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Non-financial performance indicators

Introduction

1.1 Limitations of financial performance indicators (FPIs)

Chapters 8 and 9 focused on FPIs. There are a number of problems associated with
the sole use of FPIs to monitor performance:

 Short-termism

 Internal focus

 Manipulation of results

 Do not convey the whole picture

 Backward looking

1.2 Solution – use NFPIs and FPIs

In order to overcome these issues a range of FPIs and NFPIs (non-
financial performance indicators) should be used to assess
performance.

Three key models can be used to assess financial and non-financial
performance:

 The balanced scorecard

 The building block model

 The performance pyramid

It is worth noting that the use of NFPIs presents its own challenges; most NFPIs are
in qualitative terms and can be difficult to measure and difficult to express in
quantifiable terms.

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