What are five advantages that nonfinancial performance measures have over financial performance measures

Answer 1

Answers will vary on this. The major advantages are listed below:

Compared to financial measures, nonfinancial performance measures are more:
• relevant to nonmanagement employees who are generally more familiar with nonfinancial items
(such as times and quantities) than financial items (such as costs or profits)
• timely than historical financial data and, thus, more apt to indicate where problems lie or where
benefits can be obtained
• reflective of the leading indicators of activities that create shareholder wealth, such as
manufacturing and delivering quality goods and services and providing service for the customer
• causative of goal-congruent behavior (rather than suboptimization) because they promote
long-term success rather than the short-term success promoted by financial measures
• integrated with organizational effectiveness because they can be designed to focus on
processes rather than simply outputs
• indicative of productive activity and the direction of future cash flows
• appropriate for gauging teamwork because they can focus on outputs that result from
organizational effort (such as quality) rather than inputs (such as costs)
• cross functional than financial measures, which are generally related to one function
• comparable for benchmarking externally than financial measures (which can be dramatically
affected by differences in accounting methods)
• aligned with the reward system because they are more likely to be under the control of
lower-level employees than are financial measures