November 18, 2019

Financial quadrants: customer, internal business process and learning and

Financial Times
(2017) defines non-financial performance measures as “any quantitative measure
of either an individual’s or an entity’s performance that is not expressed in
monetary units.” Increasingly, companies are supplementing internal financial
measures with non-financial information (Bhimani et al 2012: 631). One of the
best ways to measure non-financial performance is to use the balance scorecard.

It measures the non-financial performance using KPIs in three quadrants: customer,
internal business process and learning and growth.

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In customer
perspective, one of the KPIs is customer satisfaction. In a competitive market,
customers are the key factor for the success of a firm because they accounted
for most of the income of the firm. By studying the figures, managers can have an
idea of what customers think and which area they need to work on in order to
meet customer requirements. High customer satisfaction can facilitate new
customers or retain customers. This can increase market share which further increase
sales and shareholder wealth.

 

The internal business process perspective
focuses on internal operations which further the financial perspective by
creating shareholder wealth. The KPI can be manufacturing capabilities or
number of new products or services. By improving those KPIs, the company can
produce more products which lower fixed costs and improve profit margins.

 

Learning and growth perspective help managers
to identify areas to improve in order to achieve superior internal processes
that create value for customers and shareholders. Example of KPI will be
employee education and skill levels. If employees’ education level improves
then they will be more efficient in completing their works or more innovative
when designing new products. This can help the company to stay competitive in
the long run. 

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