Question

Compare financial and non-financial performance, and explain why planning and control systems should consider both.

Answer 1

Answer:

Planning and control :

Planning control is concerned with the reconciliation between what the market requires and what the operation's resources can deliver. Planning and control activities provide the systems, produces and decision which bring different aspects of supply and demand together. The purpose is always the same to make a connection between supply and demand that will ensure that the operation's processes run effectively and produce products and services as required by customers.

Consider, for example,

The way in which routine surgery is organised in hospital. When a patient arrives and is admitted to the hospital, much of the planning for the surgery will already have happened. The operating theater will have been reserved, and the doctors and nurses who staff the operating theater will have been provided with all the information regarding the patients condition. Appropriate preoperative and post operative care will have been organised. All this will involved staff and facilities in different part of the hospital.All must be given the same information and their activities coordinated. Soon after the patient arrives, he or she will be checked to make sure that their conditions is as expected. Blood, if requires, will be cross-matched and reserved, and any medication will be made ready.Any last-minute changes may requires some degree of re-planning.

For example, if the patient shows unexpected symptoms, observation may be necessary before the surgery can take place.Not only will this affect the patients own treatment, but other patients treatment may also have to be rescheduled. All these activities of scheduling, coordination and organization are concerned with the planning and control of hospital.

Key performance indicator (KPI) is a measure used to reflect organisational success or progress.

Financial KPIs are generally based on income statement or balance sheet components, and may also report changes in sales growth (by product families, channels, customer segments) or in expense categories.

Non-financial KPIs are other measures used to assess the activities that an organisation sees as important to the achievement of its strategic objectives. Typical non- financial KPIs include measures that relate to customer relationships, employees, operations, quality cycle-time and the organisation's supply chain or its pipeline . Some prefer to use the term extra-financial' rather than non - financial, suggesting that all measures that contribute to organisational success are ultimately financial.

Financial performance indicates the growth of the firm while the non financial/extra financial performance are the indicators of customer satisfaction or the quality of service /products, the firm is supplying to customers which makes both the performance indicators necessary for the control and planning system.