To better measure an organization’s success in carrying out its vision and strategy, many are now looking beyond the numbers and utilizing broader, far-reaching performance management measurements that capture both financial and non-financial performance metrics.

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Article reprinted from Spring 2013
S T R A T E G I E S
Management & Performance
Performance Management: Looking Beyond the Numbers
H
istorically, many organizations measure the health of organization and the successful utilization of these areas is
their business through traditional financial reporting often not monitored and measured.
metrics. Executives tend to evaluate success or failure
To better measure an organization’s success in carrying
based on high-level results such as revenue growth, net income,
out its vision and strategy, many are now looking beyond
current ratios and others. There are obvious reasons for this.
the numbers and utilizing broader, far-reaching performance
First, traditional financial statements provide very specific
management measurements that capture both financial and
analysis. By comparing current financial statements to prior
non-financial performance metrics.
financial statements, a stakeholder can easily determine where
a business has improved or deteriorated simply by comparing A great example of this is the balanced scorecard approach.
current results to prior or budgeted results. Second, many third- Developed by Robert Kaplan and David Norton, the balanced
party stakeholders such as banks, outside investors or regulatory scorecard has actually been around for a number years, but
groups utilize traditional financial statement results to assess continues to gain traction as many organizations are looking
their own compliance needs, creating an obvious incentive for for competitive advantages in this tight, global economy. The
management to focus on those metrics. balanced scorecard measures an organization through its
financial results, customer satisfaction, internal processes and
While financial statement reporting metrics provide value,
its own employees. The approach is dictated by the assumption
they have certain inherent limitations. First, financial statement
that all parts of a business, both financial and non-financial,
results are “lagging” indicators; they represent a measurement
need to be evaluated and improved. The balanced scorecard
of results at a certain time, which can be days or even months
approach requires a business to develop its own non-financial
behind when that data is being evaluated. These are fine for
© Copyright 2013. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved.
reporting metrics that can be monitored and evaluated on an
evaluating the viability of an enterprise. More valuable for
ongoing basis. This is critical as any performance measurement
strategic planning purposes are “leading” indicators, which are
plan must provide the ability to measure success or failure.
generally non-financial metrics that can be produced easily on a
real time basis and can provide management with more relevant Regardless of the particular performance measurement plan
information in the decision-making process. Second, financial an organization uses, if metrics are to serve as a useful tool,
statement metrics only report on a portion of an organization’s they should address all functions that support the success of
activities. Many important aspects such as intangible asset the organization, both financial and non-financial.
usage, human capital, organizational culture and others are
not easily evaluated through the review of financial statements.
Yet, they can be some of the most important elements of an JEFF MANWILLER
CBIZ MHM, LLC • Bethesda, MD
business is growing yours
301.951.3636 • jmanwiller@cbiz.com
our