What is the importance of non-financial KPIs?

by Herschelle Haywood | March 16, 2023

Have you ever wondered why a company like Airbnb, which owns very few physical assets, is valued at billions more than the largest hotel chains with hundreds of properties globally? The answer lies in non-financial KPIs. Non-financial KPIs are frequently ignored and excluded from an organisation’s operations since many organisations have been disappointed in their efficacy. While it is not automatically implied that these large hotel chains don’t use non-financial KPIs but rather that Airbnb places a greater emphasis on them to drive customer satisfaction. This success of Airbnb’s non-financial KPI driven business model highlights the importance of non-financial KPIs in driving business performance and ultimately impacting a company’s financial results.

What are non-financial KPIs?

Non-financial Key Performance Indicators (or KPIs) are measurements that gauge a company’s performance in areas outside of its financial outcomes. These may include operational effectiveness, employee engagement, and customer satisfaction. Non-financial KPIs are crucial since they can offer essential insight into the general health and performance of an organisation. For instance, high customer satisfaction levels may be a sign of a solid brand reputation and a devoted clientele, but low employee engagement may be a sign of subpar management or a hostile workplace. A corporation can identify opportunities for improvement and make strategic decisions to enhance its overall performance by comprehending and tracking these non-financial KPIs.

Why should a business focus on non-financial KPIs?

“What you reap is what you sow” is a cliché phrase which translates so well to KPI’s. Whichever KPIs a business chooses to measure its performance will often translate directly into outcomes. Thus, what you measure is what you get.

To emphasize the point expressed above, let us look at the following example. Sales managers and sales representatives who are incentivised by bringing in more revenue will frequently find themselves seeing more clients than is reasonable and, in the process, sacrifice the quality of their services. This is because a business that is driven by sales will measure their performance by the total revenue that their clients bring to the company. As a result, there could be fewer repeat customers, which could damage the company’s reputation.

However, had the abovementioned business focused on the non-financial KPI’s in which the sales manager along with the sales representatives emphasised client satisfaction as opposed to the company’s revenue, it might result in a higher return from existing customers and, in addition, the business could see an increase in new customers through reputation growth. This will be more beneficial to the company in the long term as the non-financial KPI will increase the financial KPI’s as well.

The benefits of non-financial KPIs

Compared to financial KPIs, non-financial KPIs have several advantages. The following are some major benefits:

  1. Holistic view: Rather than concentrating solely on financial results, non-financial KPIs offer a more comprehensive picture of a company’s performance. This can assist in locating potential improvement areas that may not be readily obvious from financial data.
  2. Early warning signs: Non-financial KPIs can serve as early indicators of potential issues. For instance, a drop in consumer satisfaction may be a sign of an issue with product quality or customer service, which may be fixed before it affects financial performance.
  3. Employee engagement: Non-financial KPIs that measure employee satisfaction and engagement can be used to spot problems with staff morale, attrition, and productivity.
  4. Strategic decision-making: Non-financial KPIs might offer insightful data for making strategic decisions. A corporation can make strategic decisions about product development and marketing by, for instance, using customer satisfaction KPIs to understand the needs and preferences of its customers.
  5. Risk management: Non-financial KPIs can be used to identify and reduce risks including those posed by the environment, society, or government. This might lessen the danger of damaging effects on the company’s reputation and bottom line.

The challenges associated with non-financial KPI

Unfortunately, non-financial KPIs do have some challenges of their own.
These include:

  1. Difficulty in measuring and comparing: Non-financial KPIs can be trickier to monitor and compare than financial KPIs since they can be more subjective.
  2. Limited ability to show financial impact: Lack of clarity regarding the financial impact of a given action or choice.
  3. Lack of standardisation: Non-financial KPIs frequently lack uniformity, which can make it challenging to compare performance across various businesses or industries.
  4. Limited ability to track long-term performance: Non-financial KPIs may not be as effective as financial KPIs for tracking long-term performance.

How can a business fully utilise the advantages of non-financial KPIs?

Since we have discussed what non-financial KPIs are, why a business should focus on them, and their benefits and challenges, it is time to talk about how to take full advantage of all the benefits and how to overcome their drawbacks in order to generate more sales and profits.

The following steps could be implemented in order to unlock the full potential of non-financial KPIs:

  1. Align non-financial KPIs with the broad business objectives: Make sure the non-financial KPIs you monitor correspond to the business’s overarching objectives. By doing this, you will ensure that the information you gather is pertinent and suitable for decision-making.
  2. Combine financial KPIs with non-financial KPIs: Financial KPIs can benefit from the context that non-financial KPIs can offer. Monitoring employee satisfaction, for instance, can assist in providing an explanation for performance measures like low revenue or productivity.
  3. Non-achievement of non-financial KPI’s should be shared with all stakeholders: Inform all stakeholders, including staff members, supervisors, and executives of KPI data that do not meet the required performance levels. This will make it more likely that everyone will be aware of the information and be able to use it to make wise judgements.
  4. Utilize non-achievement of non-financial KPI data to take action: Use this data to pinpoint areas that require improvement and implement modifications to resolve any problems. This will make sure that the data is being used to effect change rather than merely being collected for the sake of gathering data.
  5. Regularly review and update non-financial KPIs: Non-financial KPIs can change over time and may need to be updated to reflect changing business goals or priorities. Make sure to regularly review and update non-financial KPIs to ensure they remain relevant and useful.

Concluding thoughts

In our concluding remarks, we would like to consider the success of a business such as Airbnb, which has based its success on non-financial KPIs. When Airbnb first debuted in 2008, it was viewed as an idea with a lot of potential but also a lot of rough edges. As First Round Review explained in their initial review of the company, the phrase “positively amateurish” was used to highlight Airbnb. ​(Schleifer, 2016)​

Today, the company is far from being perceived as “amateurish,” contrary to earlier perceptions. This is mostly because Airbnb’s founding start-up team came together and took action to work on its non-financial KPIs, with the company’s primary focus changing towards delivering an amazing user experience. Before making bookings, users are now given reasonably priced and opulent rental listings with eye-catching, professional images of each property. After this turnaround, the business experienced phenomenal growth and profits.

Despite all the macro variables that most people believed would negatively affect the company, Airbnb had its most successful quarter in its most recent Q3 financial performance results. The company experienced a 31% year-on-year growth in gross booking value and a massive 46% year-on year growth in its net profits.

With all these considerations in mind, it is clear that non-financial KPIs should be the primary component in determining the entity’s financial KPIs in order to elevate enterprises to the next level, which will in turn lead to increased performance and profitability

If you need assistance in implementing non-financial KPI metrics in your business, contact Dale Petersen at 021 819 7802 or at dpetersen@wauko.com to arrange a helping hand from our team.


​​Schleifer, A. (2016, December 8). How Design Thinking Transformed Airbnb from a Failing Startup to a Billion Dollar Business. Retrieved from First Round Review: https://review.firstround.com/How-design-thinking-transformed-Airbnb-from-failing-startup-to-billion-dollar-business


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