10. Non-financial Performance Indicators Flashcards
What are non-financial performance indicators?
They are used to help measure a wider variety of important aspects of performance and allow a more ‘all round’ measure of the business. They consider things such as quality, efficiency, productivity, staff morale and customer satisfaction
Why do we need NFPI’s?
- Increasing competition means we need to perform better
- Increasingly sophisticated customers expect high quality
- Changing nature of costs means more costs tend to be overhead which are harder to trace directly
What are the benefits of looking at NFPI’s?
- forward looking and will lead to a more sustainable business
- long term targets, reduce focus on short term profits
- can be calculated quickly so corrective action can be taken promptly
- less scope for manipulation, not subject to accounting policies
- easily understood by non accountants
- managers can appraise many areas of the business
- allows consideration of various important stakeholders
What is the balance scorecard?
A management tool that can combine FPI’s and NFPI’s. It gives a true ‘all round’ view of performance and looks at indicators in the four areas.
What are the four areas of a balanced scorecard?
The financial perspective
The customer perspective
The internal business perspective
The innovation and learning perspective
What is the financial perspective of the balanced scorecard?
It looks at whether financial performance will keep stakeholders happy. It looks at profitability ratios.
What is the customer perspective of the balanced scorecard?
It looks at whether we have kept customers happy by offering high quality products and customer service. It measures levels of repeat business and feedback surveys.
What is the internal business perspective of the balanced scorecard?
It looks at the efficiency of internal processes to ensure resources are used effectively. It measured average time to fulfil orders, number of defects in the production process, number of customers felt with by each member of staff.
What is the innovation and learning perspective of the balanced scorecard?
It looks at whether we are investing in the future of the business. It measures number of nee products produced each year and number of days training staff.
