1. Use of non-financial measures in performance evaluation

2. Content Traditional Financial Performance Definitions Examples
Pros and Cons of Non-financial measures
Mistakes and Solutions
Conclusion

3. Traditional Financial Performance
They only tell what has happened over a limited period in the immediate past;
They give you no indication of what is going to happen in the future;
They do not relate to the strategic management of the business etc.

4. Definitions
The financial measures show the impact of the firm’s policies and procedures on the firm’s current financial position and its current return on shareholders.
The nonfinancial factors show the firm’s current and potential competitive position.

5. Examples: Financial Measures of Success
Non-financial Measures of Success
Sales growth
Earning growth
Dividend growth
Bond and credit ratings
Cash flow
Increase in stock price
Customer Measures
Market share and growth in market share
On-time delivery
Customer satisfaction
Brand recognition
Position in favorable markets
Internal Business Processes
High product quality
Manufacturing innovation
High manufacturing productivity
Cycle time
Yield and reduction in waste
Learning and Innovation (Human Resources)
Competence and integrity of managers
Morale and firmwide culture
Education and training
Innovation and new products and manufacturing methods

6. A process is a sequence of activities linked together for performing a particular task.
Example:
Input
Activity or Process
Output
Inputs:
Employee training
Employee experience
Number of new menu items
Number of employees
Fryer reliability
Fountain supply availability
Outputs:
Line wait
Percent order accuracy
Friendly service score
Activity
Counter service

7. Advantages Closer link to long-term organizational strategies;
Can provide indirect, quantitative indicators of a firm's intangible assets;
Can be better indicators of future financial performance;
Less susceptible to external noise than accounting measures

8. Disadvantages Time and Cost; Measures in many ways;
Lack of causal links;
Lack of statistical reliability
“Measurement disintegration”

9. Mistakes Not linking measures to strategy Not validating the links
Not setting the right performance targets
Measuring incorrectly

10. Solutions Develop a casual model; Pull together the data;
Turn data into information;
Continually refine the model;
Base actions on findings.

11. Conclusion
Non-financial measures are increasingly important in decision – making and performance evaluation;
Companies should not simply copy measures used by others;
The choice of measures must me linked to factors such as corporate strategy, value drivers, organizational objectives and the competitive environment.
Performance measurement is a dynamic process, etc.

12. Thank you very much for your attention!