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24.7 Use Non-Financial Performance Measures to Improve Decision-Making

Non-Financial Metrics​

Non-financial metrics provide insight into future performance drivers:

  • Customer feedback
  • Employee engagement
  • Quality indicators
  • Innovation metrics
  • Compliance metrics

Leading Indicators​

Non-financial metrics are often leading indicators:

  • Customer satisfaction predicts future sales
  • Employee engagement predicts retention
  • Process quality predicts rework costs

Example: Customer Feedback Loop​

  1. Measure customer satisfaction
  2. Analyze feedback
  3. Identify issues (service, product, environment)
  4. Implement improvements
  5. Monitor impact on satisfaction and revenue

Example: Employee Engagement​

  1. Conduct engagement surveys
  2. Identify areas for improvement (communication, growth)
  3. Implement programs (training, recognition)
  4. Monitor turnover and productivity

Example: Process Quality​

  1. Track defect rate
  2. Analyze root causes
  3. Implement quality improvements
  4. Reduce defects and rework

Integrating Non-Financial Metrics with Financial Metrics​

  • Balanced scorecard ensures both are tracked
  • Correlate non-financial metrics with financial outcomes
  • Use data analytics to identify relationships

Decision-Making Framework​

  1. Collect data (financial and non-financial)
  2. Analyze trends
  3. Identify gaps (variances)
  4. Determine root causes
  5. Develop action plans
  6. Monitor results

Luxembourg Compliance Note​

Luxembourg SMEs often serve international clients with high expectations. Non-financial metrics (customer satisfaction, service quality) help retain clients and comply with service level agreements.

Think It Through​

How can non-financial metrics provide early warning signs that financial metrics might miss?