Content Filtrations 6. Bureaucracies can cause the measurement process to degenerate into mechanistic exercises that add little to reaching strategic goals. The easiest way to define non-financial performance measures is to But successful research improves future profits if it can be brought to market. Although there are many advantages to non-financial performance measures, they are not without drawbacks. Really, in essence, two steps here. More importantly, the results also suggest that (1) the process by which nonfinancial measures affect employee job satisfaction is not different from that of financial measures, and (2) the relative importance of nonfinancial measures vis-à-vis financial measures has … Non-financial metrics are quantitative measures that cannot be expressed in monetary units. The non-IFRS financial measures that we report should only be considered in addition to, and not as substitutes for, or superior to, our –IFRS financial measures. Prohibited Content 3. Financial evaluation systems generally focus on annual or short-term performance … Others assign arbitrary weightings to the various goals. Rather than attempting to extract such informa­tion from a system designed primarily to satisfy external reporting and auditing requirements, we should design systems consistent with the technology of the organisation, its product strategy and its organisation structure.”. One bank that adopted a performance evaluation system using multiple accounting and non-financial measures saw the time required for area directors to evaluate branch managers increase from less than one day per quarter to six days. These measures focus on the long-term success and the qualitative aspects of a business. TOS 7. Although non-financial measures are increasingly important in decision-making and performance evaluation, companies should not simply copy measures used by others. Likewise, a specific division may have invested on providing training, education, job enrichment and development, whereas some other division might have totally neglected these activities. A nonfinancial performance measure expresses performance in a measure other than money. advantages Non-financial measures offer four clear advantages over measurement systems based on financial data. Xerox, for example, spent millions of dollars on customer surveys, under the assumption that improvements in satisfaction translated into better financial performance. These measures are typically separated into four perspectives outlined in the following. Non-financial performance measures are performance measures that are not communicated in currency-based terms. Without knowing the size and timing of associations among measures, companies find it difficult to make decisions or measure success based on them. Content Guidelines 2. This also lowers the risk imposed on managers when determining pay. Second, critics of traditional measures argue that drivers of success in many industries are “intangible assets” such as intellectual capital and customer loyalty, rather than the “hard assets” allowed on to balance sheets. Unfortunately, relatively few companies develop such causal business models when selecting their performance measures. Third, non-financial measures can be better indicators of future financial performance. In general, financial performance is easy to measure (earning per share, profit, dividends, EVA etc) but these measurements do not tell managers why financial performance has improved. For example, shortly after becoming the first US company to win Japan’s prestigious Deming Prize for quality improvement, Florida Power and Light found that employees believed the company’s quality improvement process placed too much emphasis on reporting, presenting and discussing a myriad of quality indicators. By supplementing accounting measures with non-financial data about strategic performance and implementation of strategic plans, companies can communicate objectives and provide incentives for managers to address long-term strategy. Johnson and Kaplan have emphasised the importance of non-financial measures and comment in the following manner: “More important than attempting to measure monthly or quarterly profits is measuring and reporting a variety of non-financial indicators. Unknown or unverified causal links create two problems when evaluating performance: incorrect measures focus attention on the wrong objectives and improvements cannot be linked to later outcomes. The input measures are used to improve the output measures. Non-GAAP financial measures are numerical measures of a company’s historical or future financial performance, financial position, or cash flows that adjust GAAP amounts in some fashion and are intended to supplement the company’s GAAP disclosures. 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