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Abstract
Every organization, profit or not-for-profit, small or large, needs to assess its performance on regular intervals in order to measures the progress it makes (Uyar, 2010). There are several ways in which organizations can measure their business success. Typically, financial metrics are used to judge whether an organization is succeeding based upon positive trends and other key figures. However, in addition to determining success, organizations need to ensure that they take into account non-financial success measures as well. Organizations that focus on financial performance measures exclusively often disregard contemporary, value-creating opportunities and fail to identify or adequately assess the value-destroying threats facing the company (Bradford, 2010). By no means should an [url=http://www.1855sacramento.com/peuterey.php]peuterey outlet[/url] organization ignore financial measures; rather, they should combine them with an adequate number of non-financial performance [url=http://www.rtnagel.com/airjordan.php]jordan pas cher[/url] metrics to support the decision making processes within the organization. This paper will consider some of the non-financial performance indicators that should be taken into consideration across an enterprise that utilizes enterprise resources process (ERP) applications. It will also analyze implications that non-financial performance measures have on the organization and make mention of weaknesses that reside with financial performance measures.
Keywords: Enterprise resource planning, non-financial success measures
Non-financial measures for monitoring business success
According to Bradford (2010), companies have historically tended to focus more on financial metrics, such as total sales, net profit or return on investment (ROI) to measure an organizations performance rather than non-financial performance measures. While financial performance measures provide accurate measurements, they have been criticized as backward-facing measures. What must be added to make up for the lack of forward facing metrics is the use of non-financial performance measures. Instead of choosing between financial or non-financial measures, each should be viewed as complementary to each other (Chow & Van der Stede, 2006). A combination of the two success factors categories allows for greater business intelligence by leveraging data analytics to identify ways in which the organization can unlock value from within. Rather than just using one or another (financial or non financial) it is best to use a balanced approach which was first pointed out in 1992 by Drs. Robert Kaplan and David Norton (Bradford 2011). Because financial performance measures are typically expected from analysts and widely known about, the following will focus on what non-financial performance measures bring to the table and why they should not be ignored when monitoring business success. (This paper will not undermine the importance of financial performance measures but will casually mention them throughout this research as they do complement non-financial performance measures.)
Non financial performance measures
Non-financial performance measures such as customer satisfaction, [url=http://www.rtnagel.com/airjordan.php]nike air jordan pas cher[/url] operating efficiency, productivity and innovation are taunted as the panacea to address some of the weaknesses of the traditional measures (Ndlovu, 2010). In addition, there is a heap of performance information that can be extrapolated by analyzing the organizations customer base and the potential that lies within by using data analytics on [url=http://www.davidhabchy.com]barbour sale[/url] customer data that already resides within various data silos of the organizations information systems. Combining what the organizations knows about its customers along with other non-financial performance measures can shore up some of the weaknesses that exist by a strategic focus of financial performance measures.
One of the major weaknesses that financial performance measures do not address is that they do not consider total quality management (TQM). TQM is something that should not be overlooked because of the sizable impact that it has on the current and future operations of the organization. TQM stands at the forefront of [url=http://www.thehygienerevolution.com/barbour.php]barbour paris[/url] an organizations reputation and can be instrumental with customer retention. Another weakness with financial performance measures is that they focus more on where the organization has been rather than where it is going. Granted there are numerous financial models which predict the value that is yet to come in the future, but they are only predictions which are typically predicated on past successes with continuity into the future. In order to overcome these weaknesses of performance measurements, we turn to non-financial performance measures to shed some light. These combined with other non-financial performance measures like TQM and various client quality service metrics can enhance the organizations [url=http://www.thehygienerevolution.com/barbour.php]barbour[/url] future success. In the past, the pursuit of customer satisfaction has been the focus of business management. However, in the age of increased competition merely satisfying the customer is not good enough; rather, delighting customers has become essential for long-term success (Yang, 2011).
Total Quality Management
Organizations that emphasize quality tend to pay more attention to manufacturing, customer order-fill cycle times, new product introductions, design efficiency, employee skills, safety, training, turnover, empowerment and employee/customer satisfaction (Chow & Van der Stede, 2006). By focusing on TQM as a non-financial performance measure, there are many byproducts that can unlock all types of value for the organization. Many of the other non-financial performance measures that stem from an organizations focus on quality require very interconnect information systems that allow for an organization to share information in real time and achieve maximum benefit from a proficient ERP system. Luckily for organizations in an enterprise environment that implore an ERP system, they likely already possess the interconnectedness that is necessary to achieve optimal performance information. ERP systems integrate the various departments within an organization which can allow management to quickly determine the organizations performance with accuracy. For example, if customers begin reporting defects in products received, controls can be set up to alert management that six sigma numbers are not being achieved and can immediately be addressed. Problems like this can be created by faulty machinery, defective input products, lack of oversight and many other reasons. This type of example becomes more complex as the size of an organization grows because a large organization that lacks a proficient ERP system might not catch a growing defective finished product problem in a timely manner. Often times this is not something that will be caught by financial performance measures until it is too late. Most organizations understand the lifetime value of [url=http://www.achbanker.com/home.php]hollister france[/url] retaining a customer for life and when quality begins to sag, customer will look for alternative products from competitors as an alternative.
Quality is a desirable characteristic in which all organization must possess and ensure to its customer in order to maintain a positive image and continue to be successful. Non-financial measures of quality are often easy to quantify and understand (Horngren et al., 2006, p. 669). Quality blunders can be catastrophic for organizations that can lead to large setbacks or total collapse of the enterprise. As an example, consider the recent class action lawsuit concerning Dell Computers and Nvidia.
Nvidia is a well known organization that provides many different graphical products ranging from graphical processing units (GPU) for mobile and cloud technology as well as graphical chips in various types of computers (nVidia, 2012). Dell Computers regularly purchases component products from various manufacturers to create personal computers (among other peripherals and services) for individual consumers and businesses. In recent years, Nvidia provided a defective GPU for 15 types of computers that caused the system board to get too hot and cause a system failure. Because the GPU on mobile technology is typically embedded into the system board, the entire system board must be replaced as a result of the defect. Nvidia was not only late in correcting this problem but was hesitant in addressing the public. As a result, it had huge numbers of system failures which resulted in a class action lawsuit and catastrophic financial results for the company. The day that Nvidia announced the significant quantity of defective GPU's and the systems affected, the company's stock tumbled 24% (Menchaca, 2010). In addition to the lawsuit, Nvidia made a write off of $250 - $150 million to cover the cost of replacing the defective parts. Furthermore, their warranty's for affected units were extended for an additional year beyond the original warranty expiration date.
The public did not take [url=http://www.lcdmo.com/jordanpascher.php]jordan pas cher[/url] too kindly to Nvidia's organizational blunder and is evidenced by the numerous forums that stormed the internet as customers voiced their resentment of the way in which Nvidia handled this quality problem. Perhaps, if Nvidia had performed better data analytics to its TQM, it [url=http://www.lcdmo.com/jordanpascher.php]air jordan pas cher[/url] could have realized [url=http://www.vivid-host.com/barbour.htm]barbour uk[/url] the magnitude of the problem and corrected it before it got out of hand caused a huge financial loss for the organization. Therefore, TQM is a success measure in which great attention should be given to in order to proactively identify problem areas which could not only limit [url=http://www.1855sacramento.com/peuterey.php]peuterey[/url] costs due to quality issues, but also ensure that customers are satisfied with [url=http://www.maximoupgrade.com/hot.php]hollister[/url] products and do not seek competitors as a better alternative.
Ken Anderson
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