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Non-Financial Parameters of Company Evaluation

Although financial parameters play a critical role in evaluating a company’s performance. Recent research suggests that non-financial parameters could play an even bigger role in company evaluation. However, using financial parameters alone may not provide a wholesome picture of the current state of affairs in a company.

It is important to note that it can be quite challenging to choose the right parameters to evaluate performance. Evaluating company performance is instrumental in developing strategies, compensating managers and assessing organisational objectives and achievements. Therefore, companies must employ adequate non financials to get a clear picture of the company’ health and trajectory.

Since the company value of these intangible parameters must be protected to generate constant value, this post will delve into some of the important ones to enable you to gain some level of understanding on their importance in company success. Read on to learn more.

1. Reputation of Company

For a company to deduce some actionable drivers that will play a significant role on improving the esteem of a company, especially among the key stakeholders, the element of company reputation comes into play. Any company must have empirical-based insights to ensure that the stakeholders behave in a certain way to elevate the status of the company. This involves assessing the particular points where you feel the company could potentially run into reputational risks. Learning these metrics could help evade such risks; thus, keeping the company on track.

Furthermore, it is important to keep in mind that there is a correlation between service quality and company reputation. The best way to use reputation as a metric is to assess the inputs and outputs while at identifying any underlying effects that reputation may be having on the outputs. The outputs could include the quality of products and services rendered.

2. Workforce

Any company requires a staff that can get the job done. That is why the workforce is an important part of the overall success of a company and especially of the non financial evaluation. Therefore, it is virtually impossible to exclude the workforce when assessing company performance.

Furthermore, company management needs to understand some of the key benefits of workforce performance to enable them to develop objective and consistent methods for evaluating the workforce, which, in turn, benefits the company. This is an ideal way of determining the weaknesses, strengths and the possible gaps in the organisation. Therefore, the right workforce:

  • Creates a positive workplace environment : When employees are doing their duties effectively, the company gets a boost. However, if they’re not motivated, it is easy to bring down the whole department. Therefore, it is up to the company to ensure that it fosters an energetic and positive work environment. This will include rewarding high-performing individuals.
  • Achieves goals: The objective of any company is to achieve goals. When the workforce is highly motivated, they play a pivotal role in achieving the company’s set goals. For instance, they help in sales, positive customer interactions; thus boosting reputation and meeting deadlines.
  • Helps establish team trends: Poor performance from employees leads to poor productivity, which ultimately affects the bottom-line. Therefore, you can look out for trends in poor performance to establish the group that is succeeding and the one that is lagging. Evaluating the deficiencies will improve the health of the company.

3. Know-How of a Company

Every company must have access to extensive know-how. It could be anything from the skills and experience of the workforce to the business environment and the understanding of the needs of customers.

Therefore, how a company gathers, exploits or shares the know-how can be very instrumental in its ability to grow successfully. It doesn’t just apply to small businesses but also multinationals. However, you must understand that using the company know-how isn’t just about innovating products or services or finding a way to diversify methods of selling. Essentially, the know-how already exists in a company and can be found in:

  • Your future plans.
  • The designs and processes.
  • Employee experience.
  • All the documents available, either on paper or digitally.

4. Environmental Responsibility

There is an increase in environmental crisis and it’s a global concern. The identification and management of such risks is a global challenge that every individual or organisation should strive to achieve. Therefore, many businesses have stepped up and shown efforts to help avert the looming crisis.

Organisations have actually played a very critical role to this end. Therefore, environmental responsibility is a core non financial parameter to evaluate company growth. Companies should implement strategies to address these issues. It goes from managing the costs of managing waste to ensure that the environment isn’t overstretched.

When companies harness their corporate power and realise that the issue of climate change shouldn’t be a matter of debate but rather action, they can easily make the shift towards a not only sustainable company but the economy as well. This is because for a company to survive and increase profit margins, they have to adopt environmental responsibility.

5. Status of Digitisation

The state of digitisation in companies has a huge bearing in their success stories; thus, a critical parameter in evaluation. Moreover, digitisation enables different new forms of company cooperation, especially between service and product offerings together with the relationships the companies have with employees and customers.

Additionally, the status of digitisation makes organisations reflect their prevailing strategy to enable them to explore new opportunities in the early stages systematically.

When evaluating the status of digitisation, companies can find out the existing gaps; thus, be able to come up with strategies on how best to use digitisation to get rid of such loopholes. Covering all the bases puts a company at a greater advantage of the growth in reactivity, flexibility and product or service individualisation.

6. Resource Allocation

The way the economy is currently set, without proper resource allocation to projects, these projects can easily dwindle. Therefore, project managers in companies have to do with the little resource they have to make the most out of it to ensure company success.

There is a direct correlation between how managers allocate resources and the impact the allocation has on company productivity. Resources could include raw materials, workforce, time and equipment required to execute the projects at hand.

Some projects may need more resources than others. This means that managers should allocate these resources to ensure that there isn’t a resource shortfall. Also, it means ensuring resources aren’t overutilised or underutilised to ensure optimal productivity.

Bottom-line

Despite non-financial parameters being increasingly important in evaluating performance and decision-making, companies shouldn’t copy the strategies used by others. Rather, the choices of the parameters to use should be linked to company-specific parameters like organisational objectives, value drivers and corporate strategy. Furthermore, these parameters are dynamic. Therefore, what may work today, may not necessarily work tomorrow, which calls for continuous assessment to ensure the continued growth of the company. Contact us to improve your non-financial performance.

By Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues.

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