CAT / FIA FMA Syllabus F. Performance Measurement - Non financial measures - Notes ^{6 / 15}

Profit based measures have the following problems:

1. the subjectivity of profit

2. the scope for manipulation of profit

3. the problem of short-termism

A non financial performance indicator measures the performance of organisations not using money/profit measures and can provide managers with incentives to improve long-term financial performance.

For example, if customer satisfaction is low, this could imply that sales demand will fall in the future and this will have a negative effect on profits.

Examples of non financial indicators include defects/month and productivity/hour