Non-Financial Objectives vs Non-Financial Benefits

Not all business objectives are defined first in financial terms. Businesspeople usually set goals for customer satisfaction or company image, for instance, regarding non-financial key performance indicators (KPIs).

Unfortunately, many people see contributions to non-financial objectives like these as second-class benefits, unworthy of serious consideration. Others may say that such benefits are essential, but still not know how to measure and value them. Or, they may not know how to compare them to “financial benefits.” As a result, non-financial benefits often receive only cursory notice in business case results and other cost/benefit analyses.

The first step towards dealing seriously with non-financial benefits is to understand, clearly, some commonly misused terms. Foremost among these are “soft benefits” and “intangible benefits.”

Some people in business classify benefits either as soft benefits or as hard benefits. Neither term has a standard definition. However, the frequent use of these terms implies that hard benefits are preferred, or superior to soft benefits. For many, “hard” benefit outcomes are certain and measurable, while “soft” benefits are neither. And, other people use the terms “soft” and “hard” to refer to non-financial benefits and financial benefits, respectively.

Using these terms inevitably positions the “soft” benefits as second-class outcomes in the eyes of many. For many, soft benefits carry less weight or importance than so-called hard benefits. As a result, it is more helpful always to avoid the terms “hard” and “soft” altogether and instead classify benefits and objectives as being either:

  • Financial or non-financial.
  • Tangible or intangible.

The word tangible means touchable, but many misuse the term, saying ” intangible” when they mean “financial.”  People sometimes say “intangible” when referring to objectives and benefits such as improvements in customer satisfaction, branding, employee morale, or reduced risk. They probably do so because they believe the financial value of these outcomes is unclear.

Business objectives and benefits are indeed tangible if there is objective evidence they exist. “Tangible objectives,” in other words, are “touchable.” Calling a “business benefit” intangible says there is no evidence for it and no way to measure it. Therefore, genuinely intangible benefits do not belong in plans, strategies, models, or business cases.

Non-financial objectives like customer satisfaction or branding can be very important or even crucial to a company’s strategy. Consequently, people who want to assign a value to non-financial benefits must find concrete (“tangible”) measures for the objectives they represent.  They can do this, even if they have to measure indirectly.

Objectives and business benefits having to do with customer satisfaction, for instance, are extremely important to companies in highly competitive industries. And, customer satisfaction no doubt supports other objectives such as the following:

  • Customer retention
  • Average order size
  • Length of sales cycle
  • Repeat business
  • Referral business
  • Lower service costs

No one doubts that improvements in these factors lead ultimately to financial gains. Nevertheless, the objective itself—customer satisfaction—is a condition of the customer mind. Because they cannot measure that directly, some people label the goal “intangible.”