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Nov 2012

How to develop non-financial KPIs

This tool provides guidance for identifying and designing key performance indicators (KPIs) for non-financial performance measures.

In today’s knowledge economy, company value is no longer driven primarily by physical assets, but is increasingly attributable to non-financial business drivers — the intangible assets of an enterprise.

Success and future value creation depend on the effective measurement and management of these critical non-financial or intangible resources that comprise the intellectual capital of the business.

Non-financial KPIs, also referred to as the intellectual capital of an organisation, include the knowledge, skills, brands, corporate reputation, relationships, information and data, as well as patents, processes, trust or an innovative organisational culture.

The Intellectual Capital Performance Indicator Design Model that provides the basis for this tool guides the user through the process of:

  • determining which value drivers to measure
  • formulating key performance questions (KPQs) to ensure KPIs are useful and meaningful to the organisation
  • selecting the right measurement instrument

Specific guidance and examples are provided for:

  • measuring human capital
  • measuring customer experience
  • creating KPI indices
  • avoiding dysfunctional behaviours

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For both existing and newly developed methods, it is important to assess (a) whether it is possible to collect meaningful data, and (b) whether the data will help to answer your questions. Finally, it is important to assess whether the resultant data warrants the cost and efforts of measurement (which can be significant).