If you thought CFO was purely a number-crunching role, think again. Growing numbers of finance leaders are looking to non-financial KPIs when forecasting future performance, according to a finding in Adaptive Insights’ Q3 2016 CFO Indicator report.
Non-financial KPIs are having an increasing impact in tracking, measuring and forecasting corporate performance. As recently as two years ago, just 10 per cent of KPIs were non-financial. According to Adaptive’s global survey of 306 CFOs, now 76 per cent of CFOs report they are tracking non-financial metrics. What’s more, 41% of respondents expect these data points will make up one-third or more of their KPIs by 2018.
There’s also a trend towards fewer KPIs overall: in the survey, 47 per cent of finance teams track 10 metrics or less, and 36 per cent of them track between 11 and 25 metrics.
Some challenges lie ahead: how to work out which are the right non-financial metrics that should be tracked – HR data? Sales figures? Productivity measures? And how to account for these KPIs being more subjective by their nature, and prone to bias?
Adaptive argues that CFOs and their teams should lead the effort to define these important non-financial KPIs, and that in doing so, their access to, and management of, non-financial data will increase. The report makes the case that there’s a correlation between effective metrics and finance teams that don’t just stick to the numbers.
“To efficiently gather and accurately track that data, organizations will need to break through existing data silos and more closely collaborate with other parts of the business. When they do, they are likely to feel even more confident in how they track their performance. Nearly 80% of companies that report having effective metrics also have finance teams that track non-financial KPIs.”
Adaptive’s report also says business processes and skillsets will need to “fundamentally” change to accommodate new non-financial metrics. This will run the gamut from data gathering and analysis to cross-functional collaboration and training.
“With the right mix of technologies that free up time and enable deep visualization and analysis of metrics, CFOs and their teams can lead the complex effort of adding the non-financial KPIs that lead to greater accuracy in forecasting an organization’s future.”
Is your organisation measuring non-financial KPIs? If so, which ones have you found to be the most effective? Get in touch – we’d love to hear from you.