Chapter 16 - Non Financial Performance Measurements

Question 1

What are nonfinancial performance measurements

Answer 1

It is important to have a range of performance measurements considering non-financial as well as financial matters this is particularly important in the case of service industries where such things as quality are vital importance of the business is to grow and long-term

The two approaches are

Fitzgerald and moons building blocks

Kaplan and Norton is balanced scorecard

Question 2

Fitzgerald and moons Building blocks

Answer 2

Fitzgerald and Muon focused on performance measurement in service businesses they suggested the following areas needing measuring of performance

Financial performance

Competitive performance
- how well vs the competitors

Quality
- how do you measure quality ? % of returning customers or perhaps % of complaints

Flexibility
- how well can we respond the changing levels of demand ? Like zero hour contracts or number of staff with more than one skill

Resource utilisation
- how efficiently do we use resources ( e.g running costs of building)
-we could measure using the occupancy rate ( ave % of rooms occupied)

Innovation
- what new ideas do we have ? Number of new services offered
- different ways of providing existing services

Question 3

Kaplans and nortons balances scorecard

Answer 3

The balance scorecard views the business from four perspectives and aims to establish goals for each together with measures which can be found to evaluate whether this goals have been achieved

Customer perspective
- what do potential and existing customers value from us ?
Measures could be;
% sales from new customers
% on time deliveries
% orders from enquiries
Customer survey analysis

Internal business perspective
- what process must we excel at to achieve out customer and financial objectives ?
Possible measures being;
Unit cost analysis
Process/cycle time
Value analysis
Efficiency

Learning and growth perspective
- how can we continue to improve and create future value
Measurements could be;
Number of new products introduced
Time to market for new products

Financial perspective
- how to we create value to our shareholders ?
Possible measures;
Profitability
Sale growth
ROI
Cash flow / liquidity