3 MIN WATCH
15 Examples Of Non-Financial Performance Measures To Track
Learn how an organization’s success is determined without financials, including specific examples of non-financial performance measures worth tracking.
Almost everyone has seen a company balance sheet or been part of an annual review that gives updates on the organization’s financial health. But not as many people are familiar with how success is determined without focusing on finances. In this article, we’ll explain the basics and show specific examples of non-financial performance measures.
What are non-financial performance measures?
The easiest way to define non-financial performance measures is to explain what they aren’t. Non-financial KPIs are not expressed as monetary values—in other words, they aren’t directly associated with dollar signs. They focus on other aspects of the business and are often leading (forward-looking) measures, whereas financial KPIs are lagging measures.
While it’s true that non-financial KPIs aren’t associated with finances, that doesn’t mean they can’t be numeric. These types of measures can be either quantitative or qualitative. Many organizations view employees’ “soft skills” as the biggest contributors to non-financial performance, which can be measured in various ways.
Why are non-financial performance measures important?
There are two primary reasons non-financial KPIs are important. First, they help explain and provide context for financial KPIs. As we previously mentioned, financial measures are typically lagging indicators, which are fairly easy to collect and analyze because they are backward-looking. Lagging measures report what has already happened, such as revenue generated or orders fulfilled for a specific time period.
But finances don’t always provide the full story. Why did sales revenue drastically drop in May? Why did the operating cash flow jump in Q2? Non-financial performance measures can fill in the gaps and give answers on monetary fluctuations. For example, if marketing efforts missed the mark one quarter, you can expect sales to be slow the next quarter.
Secondly, non-financial KPIs are easier to link to certain aspects of your overall strategy. More specifically, most organizations don’t have finance-based mission and vision statements. If your mission is to provide the best customer service in the industry, revenue numbers aren’t a good way to track that—but something like customer satisfaction scores are.
Why should companies track non-financial performance measures?
There’s no doubt that tracking financial KPIs is critical and (arguably) the top priority for some organizations, but that doesn’t mean you should overlook other KPIs to keep things simple when managing performance. Companies need to track non-financial performance measures because they:
- Help capture strengths and weaknesses. If you excel at customer service but have long wait times before a customer reaches a representative, that will show up in a non-financial KPI such as a feedback survey. These measures can reveal your core competencies and highlight other areas you didn’t realize were suffering.
- Affect business performance. Over- or underperformance is eventually going to show up in your bottom line, and you can trace it back to the source with non-financial performance measures. For example, if the HR recruiting budget skyrocketed, you can see it’s because of the high employee turnover rate and exorbitant cost (in time and resources) of hiring.
- Give employees better feedback on how to meet strategic objectives. When properly constructed, non-financial KPIs are specific, measurable, and ladder up to the organization’s big-picture strategy. Team members are able to see exactly what they need to do to hit their goals and they also understand why they need to pull the same report every month or how their attendance rates lead to productivity. There’s a clear connection between daily tasks and strategic direction.
- Are better at adjusting for external factors. Every business faces external risks outside its control that can negatively impact measures like revenue and expenses. Recessions, war, and Acts of God are unavoidable and unpredictable. If you were just looking at financial KPIs in these situations, it would seem your company’s performance was beyond hope. But non-financial performance measures are largely within your control and can provide a different, more holistic perspective. If you’re getting high marks for company culture and customer satisfaction during a trade war, you’re being successful in key parts of your strategy, and that should pay off in the long term.
15 Examples Of Non-Financial Performance Measures
Taking the Balanced Scorecard approach, there are four perspectives involved in strategy management: customer, internal processes (operations), learning and growth (HR), and financial. Below are 15 examples of performance KPIs, organized by the three non-financial perspectives:
- Conversion Rate: The percentage of interactions that result in a sale. Formula: (Interactions with Completed Transactions) / (Total Sales Interactions) = (Conversion Rate)
- Retention Rate: The portion of consumers who remain customers for an entire reporting period. Formula: (Customers Lost in a Given Period) / (Number of Customers at the Start of a Period) = (Customer Retention Rate)
- Contact Volume By Channel: The number of support requests by phone and email. This allows the organization to not only compare which method customers prefer, but also to track the number of support requests month-to-month.
- Customer Satisfaction Index: Gauge of a company’s success at meeting customers’ needs.
- Net Promoter Score: The likelihood that customers will recommend a brand to others. A score from 1-10 that qualifies promoters (usually 9-10) and detractors (under 6). Formula: (Number of Promoters) - (Number of Detractors) = (Net Promoter Score)
- Customer Support Tickets: The number of new tickets, the number of resolved tickets, and resolution time.
- Product Defect Percentage: This will give you the percentage of defective products in a specified timeframe. Formula: (Number of Defective Units in a Given Period) / (Total Number of Units Produced in a Given Period) = (Product Defect Percentage)
- On-Time Rate: The percentage of time products were delivered promptly as scheduled. Formula: (Number of On-Time Units in a Given Period) / (Total Number of Units Shipped in a Given Period) = (On-Time Rate)
- Efficiency Measure: Efficiency can be measured differently in every industry, so this common KPI will vary. For example, the manufacturing industry can measure efficiency by analyzing how many units are produced every hour and the plant’s uptime percentage.
- Overdue Project Percentage: The number of projects that are late or behind schedule. This can be pulled from your project status dashboard. Formula: (Number of Overdue Projects in a Given Period) / (Total Number of Projects in a Given Period) = (Overdue Project Percentage)
Learning & Growth
- Salary Competitiveness Ratio (SCR): The competitiveness of compensation options. Formula: (Average Company Salary) / (Average Salary Offered from Competitors (or Average Salary Offered by Industry)) = (SCR).
- Employee Productivity Rate: Workforce efficiency measured over time. Formula: (Total Company Revenue) / (Total Number of Employees) = (Employee Productivity Rate).
- Turnover Rate For Highest Performers: The success of retention efforts for top performers and plans for talent replacement. Formula: (Number of High Performers Who Departed in Past Year) / (Total High Performers Identified) = (High Performer Turnover Rate).
- Average Time To Hire: The efficiency of the hiring process measured by time to recruit, interview, and hire.
- Internal Promotion Rate: The successful retention and growth of top performers. (The Number of Promoted Individuals) / (Total Number of Employees) = (Internal Promotion Rate).
Remember to track the non-performance measures that best fit your organization’s needs. There are hundreds of KPIs to choose from—focus on the ones that make the most sense for your strategy.
(Financial measures are clearly important, too—if you’re interested in seeing examples, check out this financial KPI library.)