Non-Financial Performance Indicators (NFPIs)

What are Non-Financial Performance Indicators (NFPIs)?

Non-Financial Performance Indicators (NFPIs) are metrics used to evaluate an organization’s performance in areas that cannot be directly measured through financial data. These indicators provide insights into customer satisfaction, employee engagement, operational efficiency, environmental impact, and other qualitative or quantitative factors that drive long-term organizational value.

Key takeaways

• Beyond financial metrics: Capture performance drivers that financial reports miss.
• Forward-looking insights: Predict future performance and competitive advantage.
• Holistic performance view: Combine people, processes, customers, and sustainability.
• Essential for ESG reporting: Key for environmental, social, and governance disclosures.
• Improves decision-making: Supports management strategies and stakeholder communication.

Categories of NFPIs

1. Customer-related indicators

• Customer satisfaction score (CSAT)
• Net Promoter Score (NPS)
• Customer retention rate
• On-time delivery rate

2. Employee-related indicators

• Employee engagement scores
• Staff turnover rate
• Absenteeism rate
• Training hours per employee

3. Operational indicators

• Product quality defect rate
• Production cycle time
• Supply chain efficiency
• Innovation rate (e.g., number of new products)

4. Environmental indicators

• Carbon footprint
• Waste reduction rate
• Water usage
• Renewable energy usage

5. Social and governance indicators

• Community impact metrics
• Diversity and inclusion metrics
• Health and safety performance
• Compliance metrics

Why NFPIs matter

Strategic importance

• Provide early warnings of operational issues
• Signal future financial and competitive performance

Stakeholder importance

• Investors increasingly evaluate ESG metrics
• Customers demand more responsible business practices

Organizational importance

• Helps align culture, performance, and long-term goals

NFPIs vs. financial KPIs

Feature	NFPIs	Financial KPIs
Focus	Qualitative/operational	Quantitative/financial
Time horizon	Long-term	Short-term or historical
Examples	NPS, defect rates	Revenue, profit, ROI
Predictive power	Strong for future performance	Strong for past performance

Challenges of using NFPIs

• Difficult to measure consistently
• May rely on subjective assessments
• Hard to benchmark across industries
• Requires strong data collection processes

Best practices for NFPIs

• Align indicators with business strategy
• Use a balanced scorecard approach
• Ensure consistency in measurement
• Combine with financial KPIs for a holistic view
• Automate data collection where possible

Examples of real-world applications

• Retail: Customer satisfaction and foot traffic metrics
• Manufacturing: Defect rates and supply chain reliability
• Tech: User engagement and innovation rate
• Healthcare: Patient satisfaction and safety metrics
• Sustainability reporting: Carbon intensity and recycling rates

Related concepts

• Key performance indicators (KPIs)
• Balanced scorecard
• ESG metrics
• Customer experience measurement
• Human capital reporting

Sources

• Harvard Business Review – Performance Metrics: https://hbr.org/
• OECD – Non-Financial Reporting Standards: https://www.oecd.org/
• IFRS – Sustainability Disclosure Standards: https://www.ifrs.org/

Frequently Asked Questions (FAQ)