Business success doesn’t always come with a pound sign in front of it. Whilst it’s vital to track your financial business performance, there are other important factors to recognise and measure too.
Key Performance Indicators help you to measure, track, and analyse your business success. They provide valuable insights to inform decisions, boost efficiency and drive business growth. These KPIS extend beyond the monetary and into the non-financial performance measures.
In this blog, I’ll share my thoughts on why it’s important to track non-financial key performance indicators (KPIs) and why that can have a positive impact on your business.
Why Measure Non-Financial KPIs?
Non-financial KPIS may not be tied to a monetary value, but they can be measured by other metrics. They focus on other aspects of the business and are often an indicator of future success, whereas financial KPIs show what’s already been achieved. Non-financial KPIS provide a more holistic view of business performance and give context for the financial statements.
Measuring financial and non-financial metrics is known as the balanced scorecard. The focus is on wider business strategy and measuring the company’s performance beyond the financial. With measurable key performance indicators, it’s easier to track a business’s progress towards its overall strategic objectives.
How can non-financial KPIs improve business performance?
1. Holistic business overview
Purely looking at financial data (like cashflow, profits and financial statements) doesn’t show the full picture of a business. Non-financial KPIs offer a broader perspective. By looking at areas like customer satisfaction, employee engagement, and operational efficiency, you may identify areas for improvement. You’ll get a more holistic view of overall business health.
2. Early indicators
Before there’s a financial impact, you may pick up on early warning signs of potential problems from non-financial KPIs. For example, a drop in customer satisfaction could signal an issue with product quality or customer service. You can address that and nip it in the bud.
3. Better decision-making
Non-financial KPIs provide data-driven insights that support strategic decision-making. Tracking these metrics (like customer satisfaction, marketing campaigns and quality control) mean you can make informed choices about areas like product development, marketing, and operations.
4. Improved efficiency and productivity
By focusing on areas like process efficiency and employee engagement, non-financial KPIs can help improve business efficiency and productivity. Say you identify an increase in employee turnover for example. You can improve morale and staff retention rates with new initiatives.
5. Build trust and strengthen stakeholders relationships
By tracking non-financial KPIs that align with business values – such as sustainable business goals – you can strengthen relationships with stakeholders like investors and partners. It shows you take your responsibilities seriously.
6. Identify strengths and weaknesses
These metrics can help to pinpoint areas where a company excels and those that need improvement. You may discover declining customer loyalty rates. That knowledge will inform your decisions on where to invest resources to address that issue.
What are the Types of Non Financial KPI?
Customer KPIs
These metrics measure how happy people are with their customer experience. Examples include customer retention rates, customer churn, new customer conversion rates, customer satisfaction index, Net Promoter Scores, customer loyalty and industry benchmarking.
Operational KPIs
This non-financial data examines internal processes. For example, customer support, product quality control, production output, delivery time, new product development, stock turnover and project management efficiency.
ESG KPIs
Environmental, Social, and Governance (ESG) is a framework used to evaluate a company’s performance and practices regarding sustainability, social responsibility and ethical issues. Monitoring your company’s commitment to these issues – which are as wide-ranging as human rights, diversity and inclusion, community involvement – is increasingly important. Sustainability reporting is one such example of non-financial KPI tracking.
Employee KPIs
These indicators look at your team members, their performance and satisfaction. Examples include employee engagement, employee turnover rates, employee retention, sales targets, incentives, performance management, productivity metrics, and employee satisfaction survey results.
Whilst these are non-financial KPIs, happy team members are likely to be more productive, efficient and effective, which will boost your bottom line too.
Learn how to establish and monitor KPIs
Non-financial KPI Examples
All KPIs are inputs or outputs and are based on your activity.
Example Inputs / Activity
- Number of networking meetings attended
- Number of planned social activities with team
- Number of clients asked for a review.
Example Outputs / Results
- Number of new customers
- Percentage of team with a happiness rating of 7/10 or more
- Number of five-star Google reviews added.
It’s helpful to track outputs and inputs. Both are measurable, so we can look back in a few months time to see if the activity achieved the results we wanted.
Real Life Example
Let’s say we want to pull in 3 new clients each month from networking. To do that, we feel we need to attend 6 networking meetings, and have 12 meaningful conversations (leads).
So, in this case, our non-financial KPI targets are:
- Clients from networking – 3
- Networking meetings attended – 6
- Leads generated – 12
Now let’s say our results were:
- Clients gained from networking – 1
- Networking meetings attended – 6
- Leads generated – 12
So, we hit the targeted activity, but the results were poorer than we wanted. Why might that be?
1. Are these results a ‘one-off’? (We only measured for a month, and maybe we’ve just been unlucky.)
2. Did the right person attend the networking meetings? Do they need more training?
3. Have we set our targets too high?
4. What about the profitability of the new client generated? Was it worth the effort?
5. Were the networking meetings attended the right type of meetings with the right quantity and type of prospect?
It’s always wise to review activities with questions like these so that you can tweak your activity.
How to Choose Your Non-Financial KPIs
The key is to track the non-performance measures that best fit your business model and needs. There are loads of KPIs to choose from, so focus on the ones that make the most sense for your business strategy.
Think about what’s most important to you as a business owner, and to your stakeholders and customers. What will give you a competitive advantage and increase your market share for example? Maybe it’s product quality, exemplary customer service or sustainability factors? Understanding these priorities will inform your decision-making when it comes to KPIs. For example, if social responsibility and being a sustainable business are core values, then they need to become specific non-financial KPIs. Choose the non-financial KPIs that reflect your business aims and beliefs.
Whichever KPIs you choose (financial or non-financial) make sure you only have around six to start with. If you focus on too many at the same time, you won’t be able to invest enough time on each one and nothing will change. And remember to track them regularly to see how your business and team are progressing.
Make non-financial KPIs part of your strategic planning
Let’s make this happen. I’m here to help you. I’ll keep you and your business on track and I’ll hold you to account. We can define the best KPIs to achieve your aims and make realistic plans to get there. You’re much more likely to take action and see results with a coach to back you and guide the way. Get in touch today to find out more.
