Chronicle Editor
IN our last issue we looked at the financial measures of performance, which include market valuation, profitability, productivity, return on equity, and real estate investment.
In this issue, we look at non-financial measures of organisational performance, which include customer relationship management, business processes, organisational learning and growth, and corporate social responsibility (CSR).
Non-financial measures of performance
According to Kaplan and Norton, non-financial measurement of a firm’s performance can be achieved through analysis of three broad categories of variables. These are customer service/customer relationship management, business processes, and organisational learning and growth. Other authors have also suggested Corporate Social Responsibility (CSR) as another variable for measuring the non-financial performance of a firm. These variables are discussed below.
Customer service/customer relationship management
Customer relationship management is a qualitative variable for measuring firm performance that can translate into revenue and profitability growth if the company deploys its strategic capabilities to attract and retain customers. In addition to attraction and retention of customers, strategic customer relationship management should also translate into increased consumption of the firm’s products and services by target customers, generating the desired revenues and profit margins. The quality of customer service and management of relationships can, thus, be an important variable in measuring organisational performance. Customers that are satisfied with product quality and service rendered communicate that through repeat business and referral of other customers to the firm, leading to growth in sales, creating scope for greater profitability and sustainable organisational growth.
Business processes
Organisational performance can be measured through the efficiency, effectiveness and sustainability with which the firm delivers products or services to its customers. Efficiency in the conversion of inputs into outputs, transaction completion time, delivery lead time, query resolution turnaround time, responsiveness to inquiries, and effectiveness of communication to customers are some of the business process variables against, which organisational performance can be measured.
Customers ordinarily need efficiency, convenience, security, and a conducive ambience for business, which are all facets of how an organisation delivers goods and services to its customers.
Standardisation and certification of business processes were found to have a positive and significant effect on organisational performance, where the implementation thereof has been executed with sincerity and deliberate intent to improve the customer experience. In this digital age, some organisations have successfully deployed information communication technologies to improve business processes and create a sustainable competitive advantage.
Organisational learning and growth
In this information and technology age, learning organisations are growing organisations. Organisations that encourage and support their employees to engage in continuous personal development, acquisition and management of new knowledge, effective deployment of skills, competencies, and demonstration of requisite attitudes, are bound to perform better than those that remain indifferent or stifle the learning and growth of employees. Promotion and support of employee learning translate not only into the employees’ growth and development but also into organisational growth and development. Empowered employees tend to be more proactive, innovative, continuously engage in research and development of new products, and are prone to offer quality service to customers, with a better understanding of the value of a customer to the organisation.
Learning and growth are critical not only for lower-level employees but also for middle and senior management, so that the learning culture permeates throughout the whole organisational fabric to drive superior performance. Learning orientation has been found to have a significant positive effect on organisational performance. Organisational learning and growth, thus, become a very critical variable in measuring organisational performance, and as such organisational leaders need to develop robust learning and growth strategies that can create a competitive advantage for their firm, leading to superior organisational performance.
Corporate social responsibility (CSR)
Organisations exist in and are supported by communities and it has become almost a natural requirement that these organisations give back to the communities that support their sustainable existence.
Communities normally have needs, which range from schools, health facilities, road infrastructure, disadvantaged families, and are sometimes struck by disasters that need rehabilitation of destroyed infrastructure and/or relief in the form of food and other basic requirements.
Organisations that practise good corporate social responsibility are active in meeting some of these community needs as and when they arise. CSR has thus in recent times become a measure of organisational performance.
The question has, however, been raised whether CSR is entirely philanthropic or it is a marketing strategy. Either way, organisational performance can now be evaluated by the extent to which a firm practices CSR.
Dr Julius Tapera holds a PhD in Strategic Management and is currently the Assistant to the Vice-Chancellor at Lupane State University. He is a Strategic Management Consultant, Motivational Speaker & Author. He is contactable on Mobile: +263773586037; Email: [email protected] <mailto:[email protected]> or [email protected]
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