Financial Operational Performance:

1

April 15, 2013 by Ozgur Ozden

Financial Operational Performance:

Most of the times operational performance of companies are measured by measurable financial outcomes such as balance sheets, profit, sales, revenue etc. This is normal because these values directly affect the success of the companies and in many companies tied to employee appraisal system. traditional operational performance may depend on the following items depend on the company:

  • Sales -annual or short term

  • Balance sheets

  • Reduced costs

  • Profit, increased sales

  • shareholders profit

  • Current Assets

  • Past performance

  • Brand value

Basicly, operational performance measures the what the company and the employees have achieved so far, takes a shop-shot of the company.

But this is not enough to survive in today’s competitive market and make prediction for the future of the company. Companies need to consider other nonfinancial performance measurement analysis.

Nonfinancial Performance Measurement
In order to become a  key player in the market companies must consider non financial performances as well such as:

  • Company Strategy long term

  • Patents, trademarks, copyrights new products in development line.

  • Goodwill

  • Customer satisfaction

  • Employee Satisfaction

  • In service Trainings

  • R&D departments, Innovation

  • Corporate Governance

All these are non financial factors and affect the company performance. These items does not bring money to company on the contrary spends companies money. But secures the position of the company in the market as one of the key players. If you are a small company and would like to become one of the big ones, R&D dept, HR dept, customer satisfaction and all the above mentioned items are very important.

Although non-financial performance is very important for company future direction they do have some disadvantages. Time and cost is one of them. some small or midsize companies find it difficult to share money for these kind of activities. Especially development may consume considerable amount of financial resource.  Second disadvantage is unlike financial data there are no certain ways to read nonfinancial data which sometimes consists of surveys and questionnaires. Most of the time, big companies are creating their own non financial measures.

Conclusion

As we have said in the beginning, performance measurement is a very difficult process especially nonfinancial performance measurement because this  one has too many unknown and different parameters open to discussion. A team of experts may evaluate these outcomes and shape a realistic future for the company.

 

References:

1- Wharton (2000), Nonfinancial Performance Measures: What Works and What Doesn’t ,(Online). Available at: http://knowledge.wharton.upenn.edu/article.cfm?articleid=279 [Accessed at: 14 April 2013]

2- EU Report, Valuing non-financial performance (Online) Available at: http://www.csreurope.org/data/files/toolbox/Market_valuation_Interim_report.pdf  [Accessed at: 14 April 2013]

3- Malcolm F Arnold, NON-FINANCIAL PERFORMANCE METRICS FOR CORPORATE RESPONSIBILITY REPORTING REVISITED (Online) Available at: http://www.investorvalue.org/docs/NonFinancialPerformanceMetricsForCorporateResponsibilityReportingRevisited.pdf  [Accessed at: 14 April 2013]

 

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One thought on “Financial Operational Performance:

  1. […] software improves the operational performance of a company.  From marketing and advertising, sales, customer service, to accounting, forecasting and human […]

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