As a former CPA, I sincerely appreciate the importance of GAAP in providing a standardized view of financial performance. However, while GAAP offers a necessary foundation for financial reporting, it has limitations. Over time, GAAP’s complexity and technical nature have become a language only accountants fully understand. The first accounting textbook I opened began with, “Accounting is the language of business.” Sadly, today, accounting has evolved into the language of accountants alone.
In today’s business environment, where CFOs serve as strategic partners and storytellers, nonfinancial key performance indicators (KPIs) have emerged as essential tools. These KPIs are more forward-looking and track performance more holistically—beyond the financial results. They can give stakeholders a deeper understanding of company performance and pinpoint areas of operational efficiency, competitive differentiation and leverageable customer experience.
Below, we offer eight nonfinancial KPIs (or KPI categories) that CFOs need to be familiar with and may want to consider adding to the core measures of organizational failure or success.
1. Customer Satisfaction Score (CSAT)
Customer satisfaction is crucial to a company’s health and future success. While financials tell us what customers have done in the past, CSAT shows how they feel now, which often foreshadows future performance. This KPI is typically measured through post-purchase surveys, where customers rate their experience with a product or service. High CSAT scores can suggest customer loyalty, likely leading to repeat business, referrals and overall brand strength.
For CFOs, CSAT can be a telling metric that reveals whether revenue trends are sustainable or need strategic adjustment. A strong CSAT score reflects well on company culture and operational effectiveness, impacting everything from customer service to product development. It’s a clear reminder that satisfied customers are an outcome of quality service and a driving force behind a company’s financial growth.
2. Employee Engagement Score
Employee engagement can directly impact productivity, innovation and retention rates. An engaged workforce is typically more productive and less likely to seek opportunities elsewhere, reducing costly turnover. Employee engagement scores are usually derived from internal surveys measuring employee satisfaction, motivation and alignment with company values.
Understanding this KPI is crucial in assessing the organization’s capacity for sustained growth. High employee engagement often signals a positive workplace culture, strong leadership and an effective human capital strategy. When engagement scores dip, it can indicate deeper cultural or operational issues that, if unaddressed, could impact financial outcomes through lost productivity or increased recruiting costs.
3. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a forward-looking KPI that estimates the total revenue a company can expect from a single customer throughout the relationship. CLV is more than just a financial metric—it’s a strategic indicator of customer loyalty, product quality and market positioning. A high CLV often means customers are satisfied and likely to continue purchasing, which translates into stable future cash flows.
For CFOs, CLV can also inform budgeting decisions related to customer acquisition and retention efforts. Suppose the cost to acquire new customers rises. CLV can help justify investments in retention programs or loyalty initiatives that may yield higher returns than a constant pursuit of new customers.
4. Net Promoter Score (NPS)
Net Promoter Score (NPS) measures customer loyalty and willingness to recommend a brand to others. Customers are asked how likely they are to recommend a product or service on a scale from 0 to 10. Responses are categorized into promoters (9-10), passives (7-8), and detractors (0-6). The percentage of detractors is subtracted from the percentage of promoters to get the NPS.
NPS provides CFOs with insight into the likelihood of organic growth. A high NPS suggests a robust and loyal customer base likely to promote the brand, thereby reducing marketing costs and increasing customer acquisition through referrals. Conversely, a low NPS can signal issues that might impact revenue and reputation, emphasizing areas that require strategic improvement.
5. Market Share
Market share reflects a company’s competitive position within its industry. It shows the percentage of total industry sales captured by the company and indicates brand strength, market demand and overall performance in a competitive landscape. For CFOs, maintaining or growing market share is vital as it often correlates with economies of scale, improved bargaining power and more pricing flexibility.
Market share growth can signal that strategic initiatives effectively drive competitive advantage, while a decline may indicate the need for product innovation or enhanced customer engagement strategies. This KPI helps CFOs understand the company’s position relative to competitors and make informed investment decisions to secure or improve market positioning.
6. Innovation Rate
The innovation rate measures the proportion of revenue generated from new products or services introduced within a specified timeframe. This KPI reflects a company’s commitment to continuous improvement and adaptation in a fast-paced market. A high innovation rate suggests a robust R&D pipeline and a strong company culture that embraces change.
The innovation rate can guide decisions on R&D budget allocation, as higher rates of innovation often lead to long-term growth. By tracking this kind of KPI, CFOs can help ensure the company maintains a competitive edge through fresh offerings, meeting evolving customer needs and market demands.
7. ESG Metrics
ESG metrics have become crucial for companies seeking to build sustainable business practices and appeal to socially conscious investors and customers. Environmental factors include energy consumption, waste reduction, and carbon footprint; social factors encompass diversity and community engagement; and governance focuses on leadership, ethics and compliance.
ESG metrics are increasingly crucial as stakeholders demand transparency about businesses’ sustainability and commitment to ethical practices. Strong ESG performance can lead to greater brand loyalty, improved investor relations and access to favorable financing terms. As regulatory expectations grow, CFOs who track and improve ESG metrics are positioning their companies for resilience in a rapidly changing environment.
8. Supply Chain Efficiency
Supply chain efficiency measures the effectiveness and resilience of a company’s supply chain operations, from procurement to delivery. This KPI highlights the company’s ability to manage costs, meet customer demand and minimize disruptions. Factors such as lead times, inventory turnover and delivery accuracy play into this kind of metric.
For CFOs, supply chain efficiency affects profitability and customer satisfaction. By optimizing supply chain performance, CFOs can reduce costs and improve service levels, positioning the company to respond flexibly to market changes or disruptions.
Of course, companies can and should consider adopting many more KPIs, some industry-specific or tailored to unique goals. As a business changes and matures, so should the metrics by which it judges success.
