Non-financial Measures Research Articles

Financial performance measurement of supply chains: a review

PurposeThis study provides a systematic review on performance measurement of supply chains from a financial perspective.Design/methodology/approachThis study systematically reviews the financial performance measures of supply chains. More specifically, this research reviews a total of 100 papers published in more than 50 peer-reviewed journals. The reviewed papers are categorized into three major areas of engineering, business and management. Additionally, the papers are investigated based on country, journal frequency, applied methods, publication date and research type (application or developmental).FindingsAccording to the obtained results, cost, return on assets (ROA), sales, asset turnover, return on investment (ROI), market share, inventory turnover, profit margin, revenue growth, economic value added (EVA) and cash-to-cash cycle are the most common metrics of financial performance measurement. Next, a framework is developed based on different categories of performance measurement and decision levels of the supply chain. Finally, some research directions are suggested to be further investigated by other scholars.Originality/valueAlthough available studies on supply chain performance measurement are very vast and comprehensive, the majority of the studies have neglected to highlight the importance of financial measures. In other words, with the advent of nonfinancial measures, however, the majority of supply chain managers still prefer to consider financial issues in their performance assessment process.

Financial and non-financial responses to the Covid-19 pandemic: insights from Portugal and lessons for future

IMPACT This article will help governments, politicians and professional bodies deliberate on how best to respond to future complex crises based on the way Portugal has dealt with the Covid-19 pandemic. It is crucial that governments learn from the pandemic in order to be face future crises as efficiently as possible. ABSTRACT This article analyses the Portuguese government’s response to the Covid-19 pandemic, discussing the main financial and non-financial measures, the successes and the future challenges. Findings show that Portugal responded rapidly to the pandemic situation with a stimulus package that not only looked at budgetary and fiscal measures, but also considered non-financial measures (regulation and flexibility). The context before Covid-19 was determinant of the capacity to act during this crisis. The article contributes to the literature about the different government responses to the pandemic and the importance of the institutional context to understand and learn from them.

How firms' performance mediates the relationship between corporate governance quality and earnings quality?

PurposeThe purpose of this study is to propose an analytical model that investigates both a direct path between corporate governance quality and earnings quality and an indirect path, in which firms' performance is a mediating variable that is influenced by corporate governance quality and that, in turn, influences earnings quality.Design/methodology/approachThe study employs a structural equation modelling (SEM), to a sample of Egyptian listed firms during 2011–2017, to test the proposed analytical model and to determine the relative importance of both the direct and indirect paths.FindingsThe findings show a statistically significant evidence of both a direct path from corporate governance quality to earnings quality, and an indirect path that is mediated by firms' performance, suggesting that both corporate governance quality and performance have a complementary effect on earnings quality. However, the weight of the evidence favouring the direct path is more important in case of accounting-based performance measures; and the weight of the evidence favouring the indirect path is more important in case of market-based performance measures.Research limitations/implicationsThe current study has some limitations. First, the study focuses specifically on one proxy for measuring earnings quality which is the absolute value of discretionary accruals. Other proxies of earnings quality could be examined in future research, such as income smoothing, earnings persistence and timely loss recognition. Another limitation is that only financial performance measures were examined, namely, return on assets, return on equity, price-to-earnings ratio and market-to-book value. Notwithstanding, non-financial performance measures could be investigated in future studies, such as balanced scorecard (BSC). Furthermore, considering cultural, political and legislative differences among countries, the results may not be generalised outside the scope of the current sample (i.e. Egyptian listed firms).Practical implicationsThe implications of the findings for both theory and practice are discussed.Originality/valueThis study is distinguished by validating an analytical model that has been overlooked by prior studies. Moreover, it provides a new constructed index for measuring corporate governance quality. Furthermore, it uses a new sophisticated statistical technique, which is SEM, for testing the proposed model.

Contracting on What Firm Owners Value

We revisit foundational questions in agency theory while assuming that the agent can fine-tune the joint distribution of all contractible and non-contractible performance measures. Under this assumption, optimal contracts behave as if the principal were making inferences about the outcome she values rather than about the agent's action. This has significant implications for what measures are included in contracts and how those measures are used. Most importantly, Holmstrom's (1979) informativeness principle changes. A performance measure is valuable if it improves inferences not about the agent's action, but about the outcome the principal values; and if that outcome is contractible, additional measures have no value. Our model predicts that contracts should be written only on outcomes that firm owners value, consistent with real-world contracts that tie executive pay to only a handful of accounting, market, or nonfinancial measures.

The Balanced Scorecard and Enterprises’ Performance Evaluations: The Saudi Context

The balanced scorecard is one of the most important and effective tools for evaluating the performance of companies by combining financial and non-financial measures. The research aims to study the effect of applying the balanced scorecard on evaluating the performance of small and medium-sized Saudi companies. Despite the benefits of applying the balanced scorecard, previous studies on this topic are limited. In particular, there is little research on small and medium-sized enterprises in the developing countries, such as Saudi Arabia. A questionnaire was developed and distributed to a random sample that consisted of 76 respondents from various sectors (the commercial, service, and industrial sectors). Using a descriptive analytical method, the results showed that applying the balanced scorecard has an impact on the process of evaluating the firm performance, which is reflected positively in the competitive advantage. The companies under study are keen to adopt the scorecard in order to attain first the customer dimension, followed by internal processes, learning and financial dimensions. The balanced scorecard is being implemented more in medium-sized companies as compared with small ones. This study contributes to providing a clear vision for managers, decision-makers, and researchers to help them understand the importance of implementing the balanced scorecard to improve the performance of companies.

CEOs’ Compensation Contracts in Family versus Non-Family Firms: The Use of Non-Financial Performance Measures

CEOs’ Compensation Contracts in Family versus Non-Family Firms: The Use of Non-Financial Performance Measures

How does relationship quality translate into better organisational performance: an empirical check

This paper examines the impact of relationship quality on organisational performance by testing the relationship quality-relationship outcome conceptual model. Organisational performance is measured in terms of relationship outcomes. A survey was used to collect data from pharmaceutical companies in India. Relationship quality is comprised of trust, commitment, communication quality, and, relationship satisfaction. Relationship outcomes conceived as a dependent variable for this study was also measured using suitable non-financial and relationship centred measures. The research instruments were refined and validated. The data were analysed using structural equation modelling. The results indicate that only communication quality and relationship satisfaction emerge as significant predictors of relationship outcomes in the current research context. This study provides valuable insights into the importance of communication quality and relationship satisfaction in sustaining the relationships and deriving required benefits from it. It also advocates the use of non-financial measures as indicators of organisational performance.

Acknowledging Alternative Perceptions of Success Among Internally Displaced Female Entrepreneurs: An Intersectional Perspective

This study addresses the misrepresentation of women entrepreneurs in scientific research as underperformers, as such misrepresentation is based on objective, financial measures of success. The purpose of the study is to explain how perceptions of entrepreneurial success are shaped with regard to the context of internally (i.e., not internationally) displaced people (IDPs) by looking at female Palestinian entrepreneurs who run businesses in the West Bank region of Palestine. To this end, the subjective nature of success is demonstrated with reference to the critical realist positional approach to intersectionality, which emphasises how disadvantage and privilege are perceived in light of the entrepreneur’s circumstances (transfactuality) and how success is shaped by overlapping identity categorisations of gender, ethnicity, and social class (intersectionality), the historical and contemporary influence of patriarchy and military occupation (temporal positionality), and a city or a refugee camp as a business location (spatial positionality). The results of this study, which emerge from data collected from a sample of female IDP Palestinian entrepreneurs, encourage policymakers and financial institutions to acknowledge and appreciate alternative, non-financial measures of success in their decisions to support these entrepreneurs, who can have a significant impact on the well-being of their society, even absent significant financial success.

Prilivi SDI odabranih evropskih ekonomija u razvoju i usponu sa refleksijama na ekonomski rast

The objective of this paper is to identify the top destination for FDI inflows as well as to analyze related growth progress in selected Emerging European Economies (EEEs) in order to suggest significant implications towards economic policy creators in Western Balkan countries. The authors conducted descriptive statistical analysis together with correlation analysis in the time period 1997-2019. The analysis of average FDI inflows includes following country groups: Visegrad States, Baltic States, Western Balkan and eleven new EU member states with regard to the structural break of Global Financial Crisis (GFC). The results suggest that the Visegrad States (particularly Poland) were the top locations for foreign investors in the analyzed time period. Having in mind a positive correlation link between significant FDI inflows, especially greenfield FDI inflows and economic growth, we suggest that Western Balkan countries should implement adequate measures to attract greater greenfield FDI inflows in order to stimulate real convergence towards developed European economies. Therefore, recommendations are directed towards economic policy of less developed countries of Western Balkan that need to continue to improve the quality of public institutions and infrastructure, as well as business environment and implementation of nonfinancial measures of promotional activities, in order to raise attractiveness of national market for foreign investors.

Inclusion of CSR in the extended performance satisfaction index – new development

Companies and organisations apply non-financial performance measures, such as human capital, brand equity and customer assets as corporate brand amplifier as well as to complement indicators of traditional financial measures. It is crucial to understand how companies and organisations may use non-financial assets to create value for their stakeholders. Using customer perception data from the Extended Performance Satisfaction Index (EPSI) Rating database, this study evaluates the relationship between customer satisfaction and corporate social responsibility (CSR). We apply the EPSI model 1 and find a positive relationship between CSR and customer satisfaction, mediated by the effect of CSR on company image. Furthermore, there are non-linear relationships between CSR and customer satisfaction, leading to a proposed CSR-effect curve. From a managerial perspective, the effect of CSR on customer satisfaction is a function of the company’s perceived efforts related to CSR. Hence, an improvement in CSR ratings from customers is expected to impact the business’ bottom line, since improvement in customer satisfaction is known to positively impact financial performance.

Evaluating and Improving Sustainability Governance

While organizational performance is a much discussed topic, the reality is that there is a good deal of confusion and argument regarding how it should be defined, conceptualized and measured. The traditional approach has been to focus on the ability of the organization to achieve its economic goals by using its available resources in both an efficient and effective manner using measures such as profitability, return on assets and equity, market share and sales growth; however, the growing importance of sustainability has led to arguments that non-financial factors, and the needs and expectations on stakeholders other than investors, should be considered in gauging organizational performance. This chapter begins by discussing conceptualizations of organizational performance and the most commonly used financial and non-financial measures of performance, and then continues with guidance on establishing an organizational measurement performance system that can be used to track, evaluate and improve organizational performance. The chapter also discusses emerging frameworks for incorporating sustainability into performance measurement including the use of the “balanced scorecard”.

Testing the 2017 PHC reform through pilots: Strengthening prevention and chronic care coordination

Numerous official reports have highlighted insufficient provision of preventive services within primary health care (PHC) in Poland. Other identified weaknesses include inappropriate referrals to ambulatory care that contribute to long waiting times for specialist consultations. Since mid-2018, a new model of PHC organization has been piloted and can be seen as an attempt to address some of these weaknesses. It draws on the Primary Health Care Act of 2017 and puts much more emphasis on disease prevention and health promotion within PHC as well as shifts management of common chronic conditions to multidisciplinary PHC teams. The implementation of this model has been supported by a range of financial and non-financial measures, including a special grant that helps PHC practices to adapt their IT systems to the requirements of the pilot. Yet, the overall requirements were prohibitive to most PHC practices and only 42 were eventually included in the pilot. In this paper, we describe the content of this model, the difficulties in its implementation and how they were addressed and discuss its possible effects on PHC and the health system more broadly.

Pentingnya Ukuran Kinerja Nonfinansial dalam Balanced Scorecard, Komitmen Organisasi, dan Kinerja Manajerial

This study investigates the role of the degree of importance of using nonfinancial performance measures (in Balanced Scorecard) by superiors for performance evaluation in influencing employee performance through organizational commitment. This study adopted a quantitative research design and conducted a cross-sectional survey by questionnaire to collect responses from 118 local managers in Samarinda, Indonesia. Based on PLS analysis, the results of this study indicate that the use of nonfinancial measures in Balanced Scorecard for performance evaluation is significantly affect employee organizational commitment and directly affect managerial performance through organizational commitment. The results also prove that organizational commitment has a mediation role in the relationship between nonfinancial measures and performance. This study provides valuable insight that the degree of importance of the use of nonfinancial measures by superiors to evaluate performance can improve employee commitment and performance. Practically, the results provide an overview for superiors to be more comprehensive in developing a performance measurement system because the system has a crucial role in influencing employee behavior.

Financial and Non-Financial Measures in Evaluating Performance: The Role of Strategic Intelligence in the Context of Commercial Banks in Kenya

This study provides comprehensive discussion on role of strategic intelligence in commercial banks, in Kenyan context. The primary focus was to evaluate the performance of commercial banks using both financial and non-financial performance measurers. The financial measurers comprised return on equity (ROE), while non-financial measures were customer satisfaction, learning and growth, and internal processes. The study was anchored on resource-based view and balanced scorecard model. The target population comprised 40 commercial banks. Additionally, the sample size 181 was selected proportionately through stratified sampling procedure. Data collection instruments comprised closed and open -ended questionnaires and online review. The study used both primary and secondary data, where primary data was obtained from Kenya commercial banks head offices, while secondary data, for the year 2016 – 2018, was obtained from the annual reports of the central bank of Kenya. Data analysis was done using descriptive statistics and linear multiple regression analysis. Findings of the study indicate that strategic intelligence has a statistically significance on the performance of commercial banks in Kenya. Moreover, both financial and non-financial measures of performance are relevant in the banking sector and growth of Kenyan economy. The study recommends that commercial bank in Kenya should integrate their training focus and strategy implementation with investors interests based on balanced score card.

Choice of performance measures for bonus plan: implications for firm performance and promotions

ABSTRACT In this study, we examine the impact of a change in the bonus-based incentives on firm performance and promotions. We use both a proprietary dataset and a field-based survey of a leading bakery chain in Japan that changed its bonus determination from focusing on nonfinancial measures to financial measures. We find that firm performance declines under the new bonus plan due to a misalignment between the choice of performance measures and the bakery’s customer-focused strategy. Moreover, supervisors consider performance measures other than what is intended by the firm for promotions i.e., financial measures) when they perceive these measures to be underweighted from the perspective of temporal alignment of the incentive system. This study contributes to prior literature by documenting the impact of a change in bonus plan on firm performance and promotions decisions, where empirical evidence is limited.

The measurement of environmental, social and governance (ESG) and sustainable investment: Developing a sustainable new world for financial services

The author of this paper was inspired by an article published in The Economist on 21st September, 2017: ‘Ethical Investment Is Booming. But What Is It?’ with a subheading ‘ESG Investment Is Hard to Define and Its Returns Are Hard to Measure’ and a telling conclusion that environmental, social and governance’s (ESG) terms are being redefined to ‘help replace feel-good bromides with crunchier measures’. Many investment firms have continued to examine which of the nonfinancial ESG factors and measures have most relevance to financial investment and are integrating those into the investment management process, in order to align their financial products towards delivering tangible sustainable outcomes. At the same time, the United Nations is striving towards constraining global warming to below 2°C above pre-industrial levels and forging new initiatives, such as convening the Global Investors for Sustainable Development (GISD) Alliance, which ‘is aimed at leveraging the insights of private sector leaders to remove impediments and implement solutions for mobilizing resources for sustainable development’. This paper examines the ESG data and analysis that is available today, along with some challenges and risks that have been identified and aims to set out how it can be used for measurement of ESG. It also outlines the types of new initiatives that are intended to help deliver a common language for ESG with agreed industry-wide definitions, which could be used to measure the tangible delivery of the necessary sustainable outcomes across the wider global investment process.

The Effect of Non-Financial Measures, Independent Board of Commissioners, and Audit Quality against Firm Value, With Cost of Equity as a Moderating Variable

The Effect of Non-Financial Measures, Independent Board of Commissioners, and Audit Quality against Firm Value, With Cost of Equity as a Moderating Variable

Separating and integrating non-financial and financial measures: a case study of a sporting organization playing the value-in-kind (VIK) game

PurposeThe purpose of this study is to characterise types of practices – or “routings” as they are denoted in this paper – that have been developed to incorporate non-financial inscriptions, representing value-in-kind (VIK) sponsorship resources, into accounting systems.Design/methodology/approachThis study adopts field-based research, utilising Latour's (1999) concept of “circulating reference”, to illustrate how VIK (non-cash) resources were managed in an Australian sporting organization.FindingsThis paper contributes to our understanding of: first, how accounting infrastructure is constituted and stabilised by a network of multiple and overlapping accounting practices; second, how VIK resources are allocated and managed via local practices; and third, the importance of “budget relief” as a method of valuation in accounting practice.Research limitations/implicationsOur paper has implications for understanding how financial and non-financial accounting inscriptions are related in practice, requiring both integration and separation within networks of multiple and overlapping routings of accounting practices.Originality/valueOur work highlights previously unexplored accounting practices, which assist in the process of utilizing VIK resources in the context of a sporting organization.

Is more really better? Performance measure variety and environmental uncertainty

PurposeThis paper asks the question of whether more environmental uncertainty affects the design of performance measurement systems in terms of a greater variety of performance measures and whether this leads to more management satisfaction with the performance measurement system and improved firm performance.Design/methodology/approachInformation processing theory is used to frame the hypotheses and findings. A questionnaire was sent to the 300 largest companies in Iceland, where environmental uncertainty has been prevalent.FindingsThe results indicate that increased uncertainty leads to a larger variety of non-financial performance measures, such as customer measures. A positive relationship is found between management satisfaction with the performance measurement system and firm performance. However, the variety of performance measures was not linked to management satisfaction or firm performance.Research limitations/implicationsThe results suggest that managers increase the variety of performance measures when uncertainty increases. However, it is not the variety itself that increases management satisfaction or improves firm performance.Practical implicationsPerformance measurement design is affected by environmental uncertainty. Managers focus on important stakeholder groups such as customers under such conditions and can consult research and practice for the purpose of customer relationship management and customer profitability measurement to improve measurement selection.Originality/valueThis work focusses on performance measurement system design, examining the use of more than 50 different performance measures, and differentiates between small and medium-sized firms and between service and non-service firms.

Key Performance Indicators (KPIs) as a Tool to Improve Product Quality

Abstract The literature includes a wide selection and distribution of performance indicators to be used in different areas of the company. The paper highlights the Key Performance Indicators (KPIs) as those that are the most universal and allow the control of intended targets in different areas of the enterprise. KPIs are financial and non-financial process measures used to assess the degree of achievement with regard to strategic and operational objectives in a company. They are also used to measure the effectiveness of all activities undertaken in an organizational unit. The paper presents the possibility of using KPIs to improve the quality of manufactured products, by analyzing the trend of selected indicators. This analysis gave an impulse to undertake improvement actions in the company consisting in the use of quality management method – in this case 5 WHY leading to the initiation of preventive and corrective actions in the occurrence of defective products.