Coming Up Short on Nonfinancial Performance Measurement

In the past decade, increasing numbers of companies have been measuring customer loyalty, employee satisfaction, and other performance areas that are not financial but that they believe ultimately affect profitability. Doing so can offer several benefits. Managers can get a glimpse of the business’s progress well before a financial verdict is pronounced and the soundness of their investment allocations has become moot. Employees can receive better information on the specific actions needed to achieve strategic objectives. And investors can have a better sense of the company’s overall performance, since nonfinancial indicators usually reflect realms of intangible value, such as R&D productivity, that accounting rules refuse to recognize as assets.