1) Why do companies measure and analyze non-financial personal metrics? In what environments is this measurement especially beneficial?
Answer: Companies measure non-financial personal metrics due to the following reasons:-
1) When any improvement in the financial metric is not going to have a positive impact on the overall health of the company: This normally happens in the case of perfect competition where the competitors have almost similar financial parameters. In such a case the only way to get ahead of the competition is by focussing on the non-financial metrics.
2) When evaluation of the company’s performance is not possible only on the basis of financial metrics: This normally happens in the services sector where the intangible aspect of the company cannot be clearly defined or captured by financial metrics. For example, satisfaction level of the customers in getting their issues addressed by the call centre executive cannot be expressed in terms of any monetary metric. This can only be captured by using non-financial metric.
3) To have idea of how the company as a whole is perceived by it’s various stakeholders including customers: The financial metric do not completely represent the overall effectiveness of the organisation as it limited directly & indirectly to the contents of the balance sheet. Measurement and analysis of non-financial metric will enable company to take better and informed decisions as they will be having additional relevant data in addition to the existing financial data.
Measurement of non-financial metrics is beneficial in highly competitive markets where every player would be having the sufficient capability to match any financial metric. The only way by which differentiation can be achieved is by focussin ...
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