MAF 551

ASSIGNMENT 3 (AC2204D)
(DIVISIONAL PERFOMANCE)
DATE OF SUBMISSSION : 26 NOVEMBER 2015
NAME OF LECTURER : MISS ZAHRAH SIRAT
BY :
1. SITI ZURINA BINTI BUSRAH (2014922253)
2. SHARIFAH FATHIAH BINTI WAN HASSAN (2014789179)
3. SITI NURUL DIYANAH BINTI MOHD MUSTAFA
(2014781841)
4.

Question 4

Explain the advantage of non-financial measure would offer for managing

resources and creating value, compared with financial measure.
Definition of non-financial measure and financial measure :
Non-financial measure is any quantitative measure of either an individuals or
an entitys performance that is not expressed in monetary units. This includes any
ratio-based performance measure in that a non-financial performance. Example
non-financial performance measure includes measures of customer or employee
satisfaction, quality, market share, and the number of new products.
On the other hands, financial measure is the results of a firm's policies and
operations in monetary terms. Hence, financial measure is a subjective measure of
how well a firm can use assets from its business and generate revenues over a
given period of time. These results are reflected in the firm's return on investment,
return on assets, value added, etc. Ultimately the universal measure of business
performance is money and the ultimate forms of this measurement are the final
accounts of the company. Money has the advantage that it can be used to measure
the effectiveness and efficiency not only of different business functions (marketing,
engineering, production etc.) but also of different businesses (from manufacturing
companies to retailers and from hotels to garages).
Non-financial performance measures are sometimes considered to be leading
indicators of future financial performance, while current financial performance
measures such as earnings or return on assets are commonly considered to be
trailing measures of performance.
Advantage of non-financial measure compared with financial measure :
First advantage of non-financial measure compared with financial
measure is It create closer link to long-term organizational strategies.
Financial evaluation systems generally focus on annual or short-term performance
against accounting yardsticks they do not deal with progress relative to customer
requirements or competitors, or other non-financial objectives that may be
important in achieving profitability, competitive strength and longer-term strategic
goals. For example, new product development or expanding organizational
capabilities may be important strategic goals, but may hinder short-term accounting
performance. By supplementing accounting measures with non-financial data about
strategic performance and implementation of strategic plans, companies can
communicate objectives and provide incentives for managers to address long-term
strategy.
Second, non-financial data can provide indirect, quantitative
indicators of a firms intangible assets. Critics of traditional measures argue
that drivers of success in many industries are intangible assets such as
intellectual capital and customer loyalty, rather than the hard assets allowed on

to balance sheets. Non-financial measures related to innovation, management

capability, and employee relations, quality and brand value explained a significant
proportion of a companys value, even allowing for accounting assets and liabilities.
By excluding these intangible assets, financially oriented measurement can
encourage managers to make poor, even harmful, decisions.
Third, non-financial measures can be better indicators of future
financial performance. Even when the ultimate goal is maximizing financial
performance, current financial measures may not capture long-term benefits from
decisions made now Similarly, investments in customer satisfaction can improve
subsequent economic performance by increasing revenues and loyalty of existing
customers, attracting new customers and reducing transaction costs. Non-financial
data can provide the missing link between these beneficial activities and financial
results by providing forward-looking information on accounting or stock
performance. For example, interim research results or customer indices may offer
an indication of future cash flows that would not be captured otherwise.
Fourth, The choice of measures should be based on providing
information about managerial actions and the level of noise in the
measures. Noise refers to changes in the performance measure that are beyond
the control of the manager or organization, ranging from changes in the economy to
luck (good or bad). Managers must be aware of how much success is due to their
actions or they will not have the signals they need to maximize their effect on
performance. Because many non-financial measures are less susceptible to external
noise than accounting measures, their use may improve managers performance by
providing more precise evaluation of their actions. This also lowers the risk imposed
on managers when determining pay.

Question 7
Explain the concept
performance.

of

benchmarking

in

improving

the

companys

Definition of benchmarking
Benchmarking is the process of comparing one's business processes and
performance metrics to industry bests or best practices from other companies.
Hence, benchmarking are measurement of the quality of an organization's policies,
products, programs, strategies, etc. and their comparison with standard
measurements, or similar measurements of its peers. The objectives of
benchmarking are to determine what and where improvements are called
for, to analyze how other organizations achieve their high performance
levels, to use this information to improve performance.
In summary, the process of benchmarking, or identifying the best practices
that exist in your particular business or industry, is a method that is rapidly gaining
a reputation for helping businesses improve productivity and profit. Its also set
standards for operation through measurable, scientific, or business methods, is a
concept that has developed and solidified into a clear series of steps that benefit
industry or businesses as a whole.
How the concept
performance?

of

benchmarking

in

improving

the

companys

Ultimately, the concept of benchmarking improve company performance as

can a whole by observing competitor, identifying area of excellence, and ongoing
work.
First, benchmarking can improve company performance by observing
competitors. Benchmarking is used to identify what other businesses do to
increase profit and productivity, and then adapting those methods to make your
business become more competitive. Imagine if you had a car lot that sells 50 cars
per month and down the street a competitor sells 300 cars per month. By studying
and identifying what your competitor is doing, you could increase sales.

Second, benchmarking can improve company performance by identifying

areas of excellence. Another productive use of benchmarking is to identify areas
of excellence with your employees and in your existing business. Picture a furniture
factory where one employee assembles more chairs than his co-workers. By
examining his methods and setting them as the benchmark for productivity, other
employees can be trained to work in less time. This will increase productivity as a
direct result of using these techniques.
Third, benchmarking can improve company performance by creating an
ongoing work. Businesses also use benchmarking as an ongoing process that
always changes and adapts. By studying and comparing your benchmarks to the
competition, the industry, and within the individual processes of your company, you
allow them to evolve to meet changing demands and requirements. By keeping
your company and your personal business benchmarks fluid, you ensure that your
business follows the best practices defined by you. The end result should be a
marked increase in productivity and profits.