Non-financial performance indicators

Question 1

Why are non-financial performance indicators important to measure the performance not-for-profit organisations? E.g. NHS

Answer 1

Usually government funded, providing an essential service.
More public scrutiny and have multiple stakeholders, so NFPI’s will be necessary to manage expectations
e.g patients are stakeholders and have little interest in how they are performing financially, more concerned about how quickly and successfully they are treated

Question 2

What are the main objectives of not-for-profit organisations?

Answer 2

Not-for-profit organisations have multiple objective, and it may be unclear which are the most important

1. Giving value for money to the taxpayer

Question 3

Why are non-financial performance indicators required?

Answer 3

The outputs or benefits of the services provided are non-financial in nature, for example, giving prompt and high-quality treatment to patients.

Question 4

Can financial measures be ignored completely?

Answer 4

No, since they have often obtain funding from the government and cannot obtain from elsewhere
So it is critical that they must be able to use budgets to control their costs as they have limited funding

Question 5

What is meant by a “budget constrained” management style?

Answer 5

Emphasizes the need to achieve short-term performance measures, e.g. the annual financial budgets

Question 6

What are the implications of a budget constrained management?

Answer 6

Encourages short-termism - may reduce performance against its objectives (e.g. quality falling)

Job related tension is a consequence of budget constrained, shown in low staff satisfaction

Encourages manipulation of results - e.g. distort waiting times by sending patients to another hospital during busy times

Does not encourage innovation, encourages cost cutting

Question 7

What are the 6 dimensions of the building block model?

Answer 7

Competitiveness
Financial performance

Quality of service
Innovation
Flexibility
Resource utilization

Question 8

What are the 3 steps to the building block model?

Answer 8

1. Dimensions
2. Standards/KPI’s set
3. Rewards

Question 9

What is the balanced scorecard?

Answer 9

Kaplan and Norton designed as a strategic performance measurement and management framework

Includes 4 perspectives:
Financial measures 
Non-financial measures (Innovation and learning)
Internal (business process)
External (customer perspecitve)

Then use each perspective to come up with CSF’s and KPI’s in line with overall objectives and vision

Question 10

In the building block model, what do standards (KPI’s) set need to be?

Answer 10

Ownership
Achievable
Equity

Question 11

In the building block model, what do rewards need to be?

Answer 11

Clear
Motivating
Controllable factors