Component 2: Analysing non-financial performance — Eduqas A-Level Business
Test yourself on Component 2: Analysing non-financial performance with EDUQAS A-Level practice questions.
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Component 2: Analysing non-financial performance explained
Money measures what has already happened; these measures tell a business what is about to happen.
Read the full explanation
Customer feedback and complaint rates predict repeat purchase and therefore next year's revenue; staff surveys predict labour turnover, calculated as leavers divided by the average number employed and multiplied by 100, and a workforce Herzberg would call demotivated shows up in a survey long before it shows up in output. Share of the market, found by dividing the firm's sales by total market sales and multiplying by 100, separates real growth from a rising tide. Output per worker per period and the environmental record, such as tonnes of carbon or waste diverted from landfill, complete the picture that Kaplan and Norton's balanced scorecard was designed to assemble. All of it can be gamed, and surveys reach only those who answer.
Your focus
- Explain how non-financial measures, including customer attitude surveys, employee attitude surveys, market share, productivity and a company’s environmental record, can be used to evaluate performance
Component 2: Analysing non-financial performance exam tips
Marking Points
- Credit for explaining each measure as a leading indicator, so customer and employee attitudes, share of market, output per worker and environmental data forecast performance the accounts will only report later.
- Marks for a calculation where one exists: share of the market as firm sales divided by total market sales multiplied by 100, labour productivity as output divided by the number of employees, labour turnover as leavers divided by average staff multiplied by 100.
- Application credit for choosing the measures that fit the business in the case, such as complaint rates for a service firm and output per worker for a factory.
- Evaluation credit for the weaknesses: samples are self-selecting, respondents tell managers what they want to hear, targets get gamed once staff are paid on them, and environmental claims can amount to greenwashing.
Examiner Tips
- 💡Questions often ask whether these measures are more useful than financial ones, so argue both and settle it on the stakeholder and the time horizon involved.
- 💡Where the case gives a survey score or a share figure, use the number; an applied sentence with a figure outscores a general paragraph about the merits of surveys.
- 💡Link a measure to a model where it fits, for example an employee survey to Herzberg or Mayo, but say what the model cannot see.
Common Mistakes
- Confusing market share with market growth, so a firm whose sales rose in a market that grew faster is described as gaining share when it has lost it.
- Treating a rise in output per worker as automatically good, ignoring that it can come from cutting staff, from longer hours or from quality being sacrificed.
- Listing measures without saying what decision each one informs, which leaves the answer at knowledge level.