Wednesday, May 13, 2020

Financial and Non Financial Measures Free Essay Example, 3500 words

On the other hand, it has been stated (Neely, 2002, 295) that ‘the key benefit in the process of deciding what to measure appears to lie in the fact that the process forces management teams to be explicit about their priorities; without precise definitions and targets it is impossible to establish appropriate measures for customer satisfaction; hence the act of deciding what to measure, forces management teams to clarify their language and make explicit what they mean when they say â€Å"we want to increase customer satisfaction’. In a research made by Neely et al. (2002, 301) the role of the non financial measures to the firm’s performance tried to be located through a postal survey of ‘1802 large service firms (employing over 250 people and with reported turnovers in excess of  £10 million)’. The main findings of this survey can be summarized to the following ones: a. ‘Ninety-two percent of mass services, 84 percent of professional service s, and 81 percent of service shops claimed to measure customer satisfaction. b. Seventy percent of mass services, 66 percent of professional services, and 64 percent of service shops claimed to measure employee satisfaction. c.We will write a custom essay sample on Financial and Non Financial Measures or any topic specifically for you Only $17.96 $11.86/page Furthermore, regarding the findings of the academic research ‘nonfinancial performance measures possess at least some degree of reliability, and that having such information audited should increase investors’ perceived reliability of those measures whereas noncomparability among types and formats likely hampers investors’ ability to use nonfinancial measures’ The operation of the financial measures in practice can face a series of difficulties. According to the study of Schuster (2000, 92-93) ‘in the process of defining value drivers and outcome measures there undoubtedly is a high potential for mistakes; particularly in the field of ‘softfact measures’ like employee motivation or organizational learning there is a risk of creating false rationalities; another problem could be the data modelling of the whole scorecard system; there is probably a lot of training and communication needed in order to avoid the impression of a ‘staff control system’ that finally leads to completely transparent employees’ III.

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