Non-financial performance Flashcards
(13 cards)
Non-financial performance
Non-Financial Measures of
Performance
Managers want to measure business performance. This
is frequently carried out by analysing and evaluating the
financial aspects of the business.
However, it is also extremely important to measure the
non-financial aspects to ensure that the firm is working
as efficiently as possible and that it is meeting all its
objectives, some of which will probably not be connected
to the firm’s finances.
Examples of non-financial performance indicators are:
1. productivity
2. market share
3. sales targets
4. environmental impact
5. quality
6. customer satisfaction
Market share
Market Share
This measures the sales of a firm relative to the market
size. It is calculated using:
Sales of a business x 100%
Total sales in a market
The sales can be measured either in financial terms or
volume (the number of items).
Market share is important as it might indicate that a firm
is the market leader. This might influence the strategy or
objectives of the business. A firm with a small market share
may set a target of increasing its share by a certain amount
over a fixed period. Market share might be an indication of
the success or the failure of a business or its strategy
benefits of increasing market share
the business will be able to have a competitive advantage within that market
can increase the sales revenue
can reach a wider audience within that market
could potentially attract the investors
drawbacks of the business increasing market share
shortage of cash - you may need to borrow money to meet expansion costs, eg buy new premises or equipment
compromised quality - increasing your production output may lead to a decline in quality, which can lead to loss of customers or sales
loss of control - as your business grows
sales target
Sales Targets
This measures the amount of sales that a firm makes
(either in terms of money or volume) in a specific time
period compared with what it set as an objective (or
budget).
Targets are set as goals to aim for. They are often
included in a firm’s budget because the amount of
revenue generated from sales will indicate how high the
expenditure budget can be. Targets can motivate staff.
However, if they are set too high or too low, they can have
the opposite effect.
the impact of not meeting sales targets
reduction in sales revenue
gives an advantages to their competitors
may result in a fall in market share
Evaluation of sales targets
additional cost could arise from attempting achieveing sales targets this is because a business may choose to increase the level of marketing in order to attract the amount of sales it depends on the size of the market tjis is because the business may have spend more especially if the market has grown
productivity
Productivity- This is the output produced in relation to the
inputs used. For a given time period this could be; output
per worker; output per machine; output per site.
Productivity is a crucial concept as it can have a significant
effect on the costs of producing a unit. Consequently,
managers are constantly seeking ways to improve
productivity (particularly labour productivity) as it means
the firm will either make more profit per unit or it can
reduce the price to become more competitive.
Methods of improving labour productivity are:
* increasing the number of hours worked
* training
* investment in equipment and technology
* changing the way work is done
* motivating employee
Benefits of productivity
show how efficiency this is useful in understanding a businesses performance that the business has a high level of capacity utilisation of all its resources
they can grow and expand this is because their level of productivity has allowed their to remain competitive within the market
Drawbacks of productivity
Doesn’t guaruntee success
Why make more if demand does not increase
Better productivity may increase costs (wage)
What if demand falls?
employees may feel overworked as a result the business may become demotivated
Quality
Quality- Targets can be set for the number of defects produced
by a production process within a given time frame, or the
number of faulty goods returned by customers. Firms are
always looking at ways of improving quality as poor quality
indicates a lack of efficiency and it increases costs and,
consequently, reduces profit. In addition, producing poor
quality products can affect a business’ reputation
Environmental impact
Environmental Impact
Consumers are becoming increasingly concerned about
the effect that business activity has on the environment.
As a result many organisations have environmental
policies, which seek to limit the amount of pollution
damage they do (air and noise pollution and waste
disposal), restricting the damage done to wildlife,
developing brownfield sites (as opposed to greenfield
sites), using renewable energy sources and promoting
conservation measures, for example.
employee attitudes survey
this is where a business ask their employees on their experiences within the work place
