitzgerald and Moon focussed on performance measurement in service businesses. They suggested the following areas needing measures of performance:
Financial performance
Competitive performance
Quality
Flexibility
Resource utilisation
Innovation
3 Kaplan and Norton’s Balanced Scorecard
The balanced scorecard (developed by Kaplan and Norton 1992) views the business from four perspectives and aims to establish goals for each together with measures which can be used to evaluate whether these goals have been achieved.
3.1 Possible Measures
Perspective | Question | Possible Measures |
Customer Perspective | What do existing and potential customers value from us? | % Sales from new customers |
Internal | What process must we excel at to achieve our customer and financial objectives? | Unit cost analysis |
Learning and Growth Perspective | How can we continue to improve and create future value? | Number of new products introduced |
Financial Perspective | How do we create value for our shareholders? | Profitability |
Non-financial performance measurement
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