Traditional KPIs for CFOs - Time to Get the Whole Story

Data matters–especially when it comes to measuring the relative performance of a business.

After all, most organizations need to know key business drivers like cash flow, sales and revenue. These numbers - traditional KPIs for CFOs -  make a business tick and are how you judge the relative success of your business, right? Well, not so fast.

Financial key performance indicators (KPIs) have always been important metrics. Historically, in most cases, these were the data points measured and tracked to create budgets and forecasts. However, more and more organizations are finding these traditional CFO KPIs don’t tell the whole story.

A Change in Models

The traditional business model has changed over the years. The rise of the Internet and advanced technology are often seen as key drivers behind that change.

Now, with the growth of big data, the success of a business can no longer be tracked by purely financial numbers. That’s where non-financial KPIs —intangible data— have become increasingly important.

To understand the importance of these intangibles, look no further than to some of the biggest brands operating today. Take Uber and Airbnb, for example. Neither existed ten years ago, and neither hold any physical assets (Uber doesn’t own cars, Airbnb doesn’t own property), yet they are worth billions of dollars.

Their success has been heavily based on customer experience, human capital and competitive intelligence. None of these drivers can be easily measured in cash flow or revenue, the traditional CFO KPIs. Yet these intangible, non-financial KPIs increasingly play a critical role in guiding strategy and long-term decision-making.

The Non-Financial KPI: An Overview

Before I delve much deeper into the topic, I want to be sure you have a solid understanding of the basics of the non-financial KPI. You’ve likely heard of them–they’ve become increasingly popular over the last few years—but this section will give you a basic overview.

Non-financial KPIs often measure intangibles—the data that matters to your organization but that is often hard to quantify. These key intangibles include:

• Customer experience.
• Customer retention.
• Business culture32.
• Employee happiness.
• Brand reputation.
• Process efficiency.

The list can go on, but these are some of the key non-financial KPIs receiving additional focus inside many organizations.

It probably seems obvious that these factors are key to overall business success. After all, a negative customer experience score will decrease customer retention, the customer churn rate will increase, sales will decrease, and the bottom line will be negatively impacted.

It’s important to note that these non-financial KPIs take the business itself into account, too. More and more data highlights the importance of employee retention and motivation as key factors in an organization’s overall long-term success.

Many businesses have taken pains to develop systems and processes that identify and track key non-financial KPIs. These are then included in any discussion of budgets, forecasts and key drivers. Organizations that have embraced non-financial KPIs find that they provide incredible insight into long-term trends and competitive advantages.

CFOs and KPIs - Breaking Down the Data

As you can see, budget managers and CFOs are in an excellent position to take the lead when it comes to non-financial KPIs. After all, few others have the access and ability to break down data better than the CFO.

As CFOs and budget managers continue to become key decision makers on the management and strategy teams, being able to collect and synthesize data (both financial and otherwise) matters.

This is where they can make the jump from the ‘bean counters’ of the past to the strategic partners of the future.

Non-financial data most often comes through other business units, such as marketing and human resources. Strategic CFOs should recognize that developing opening communication with other departments and instituting routine info sharing sessions will only benefit the organization overall.

In addition, CFOs and budget managers can take the lead in developing processes for identifying which non-financial KPIs truly matter. This gives them the advantage of being key stakeholders in creating a new financial forecasting and decision-making model that includes a more modern and well-rounded data presentation.

Final Thoughts

Virtually every organization can benefit by adding non-financial KPIs into the mix.

These factors will often help highlight the overall long-term strategic goals for the business and can highlight areas of intellectual and competitive advantage.

If you haven’t considered tracking non-financial KPIs, there’s no better time to get started.