Impact of non-financial indicators on the company's performance

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National Research University Higher School of Economics

Faculty of Management

SINGH BHUPENDRA

Impact of non-financial indicators on the company's performance

Master's Thesis

in the field of “Management” 38.04.02

“Global Business” Master's programme

Academic Supervisor

Senior Lecturer, Professor

Anna Novak

Reviewer

Seniorlecturer, Facultyof Economics

Financial Management Department

Irina Khvostova

Nizhny Novgorod, 2020



Table of Contents

1.Introduction

2.Significance of Balance Scoreboard

3.Contractual Approach : theoretical analysis

3.a) Contractual approaches: postulates, aims and methods of control

3.b) The role of non-financial indicators: they facilitate coherence between strategy and allocation of decision rights

3.c) Role of non-financial indicators : they help in reducing the conflicts

4.Cognitive Approach: theoretical analysis

4.1) Cognitive Approaches:postulates according to the theories

Organizational Learning and movement of resources and skills

4.2) Cognitive Approaches : purposes and methods of control

5.An analysis of customer satisfaction

6.Relevance of Non-financial indicator in economic crisis

7.Advantage and disadvantage of non-financial indictors

8.Conclusion

9. References

satisfaction customer non-financial indicator crisis



Introduction

The factors justifying the use of non-financial indicators for evaluating the performance of an organisation are various and refer to various theoretical explanation. Our interest in these criteria is justified in a actual context (financial scandals, increased market volatility, etc.) showing the limits of accounting and financial information as a communication vector of performance. Parallelly, Financial indicators have been recognised through their Economic Added Value and the non-financial indicators have been considered for the instrument such as Balanced Scorecard. What is the significance of non-financial indicator ? Are not they the vector of intern or extern communication ? To what extent non-financial indicators are being implemented while evaluating the performance of company ? How could be measured Customer satisfaction, one of most effective non-financial factor ? Is customer satisfaction impacts share value of the company ?

How the multicultural team helps in the expansion company in another countries ? This thesis would try to find the answer to these question basing research on theoretical explanation (Contractual Theory and Cognitive theory).

Even lot of scientific literature have been considered to answer the above raised question and showcase the relevance of non-financial indicators. Internship of two months in TransLink organisation helped me to understand as to how the non-financial indicators namely multicultural teams and customer satisfaction have impacted the growth of company and its expansion to other regions of world. Although ongoing pandemic of COVID-19 has affected the life of every individual but it exhibits the relevance of non-financial indicators and it would be considered to showcase the significance of non-financial indicators during economic crisis generated through various factors such as economic break down as in 2008 economic crisis or pandemic issue - present situation as in 2020.

The synthetic definition of the idea of non-financial indicator does not emerge from literature. Non-Financial indicators are often considered contrary to financial indicators according to their function or contextual manner. According to Kaplan and Norton (1998), non-financial indicators constitute the central subject explaining that they complement financial indicators which pays a lot of attention to the management of project of short term. Therefore, indicators such as measuring the penetration of the market, level of quality of an organisation, satisfaction of client and employees, level of motivation of employees are the indicator of natural strategic which could be used to improve the rate of profitability.

Strategic indicators helps the manager to deploy and manage the specific strategy of short term whereas non-financial operational indicators such as rate of waste in a workshop, weekly promotional investment in the sales force makes the management of daily routine better. A whole stream of literature dealing with the control of management and steering consider non-financial indicators of this kind (Lorino, 2003). They are supposed to reflect the strategy of the organisation and performance axe on which they operate: Clients, internal process and HR. They are non-financial indicators because they can't express directly the financial objective of the organisation as could be done by profitability indicators, based on the result or turnover.

Besides, non-financial indicator which are included in strategic perspective are based on the management of human resources or on the relation of organisation to external factors such lobby, ecological association etc. could be respectively qualified as social(Martory, 1999) and societal (Oxibar et Dejean, 2003). Based on this literature, this thesis propose following synthetic definition: As opposed to financial indicator, non-financial indicator cannot be measured accurately in terms of exact value. They don't provide global arithmetic evolution of creation of value for an organisation.

In this thesis, I will extend the these different approaches showing that use of on financial indicators with respect to the performance could be justified by basing on theoretical grids contractual and cognitive.

As far as contractual theory, key performance is linked to the structure of control system and allocation of rights of property (Charreaux, 2002 a, p. 30). In this context, non-financial indicators fits into the incentive and control system in order to ensure that employees or leader don't waste the potential value. They allow to reduce the conflict of interest between shareholder and managers or manager and employees and they are more impactful then financial indicators because they are also considered the most suitable means of evaluation of the performance.

For the cognitive theory(theory based on the knowledge), performance is linked to the fact that organisation knows to adjust to its environment and also knows to develop source of knowledge which could create the value (Charreaux, 2002 a).The ultimate purpose of non-financial indicators is not only to limit the conflict but rather enlightened the management on the ways to accomplish double objectives namely to adjust and to learn.

Theoretical grids that i refers to (contractual and cognitive theories) have been considered because they justify that non-financial indicators could be used for the objective of creation of the value. However, it should be highlighted that link between the choice of non-financial indicators and research on the performance deserves deep researches. As highlighted by Bessire (1999) and Bourguignon (2000), the idea of creation of value and performance are the concepts not well defined. In one case, performance and creation of value are considered as the result of the action (conception rather contractual) whereas in other case, they are assimilated in such a way that the actions themselves take place (conception rather cognitive).

Jensen (2001), referring the first case, noted that it is counterproductive , for example at the same time, wishes to maximize the profit of an organisation which is financial indicator of the performance and the parts of the markets (non-financial indicators).Other way to say is that maximization of creation of short or long term value can't be obtained only by supposing that organisation has the only one objective to accomplish.

In the contractual theory, non-financial indicators of the performance for example the indicators of satisfaction of the clients or the employees are used only as sources to better achieve the ultimate objective. The ultimate goal is to search for shareholder value and possibly partnership. As Cappelletti and Khouatra (2004) remind us, "the problematic value refers to the question of the recipients of the created performance: for whom the value is created ? For some authors (Albouy,2000), privilege shareholder value does not mean to ignore other stakeholders. For other authors (Charreaux and Desbriere, 1998, p.130), the concept of partner value is proposed as an alternative to that of the shareholder value. In the cognitive theory, non-financial indicators are further used as means of interpreting the levers of value creation only as a measuring instrument serving an ultimate goal.

Purpose of this thesis is to showcase the relevance of non-financial indicators by using the contractual and cognitive theory and using the other factors such as customer satisfaction and multicultural team. Moreover, crisis of Covid-19 could be considered a situation which further substantiate the importance of including these non-financial factors while evaluating the performance of a company during the economic crisis.



1. Significance of Balanced Score Card

You can measure what you receive or observe. There are lot of factors in economics which cannot be measured in term of quantity. This could be compared to phenomenon of tangible and intangible things. So economic factors which cannot be quantified but carries a significant importance are similar to intangible factors. Earlier traditional accounting measures such as return on investment and earning per share, profitability rate etc. are no longer only factors while measuring the performance of company. There have been constant debate and research to find a balanced system which integrate both financial and non-financial factors for evaluation of organization.

Since there are many non-financial indicators such as motivation of employees, innovation, investment on improving the skills of employees, coordination among different department, customer satisfaction, free flow of communication from top to bottom and inverse. So Balance Score card takes into account all these non-financial indicators and showcase the possible result and measures to work on.

Balance Score card reply to four core questions namely:

- How customer consider us or judge our products

- What are the fields where in we must excel?

- How we can continue to improve and implement innovation

- How do we respond to shareholders?

Usages by several companies of Balance Score Card exhibits followings features:

Firstly, it proposes a detailed report including company's agenda as emphasize on customer satisfaction, short earning response time, focus on quality, encouraging the teamwork, minimizing the time of new product launch and look for long term results.

Secondly it acts us safeguard against the optimization. Since best objectives could be achieved by manipulation. So, this would be a check to mal practices.

Customer part comprises of four segments: time, quality, performance and service, and cost. In order to have the benefit of the Balance Score Card in the company, company should define the goals for all above mentioned segments and converts these goals into specific measures. E.g. establishment of general criteria to measure the customer performance, get products to market sooner, develop innovative product customized as per the customer's requirement.

Whatever feedback we receive from customers, they should be translated into requirements and company should find ways to fulfil these needs in next product. Company should equally focus on core competencies, the constant evolution in the usage of technology to ensure the market leadership. In order to achieve the goals in cycle time, quality, productivity and cost, manager should focus on behavior of employees which would result in efficiency.

When an expected signal occurs on Balance Score Card, manager should look into this matter minutely in order to find the source of trouble. In a situation wherein aggregate measure for on-time delivery is not satisfactory, executive with good information can rapidly identify cause of late deliveries by looking behind the aggregate measures of department day by day and from a particular plant to an individual customer.

Innovation and learning perspective

Measures related to customer and internal business process on the Balance Score Card helps in recognizing the parameters that are highly important for company's competitiveness. Due to globalization, there is tough concurrence and companies are required to constantly upgrade their products and improve their process and have the capacity to introduce the new products with additional capabilities.

An organization's ability to incorporate innovation, improvise the process and learning exhibits its core value. By launching new products, creating more values for customers and improving operating efficiencies, an organization can enter a new market and increase its profitability.

Innovation measures emphasize on the ability of company to make and launch new products rapidly, such products are expected to become the main source of future sales. When manufacturing improvement measures highlights new products, the goat should be to achieve the stability of manufacturing of new products rather than to focus on manufacturing of existing products. Factors involved in the innovation varies from company to company. So, the measures depicted by Balance Score Card would also differ.

Financial Perspective

Measure of financial performance showcase whether a company's strategy, innovation and execution are contributing factors to bottom line improvement.

Generally financial goals are derivatives of profitability, growth and shareholder value. Should executives or managers pay attention to short terms measures such as quarterly sales and operating income? This financial approach is criticized for the reason as it is based on past result and lacks the ability to reflect the contemporary value creating actions. Although we have shareholder value analysis, which forecast future cash flow and they can be discounted to obtain the present value. But this analysis is based on cash flow rather than on the activities and process from where these cash flows are being generated.

Some expert's critic the traditional financial measures as these measures do not improve customer satisfaction, quality, cycle time, and motivation of employees. They think that financial performance emerges from operation activities, therefore, financial success should be logical consequence of doing the basics well.

Ideally, organizations should be able to indicate as to how improvement in quality, cycle time, launch of new products will result in higher market share, operating margins and asset turnover. The difficulty is to create an explicit linkage between operation and finance.

How to efficiently use the Balance Score card

The Balance scorecard highlights the strategy and vision and not the control. It proposes the goals but they should be adapted accordingly and after discussing with stakeholders such as seniors managers of each departments. By combining the financial, customer and internal process along with innovation, Balance score hard helps manager to understand the various inter relationships. This knowledge would allow them to transcend traditional ideas about the functional barriers and results in improved decision making and problem solving.



3. Contractual Approach : theoretical analysis

On considering the synthesis on contractual approach, it is found that non-financial indicator mitigate the conflict of interests between manager and employees and between shareholder and manager by improving the knowledge of achieved targets and results accomplished by factors involved in completion of set targets. Contractual theory can be defined as set of derivatives or solution acquired through neoclassical economic theory. These theories have tendency to consider the variable factors like fundamental factors in creation of value in the organisation. Among these contractual theories, we can quote agency theory(Jensen et Meckling, 1976) and organisational architecture (Jensen et Meckling, 1992 ; Charreaux, 2002a).

In the contractual approach, different system of measurement of performance, particularly the introduction of non-financial indicators has the purpose. It correspond to the strategy of allocation of decision rights of organisations, ensuring the internal coherence, provide the relevant information and reduce the chance of decremental of value and reduction of conflict of interests.

a. Contractual approaches: postulates, aims and methods of control

According to the Agency theory (Jensen et Meckling, 1976), function of property includes a decisive function (responsibility of the managers) and a control function which has incentive and control system implemented by shareholders. The conflict of interest between shareholders and managers come from a delegation of the decision-making power of the shareholders to the managers. The research to minimise the cost related to the conflict of interest resulting from the dismembering of its member is fundamental and the source of efficiency is essentially disciplinary. In the theory of organisational architecture (Jensen et Meckling, 1992), the decisional function is shared between managers and their subordinates and conflict of interest among them emerges from this delegation. Managers are responsible to implement the incentive and control system for making the employees disciplined. In this approach, different system of measuring the performance particularly introduction of non-financial indicators, has following functions: 1) to match the strategy to the allocation of decisional rights of an organisation, to play an informational role and avoiding to destroy value; 2) reduce the conflict of interest. Based on the inspiration from Langevin (1999), I propose the synthesis of ways of control for the contractual approach.

b. The role of non-financial indicators: they facilitate coherence between strategy and allocation of decision rights

Different system of measurement the performance of an organisation, particularly the non-financial indicators seems very useful at initial stage for the manager as it allow him to assure the coherence between strategy and allocation of decision rights.

Table 1 Synthesis: purposes and methods of control (Taken from Langevin, 1999)

	Contractual Approach
Problem requiring the existence of control	Opportunity of the actors
Purpose of control	Incentives to respect the contracts
Appearance of control	Imposed
Exercise of control	Hierarchical
Role of controller	Decline the strategy, assure the intern coherence, measure the performance and remunerate
Intervention of control	A posteriori
Circulation of the information	Vertical

Various researches are being carried out in the current convention of the strategy in order to explain the use of non-financial indicators on this basis. Literature in management strategic(Mintzberg et al., 1999, p. 349 ; Koenig, 1996, p. 39) distinguishes the theories which are based on privileged way on deliberate development processes of the strategy (strategic current called "Normative" or "design" or conventional) or of those based more on processes emerging (so-called "cognitive" stream).

By analogy to these works, we consider the theories which belongs to the current of conception (Cognitive stream) are included in the contractual perspective (Cognitive). In the context of the conventional trend, the strategies developed a priori by the leaders (disciplinary dimension), deliberately, are part of a logical general search for external and internal coherence and conflict reduction.

Figure 1 (Brickley et al., 1997), which is based on a strategic reading, shows the articulationbetween strategic variables and the organizational structure (defined by the allocationdecision-making rights, systems of incentive, control and evaluation of performance).

Diagram 1. Strategy, allocation of decision rights and non-financial indicators

Indicators defining the fluctuating character of the condition of an organisation
Environment (technology)	Condition of market (competition, client, Supplier)	Legal environment (Taxes, anti-trust laws etc.)

Strategy of an Organisation Nature of Product and services; types of clients, Nature of comparative advantage (strategy based on the cost or on differentiation) ; degree of vertical integration.

Organisational Architecture Coherence between allocation of decisional rights and control system (which includes the system of evaluation for the performance)

Value of an organisation



This research of coherence is a role which traditionally has been devoted to the devices of control management (Anthony, 1965). But the process was basically dependent upon the financial indicators and these indicators were namely cost expenditure and budget management. The notion of using the non-financial indicators in studying the traits of coherence was recent as before they were not looked at in this perspective.

Johnson et Kaplan (Chapter 11 :<<System of measuring the performance for the future>>, 1987) make the this idea progress forward. From the usage, remarkable observation was made on the management control as non-financial indicators facilitate the building of strategy for an organisation which in other words means that it ensures the coordination between strategy and distribution of decision making rights.

Various studies have at later stage confirmed this postulate. The involvement of non-financial indicators enhance the coordination, either by playing a crucial role in mechanism of taking initiative Or, acting as crucial ingredients of control system (Ittner et Larcker, 2002 et Chenhall, 1997), or combination of both of them working together, or subsequently the means evaluate the performance achieved.

Perera, Harrison and Poole(1997) have remarked (1997, p. 561 et 569) the need of encouraging subordinates to focus their efforts on the strategic priorities of the organization. When these criteria are focused to assure the satisfaction of the clients, non-financial indicators permits to have right evaluation of the performance of its subordinates.

Ittner et Larcker (1997), Govindarajan et Gupta (1985), Fullerton et McWatters (2002) support their demonstrations of coherence between strategy and organisation architecture on studying the organisation which develops respectively strategy oriented towards the quality, differentiation, or deployment just in time. This non-financial indicators would be used at different hierarchical level : Human resources (Govindarajan et Gupta, 1985) or executive (Ittner et Larcker, 2002).

Different mentioned researches states that non-financial indicators are ultimately preponderant when the decision-making function is decentralized. Therefore, they compose the incentive mechanism, of control and evaluation of the performance, more suitable than financial indicators. Infact, according to Brickley et al. (1997, p. 178), a movement of decentralization in an organization can be explained by an increase in the uncertainty of the environment, a price strategy, or quality orientation or customer satisfaction. The usage of non-financial indicators accompany this movement.

c. Role of non-financial indicators : they help in reducing the conflicts

Non-financial indicators in some case have been proven to be more suitable to control and initiation mechanism.

Ittner et al. (1997), inspiring from the researvh of Feltham et Xie (1994), consider that managerial incentive contracts based only on the financial indicators of the performance are not most efficient ways to encourage the managers to work in the interest of shareholders.

They should be complemented by non-financial indicators which inform further and quickly the shareholder about the efforts accomplished by the managers for value creation. These criteria appears particularly relevant when the manager chooses, for example, a strategy for developing new product, increasing the share of market or strategy destined to improve the quality or the organisation is in financial difficult situation. The presence of these indicators is medium which reduces the conflict between managers and shareholders. Ittner et al. (1997) also consider that non-financial indicators may be more subject to manipulation managerial, difficult to detect, which would lead to a counterproductive effect.

They test the relevance for introducing the non-financial indicators in the contract of bonus proposed to the managers and conclude that they play rather an informative role. This role is equally held when the incentive system concerns the executive level employees (Ittner et Larcker, 2002) .

Other theories could be used in order to explain the presence of non-financial indicators.

For the theory based on the implicit contract (Cornell et Shapiro, 1987), value creation is linked to the creation of organisational capital (specific surplus associated with the implementation of Implicit contracts with stakeholders). An implicit contract would be, for example, for the enterprise to make efforts to increase the useful life of its products through greater quality and the implicit claim would be the price supplement that the customer would agree to pay. Non-financial indicators in this case based on the satisfaction of the client would be a medium to witness the role of efforts.

In the perspective of distribution of value created by an organisation not only between shareholders but also among the stakeholders (stakeholders involved in activities of this organization), Managers have personal interest to favour or not favour the stakeholder who had contributed more or less in the value creation. This reason could lead the manager to pay some stakeholder more or less than their actual share for which they are entitled (Charreaux and Desbrieres, 1998).

D'Souza et Williams (2000, p. 234) suggest a correlation between nature of indicators of performance, their evolution and importance of key stakeholder in the activity of the organisation, sometimes without providing the details of nature of indicators.

From stakeholders' point of view , a prior through study is needed to recognise, according to stakeholders, the criteria justifying that they are more or less crucial in the process of addition of value. For the employees of the organisation, what are the criteria that validate a different remuneration from the cost of the opportunity ?

Take an example of an organisation which deploys the strategy which leads to key skills which plays a determining factor in the addition of the value. In this scenario, one can ponder that the relative non-financial criteria, for example, loyalty of person working in company or their level of motivation will play an important role. In the same way, indicators of the performance concerning the customers (a criteria to measure the satisfaction for example) will be more visible provided the organisation has conducted a strategy of differentiation carved out of innovation.

Finally usage of non-financial indicators to receive the information about managerial action should change constantly. This should be implemented because there are lot of factors which could happen like economic crisis and shutdown of organisation due to strike or any other unforeseeable reason. This would put the manager under constant stress of showing the results as asked by shareholder to maintain his privilege and bonus.

Therefore, all these unpredictive events should be considered so that manager do not resort to manipulation but give the right report to shareholder even if growth is in negative. Such feedback would result in adoption of right strategy for the future and organisation would overcome the setback and would prosper.

Table 2 Presentation of five points of divergence between contractual and cognitive approach : Characterisation of these points for the contractual approach

	Contractual Approach
Recipient	Constituents
Main Objective	Evaluate
Temporary Horizon	Creation of immediate value
Main determinant	Decentralization of the decision-making function
Nature of consequences	Predetermined



4. Cognitive Approach: theoretical analysis

As shown by Charreaux (p.25, 2002 b) , approaches that don't agree to the contractual paradigm can be clubed in the name "cognitive theories of the firm": they group together the behavioural current (Simon, 1947, Cyert and March, 1963), theory of evolutionary (Nelson and Winter, 1982), the theory leading the learning in organization and the theory of strategy based on resources and special training which may be called as skills (Penrose, 1959).

After having characterised the cognitive approach based more specifically on the last two theories, paper establishes the purposes and methods of control, and then the role played by these non-financial indicators. Objective is to justify this use by cognitive arguments.

By cognitive theories we mean a set of grids with characteristic important to consider variables related to the acquisition and exploitation of knowledge as the fundamental determinants of value creation in an organization.

4.1. Cognitive Approaches:postulates according to the theories Organizational Learning and movement of resources and skills

In the theory of organizational learning (Argyris and Schцn, 1978), a firm creates value if it has the capacity to generate learning. These value-creating abilities are linked at the level of knowledge of organizational routines and, in an evolutionist perspective (Nelson and Winter, 1982), to the foundings of their evolutions. Daily activities are models based on behaviours and surrounding that people are used to tackle the different situation. Composition of these habits corresponds to learning in organization (collective).

Nonaka and Takeuchi (1997) analyse the growth of knowledge in organization and distinguish behavioural study (learning "how to "by observation, imitation, experience) and cognitively dominant (" learning outcomes are a cognitive change that results in processing of knowledge and responsible for enrichment of learning or modification of scheme in interpretation", p. 7).

A process Comprehensive organizational learning leads to behavioural and cognitive change. This is why the behavioural dimension is at the heart of theories of organizational learning. It refers to variables such as the degree of motivation and confidence of the actors who have an influence, among others, on the level of organizational learning in a firm.

Organizational learning is also the result of tacit knowledge transfer between groups who share a certain amount of information. These transfers are not based on a hierarchical process but emerge from the informal communications that take place between groups. Nonaka and Takeuchi (1997) believe that, although this knowledge is usually tacit, "Quick access to a wide variety of information, flexible organizational structures andthe units are connected, frequent changes in these structures and post rotations (p.13) "promote organizational learning and therefore value creation.

The Movement of Resources and Skills (now MRC, Laroche and Nioche (dir.), 1998,p. 166) has its origins in the work of Ricardo, on the occasion of which the notions of rent and quasi-rent, then more directly in the study of Penrose (the Resource Based View, Penrose, 1959).

Ricardian rent consists of owning and using a asset rare based on the strategy and this offer is defined and which cannot be easily copied or duplicated. The quasi-rent is the specificity of an asset that may be of greater value to a company than to a competitor. Value creation comes from a ability of a firm to acquire, manage and generate rare, valuable, cannot be copied and non-replaceable resources.

The MRC thus manages to re-concentrate the deep thinking at the core of the organisation by suggesting to identify its rare resources and more concretely his manpower and organizational capacities, what some call his "intellectual capital". The elements of this capital are then considered as very crucial resources of first order, which can provide companies with a decisive competitive advantage. By relying on evolutionary theory, the MRC also invites the manager to grant a special attention to the relevant exploitation of so-called secondary skills.

The theory of organizational learning and the MRC refer to an emerging strategic mode and interactionist, which includes identifying resources and skills step-by-step, then to analyse the relation between these available resources and abilities and the conditions of the environment. Mintzberg et al. (184, 1999) explain that the theories of organizational learning belong to what they call the "cognitive current of strategy".

4.2 Cognitive Approaches : purposes and methods of control

In general, cognitive theories place the actor at the centre of methods of control andgive a greater role to their informal dimension. The control modes are then emerging and interactive.

If we take the point of view of the theory of organizational learning, the purpose of the control system is to maintain the continuity of Company. Therefore, the manager must fulfil an liveliness and core mission in order to help the actors to work in harmony. Thecontrol mechanisms provide information on the contribution levels of the different actors andthus a reduction of the "organizational slack". They make it possible to coordinate the routines, to measure and to transmit internal and external signals, to stabilize behaviour and to arouse self-control (Langevin, 1999).

These signals also promote the emergence of skillssecondary education by facilitating organizational learning, that is, by improving exchanges,communication and training. Finally, the issue of managing cognitive conflicts is fundamental in this framework of analysis. From the perspective of the MRC, the control methods facilitate the management of cardinal skills of the firm, identification of key competencies and promote deployment of resource-based strategies.

Beyond this general presentation, it is interesting to show that cognitive logic meets a favourable echo in some theories of control as well as in certain practices. Ouchi (1979) shows that, in a situation of uncertainty, the enterprise must resort to other methods of control than resorting the disciplinary control. Ouchi recommends the use of informal control mechanisms at the last resort. It can be clan or ritual checks, that is to say control methods based, for example, on the corporate culture or the degree of autonomy of a working group and its level of accountability and involvement (notion of self-control).

Simons (pp. 124, 1995), also breaking with the orthodox theories of control, develops the concept of "interactive control", which leads him to place the actor at the heart of steering of the organization. To draw the organization's attention to strategic uncertainties, leaders will select some control methods that they will have to use in an interactive way.

Inspired by Langevin (1999), a synthesis of control modes for the cognitive approach is being proposed.

Table 3 Synthesis: theoretical currents and control modes

	Cognitive Approach
Problem requiring existence of control	Incertitude on the behaviours of the actors
Process of control	Coordination and help with decision
Appearance of control	emerging
Exercise of control	Auto control and informal in part
Role of controller	Manage the behaviour, favour the communication and learning
Intervention of control	A priori
Circulation of information	Transversal

4.3. Role of non-financial indicator in the Cognitive theories: encourage learning, anticipate changes and formulate strategies

If we rely on the theory of organizational learning, non-financial indicators play several roles that can fit together. More than financial indicators, non-financial indicators stimulate organizational learning by informing about behaviours, influencing them, favouring self-control or anticipating changes in terms of skills needs (notion of "leading indicators" or "signals"). As part of the MRC, the non-financial indicators facilitate strategic management, allowing more specifically detection and development of cardinal competences (Hamel and Prahalad, 1990) and that organizational registration of these skills. Since it involves detecting aspects often tacit and difficult to codify value creation, only non-financial indicators to help managers to manage their activity.

Unlike financial indicators, they have the ability to fit into the most intimate texture of an organization and combine dimensions rational and emotional (Vaivio, 2004). Indicators reflecting, for example, the level of participation of employees in projects and initiatives, the evolution of the time they devote to administrative tasks to the detriment of more creative tasks or the potential of information systems, are justified in a cognitive perspective.

There are many recent developments in non-financial indicators that are based on cognitive logic. But the theoretical link is rarely formalized, except at Vaivio (1999 and 2004), which analysed the emergence of non-financial indicators, theory of organizational learning (Nonaka and Takeuchi, 1997). He explains that the non-financial indicators do not only have the role of declining the strategy.

They also help in emergence of new strategies. These emerge through a sequence of structured processes and formal and informal and incremental processes. Non-financial indicators bring managers in the field, stimulate exchanges and debates between operational staff, provoke the emergence apprenticeships and may be controversial (cognitive conflicts).

Non-financial indicators, through the use of intellectual capital (IC), are a means of better understanding the potential for value creation through human and organizational skills.

IC refers to an organization's ability to create value from its stock of knowledge. Edvinsson and Sullivan (1996) explain that IC is made up of human capital (knowledge, know-how, employee experiences, attitudes and capacities for innovation and learning) and structural capital (skills that can be valued on the market). The structural capital includes tangible assets, but especially intangible assets in relation with the partners sales, or in relation to the structure (costing systems, manufacturing process and innovation, decision-making process, etc.). This IC definition focuses on levers of value creation based on cognitive aspects.

It is indeed a question of encouraging the creation of capital by new organizational forms, new management styles or training methods. It is also a question of promoting the creation of marketable assets human capital and, finally, improve the protection of intellectual assets. The IC reveals the ability of an organization to adapt to a changing environment because its strategy is reflected in according to its internal basis of competence, and establishes recognition of the importance of the role of employees in the value creation process

Finally, let us recall that cognitive approaches are focused on the justification of non-financial indicators during their validity of usage (the consequences of their introduction emerge during their phase of usage). Value creation is "built". The common point to all of these explanations are a greater sharing of knowledge between the actors. The induced knowledge is intended primarily for those who make it emerge.

Table 4 Presentation of five points of divergence between contractual and cognitive approach: Characterisation of these points for cognitive approach

	Cognitive Approach
Recipient	The agents in priority
Main Objective	Manage and coordinate
Temporary Horizon	Non immediate value creation
Main determinant	Decentralisation of Knowledge
Nature of consequences	Non Predeterminant



5. An analysis of Customer Satisfaction

Customer satisfaction is one of the principal non-financial factors which is crucial in evaluation of organization. It allows the retention of customers and result in higher revenue growth as he would tend to become loyal to a service and would always buy from a particular company. Secondly, it leads to spillover effect as satisfied customer would work as word-of-mouth advertising and increased the company's reputation.

The marketing shows that higher customer satisfaction increases the revenue growth by making the customer loyal, reduction in price elasticities, reduction in marketing costs, lowering the transaction cost and improving the reputation of organization (e.g., Anderson, Fornell, and Lehman).

The most important feedback is being received through customer. A satisfied customer becomes loyal and then even in case of negative feedback of a newly launched product would not deter to continue to buy other product of company.

However, at the same time, it is very important to consider the feedback of customer and act on them in order to eliminate them in future product and even in existing products if some defect exist, they should be rectified.

Few years back, car produced by FORD had issue with engines but it was detected after some time when lot of cars were already sold. Despite the fact that it would involve lot of expenditure. Still the management of Ford decided to offer the free of cost rectification in the vehicles sold before. This way, they were able to retain their customer and maintain the reputation of company.

This gesture increased the value of company as customer who have never bought a car and would like to buy in near future, would definitely consider this fact. Such information influences the buying behavior of customer. This trend is applicable in all business and not limited to automobile industry.

Even sharing an experience from internship in Translink. Translink is a translation company specialized in translation and interpreting services. It has offices in Switzerland, Russian, Ukraine, Singapore and Kazakhstan. We propose the translation services to various organization in different domain such as banking, law and order, manufacturing, medicines and oil and energy sector.

We had a special team in HR who were responsible for analyzing the feedback from the customer. They have created questionnaire form for clients and after each order processed, sales team was instructed to receive the feedback for the services which they received. This feedback was analyzed and all the remarks of client were considered while proposing the next order.

They become very satisfied and even it allowed our company to constantly improves its internal process and ensure that errors are not repeated. This gives an edge over the other competitor companies. Feedback from client not only gave us suggestion of work proposed but also a reference to what is relevant in industry at this moment. Otherwise, it involves additional resources to update the ongoing changes. Through customer, we get the first-hand experience and apply them for future production.

Customer satisfaction resulted in retention of client and even company got the new clients who were recommended by existing clients.



6. Relevance of non-financial indictor during economic crisis

In economic crisis situation occurred either due to war or pandemic as in today's scenario, financial indicators of performance become more volatile and noisier. And it becomes difficult to evaluate the performance of company by basing on financial indicators.

Owing to economic crisis of 2008, years following the crisis had seen the immense change in the strategy of big corporate companies in choosing CEO. They took various non-financial indicators in order to predict the value of company and accordingly propose the remuneration to CEO. His/her bonus depended upon various factors which were in nature of non-financial.

Today's scenario is similar as COVID-19 had brought the various sectors at halt. Economy of world is going through recession. When most of financial indicators seem not be working in current situation, then what is driving the strategy of organization? It is wholistic approach based on mixture of non-financial and financial factors. Organizations are basing their growth on balanced approach consisting of motivation of employees and encouragement to innovate and develop ideas, incentivize the group work and breaking the barrier and allowing the free flow of communication among different department and cordial coordination amongst different departments within an organization.

Non-financial measures such as development of workforce, improving the quality of product, market share, efficiency and leadership etc. measures the non-financial aspect of an organization (Ittner, Larcker, & Rajan,1997).

Inclusion of non-financial indicators increases the future performance of company and they are considered the vector of future strategy. Secondly, they encourage and focus on long term goals. Since strategy is vital determinant as it led down the path to overcome the competitors. Study of Govindrajan and Gupta (1985) find that organization which takes the path of `to build' rely on non-financial indicators whereas the other relying on `to harvest' base their strategy on financial indicators.

In today's context, company which relies on non-financial indicators such as motivation of employees and introduction of innovative methods, encouraging the new learning proves would sail through this difficult time. Most important is not only to look at financial figure achieved at the end of month or year but to rather look at the process involved and try finding ways to make it better. It cannot be denied that financial indicators should be kept aside and only focus on non-financial indicators. They are complementary and should be used in combination but their usage could vary from sector to sector and to what extent they can influence.



7. Advantage and Disadvantage of Non-financial Indicators

Although trend of using the non-financial indicators in evaluation of performance of company is becoming popular and being accepted in all spheres of business activities.

Even then, many industrialists put so much emphasis on financial indicators such as earnings and accounting return and an insignificant focus on drivers of values such as innovation, quality and customer and employee satisfaction. So, it become fundamental to use them correctly. As, the interpretation and how these indicators are used could differ. That's why it's important to understand as to how and when non-financial indicators should be used? what decision could be taken based on the output of these indicators?

Depth research was conducted by Ittner and Larcjer (200), and showed the advantages and disadvantages by comparing the performance of financial and non-financial indicators an analyzing their trends and output.

The principal advantage of usage of non-financial indicators provide us a better approach to company's long strategy, comprehensive display of future financial performance result, quantify the indicators of intangible assets. It is evident that financial indicators do not focus on progress with regards to customer requirements or competitors.

This can be understood by the easy example. Supposing the company wish to launch a new product, while doing so, non-financial indicators are equally considered otherwise basing the expected result on financial figure would lead to failure of new product launch.

By combining the financial and non-financial indicators with purpose to implement the strategic plans, organization can communicate efficiently its targets and encourages its manager to work towards long term strategy.

It is agreed that research and development expenditure are charged for the period in which they occur thus reducing the profitability of an organization. But in case of success of research or innovation under process, it would increase the company's profit by big margin and provides the huge advantage on its competitors in the market.

Similarly, judicious investment in customer satisfaction would enhance the economic performance by generating more revenue and retention of clients and making them loyal to its products.

Whereas the disadvantage comes from the way of implementing these indicators in the process of assessment as it involves additional cost and time factors. Or in simple words, they need to be explained to employees and in order to implement these indicators, additional information is needed.

Principally, it is complex system as some indicators are expressed in time unit whereas other are quantitative unit or percentage or even a free form. As result, we might receive the incorrect report on non-financial indicators. Although Balance Score card helps in identifying the error but if unidentified causal links not observed could the company to focus on wrong objective.

Second biggest disadvantage of non-financial indicators is the fact that most of these indicators such as customer satisfaction are based on survey and they are based on few numbers of participants and certain questions asked in survey. So, this might not give us the right picture of situation.

Despite the few cumbersome in usage of non-financial indicators, there are ways to improve their usage to best result by basing the task on a causal model, and constant improvement of the model, use of model data in making decisions and assessing the outcomes of model performance in order to ensure that they provide us the correct judgement. In order to implement successfully the causal modal, it is strongly recommended to summarize information and keep a check on causal modal by using mathematical statistics.