Measuring business success on multiple fronts: the role of non-traditional KPIs
From regulators to investors, market stakeholders are demanding greater accountability and transparency from organizations.
Increasingly, organizations are looking for nonfinancial metrics to evaluate key drivers of value and performance.
While these new reporting requirements are not yet mandatory in Alberta, as KPMG partner Zarina Bhambhani points out, regulations require such reporting in many parts of Europe. Their movement from discretionary to compulsory on this side of the Atlantic is not a matter of ‘if ’ but ‘when.’
Selecting the right metrics can help a company meet regulatory requirements and stakeholder expectations, make smarter choices and deliver relevant results.
Yet implementing these metrics is a highly complex task that organizations may struggle with. KPMG’s two newest partners in Edmonton share their insights: Bhambhani, an audit partner who works with private and publicly traded companies, and, Michael Capus, an advisory partner who focuses on public sector organizations.
SUSTAINABILITY
Including the environment in your bookkeeping is an idea that grows in relevance with each passing year. Measuring organizational sustainability is not yet a widespread regulatory requirement in Alberta, says Bhambhani, but it is becoming a best practice and will likely become mandatory.
There are a multitude of widely recognized metrics for environmental impact such as greenhouse gas emissions, water consumption and waste output. Capus sees a change in how these measurements are being communicated to external stakeholders.
“We are increasingly advising our clients to frame these metrics from the stakeholder’s perspective,” he says. “For carbon emissions, instead of saying ‘We emitted this many tonnes of carbon dioxide,’ we suggest providing context, such as ‘Our emissions are equivalent to one person flying around the world this many times.’”
SAFETY
Accident responses and workplace injuries have always been of interest to responsible employers, and Capus projects that their relevance will only increase with time while new measures are developed.
Boards of directors are already demanding accountability for metrics such as the number of safety incidents that occur, but regulators are now looking for new measures of safety alongside these traditional yardsticks.
Bhambhani sees cyber security as a burgeoning field here. As firms come to hold more and more data electronically, a company might be held accountable in the near future for the speed of its response to a cyber attack just as oil companies today are held accountable for spills. She says that KPMG works with organizations to identify these threats from the boardroom to the back office.
REPUTATION
Information moves faster now than it ever has—which means a reputation that took years to build can be tarnished or destroyed in record time, possibly jeopardizing the survival of an organization. In response, many companies are creating or strengthening whistle blower programs, says Bhambhani. “The extent of the public reporting varies, but many organizations are carefully quantifying and analysing their whistle blower data because they understand the potential impact on their public image,” she says.
On the public side, Capus sees many governments beginning to build in reputational requirements to service delivery contracts. By stipulating minimum satisfaction rates in contracts with private service providers, governments can hedge their reputational risk and help secure the services citizens need. The Australian states of New South Wales and Victoria are trailblazers in this area, according to Capus, though most provincial governments in Canada are now considering how to apply this idea.
CUSTOMER FOCUS
Leading public organizations are taking steps to bring the voice of the people they serve formally in to their accounting practices, says Capus. He was worked with clients to help frame their strategy with such ideas as “Yelp for citizens,” where users provide ratings of the services they use, which the organization can track and set goals around.
Businesses are also recognizing that today’s consumers prioritize more than just a company’s bottom line, both when choosing products to buy and when making investments. Bhambhani points to the growing “social enterprise” model, where businesses partner with non-profit organizations to donate a portion of profits or products to causes. Companies track metrics like the dollars that are donated each year and volunteer hours spent by employees, and often report these figures publicly to address customers’ and investors’ desires to support a company that gives back.
Non-financial metrics will be different for each organization.
According to Capus, most organizations have three or four key assets that contribute to the overall picture of a company’s performance and provide a unique competitive advantage.
These assets are at the heart of the organization’s ability to generate future earnings and help to demonstrate long-term value—and quite often are not reflected in the balance sheet.
The key is to identify and measure key performance indicators that focus on the matters most relevant to the future of an organization.
To learn more about emerging key performance indicators, speak with a KPMG adviser or visit