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Chapter 1

PROBLEM AND ITS SETTING

Background of the Study

Measuring business performance is a critical issue for academic

scholars and practicing managers. Performance is a widely used

concept in many areas. Usually, it is a measure of how well a

mechanism or process achieves its purpose. In enterprise management,

an organization’s performance is defined as “how well the organization

is managed” and “the value the organization delivers for customers and

other stakeholders” (Moullin,2003). In general, it is satisfying

company’s desires and of its stakeholders. It must be assessed to

measure the firm’s accomplishment.

In developed countries the use of non-financial performance

measurements (such as quality, delivery and customer satisfaction) has

received a lot of attention from practitioners and academics over the

last two decades. (Aisha Salem El-Shukri, 2007). Performance

measurement systems play a vital role in developing strategy,

evaluating the achievement of organizational goals and objectives

(Kaplan and Norton, 2001). Inadequacies in financial performance

measures have led to innovations in financial reporting ranging from

disclosure of non-financial indicators of “intangible assets” and

“intellectual capital” to “balanced scorecards” of integrated financial

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and non-financial measures (Niven, 2006; Drury, 2004; Kaplan and

Norton, 1996).

In the Philippines, some researchers used only financial measure

and others adopted many other operational performance indicators.

(Neyestani & Juanzon, 2017). Then this study was categorized the

production process (internal business process), customer's satisfaction,

and innovation and growth as non-financial performance.

This study will evaluate the non-financial performance among

printing press in Tagum City. Researchers of this study aims to

contribute a better understanding on the development of the Strategy

Formulation on non-financial performance among printing press in

Tagum City.

The researcher has not come across a study that specifically

discuss the Assessment of Non-Financial Performance Among Printing

Press. Furthermore, this study will provide relevant concepts that

would possibly create awareness and knowledge in the academic

community.

Statement of the Problem

The objective of this study is to develop a strategy formulation on

non-financial performance among Printing Press in Tagum City.

Specifically, this study will be conducted to seek answers to the

following objectives:
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1. What is the level of non-financial performance among Printing

Press in Tagum City in terms of:

1.1 Job Satisfaction

1.2 Customer Satisfaction

1.3 Entrepreneur Satisfaction

1.4 Organizational Commitment

2. What intervention program can be formulated in the study?

Review of Related Literature

This chapter contains a broad review of literature related to the

issues and variable under this study. Literature review is defined as the

use of ideas in the literature to justify the approach to the topic, the

selection of methods, and demonstration that the research contributes

something new to the overall body of knowledge or advances the

research field’s knowledge-base (Hart, 1998).

The review also facilitates theory development, closes areas where

research exists and uncovers areas where research is needed (Webster

et al, 2002). Accordingly, this chapter presents a review of theoretical

perspectives and empirical literature from business performance

theory, the performance measurement theory of the firm and non-

financial performance theory. Finally, the chapter presents knowledge

gaps that the study sought to address as well as the conceptual

framework and hypotheses that were developed and tested by the study.
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Business performance

Business performance management is a set of performance

management and analytic processes that enables the management of

an organization's performance to achieve one or more pre-selected

goals.

All firms, including microenterprises, are established to achieve

certain goals. Firm performance is therefore defined as a firm’s ability

to achieve planned results as measured against its intended outputs

and encompasses outcomes related to financial performance, market

performance and shareholder return (Sabana, 2014). Firm performance

is a common construct in strategic management research. Despite this,

research into firm performance suffers from problems such as lack of

consensus, selection of indicators based on convenience and little

consideration of its dimensionality (Sabana, 2014). Classical economic

theory on firm performance, firm performance was largely influenced by

the resources and competencies within the firm (Sabana, 2014).

Companies have many possibilities for evaluating business

performance. The first and the simplest method is to evaluate the

performance by one selected indicator, which is based on the

company´s goal. This method has pros and cons and because of them

it is used by small and medium companies. Simplicity and intelligibility

of this system are the main advantages, so far, the disadvantage is

orientation on achievement one goal while other goals stay behind. For
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example, if the goal is to maximize the profit, the criteria for evaluating

business performance is the profit achieved (Misankova, 2017).

On the growth of business performance top management of the

company is mainly involved. They affect managers at lower levels and

those are interested in changes, which they can manage from their

position and that can lead to increasing value. It is important to know

factors, which can affect business performance. Identifying factors and

its impact on the value of performance is an important tool of the

management oriented on the growth of company value. The main

factors affecting the business performance are generators of the value,

pyramid system of indicators, earnings, costs and profit, strategic long

- lasting investment decision making, management of net working

capital, costs of the capital, financial and capital structure of the

company (Misankova, 2017).

Performance is "the one that can keep the distance on a long

term, compared to the competitors, by using a strong motivation (based

on systems of reward) of all the organization’s members (Doinea, 2011).

"An enterprise is performant when it is at the same time efficient and

effective. Therefore, the performance is a function of two variables,

efficiency and efficacy. While efficacy reflects the achievement of

external expectations, efficiency is measured by the achievement of

internal environment of firm” (Misankova, 2017).

In the International Financial Reporting Standards (IFRS)’ view,

the performance of a company isn’t exactly defined, but they note that
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"profit frequently used as a measure of performance or as a reference

for other indicators such as profitability investment or profit per share.

Revenues and expenses are directly related to measuring profit

structures.

Performance Measurement

Performance is a widely used concept in many areas. Usually,

performance is a measure of how well a mechanism/process achieves

its purpose. In enterprise management, defines an organization’s

performance as “how well the organization is managed” and “the value

the organization delivers for customers and other Stakeholders” (Alaly,

2013). Performance Measurement as “the process of quantifying the

efficiency and effectiveness of past actions through acquisition,

collation, sorting, analysis, interpretation and dissemination of

appropriate data” (Sulle, 2014).

Measuring performance is a multi-dimensional concept.

Effectiveness and efficiency are the two fundamental dimensions of

performance (Nyang’au, 2011). Effectiveness refers to the extent to

which stakeholder requirements are met, while efficiency is a measure

of how economically the firm’s resources are utilized when providing a

given level of stakeholder satisfaction. To attain superior relative-

performance, an organization must achieve its expected objective with

greater efficiency and effectiveness than its competitors (Mukiibi, 2016).

To illustrate efficiency, effectiveness, and the value delivered, multi-

measures should be used.

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Performance measurement refers to the process of measuring the

action’s efficiency and effectiveness (Roshan & Jenson, 2014).

Performance measurement is the transference of the complex reality of

performance in organized symbols that can be related and relayed

under the same circumstances (Al-Matari et al, 2014). In the current

business management, performance measurement is in a more critical

role compared to quantification and accounting (Al-Matari et al, 2014).

Performance management as a process wherein the organization

manages its performance to match its corporate and functional

strategies and objectives (Al-Matari et al, 2014). Additionally, the firm’s

value can be described as the benefits stemming from the firm’s shares

by the shareholders (Rouf, 2011). The company’s performance can be

viewed from the financial statement reported by the company.

Consequently, a good performing company will reinforce management

for quality disclosure (Herly & Sisnuhadi, 2011).

Measuring business performance in today’s economic

environment is a critical issue for academic scholars and practicing

managers. In general, business performance is defined as “the

operational ability to satisfy the desires of the company’s major

shareholders” and it must be assessed to measure an organization’s

accomplishment (Zulkiffli & Perera, 2011).

Performance measurement systems are considered information

systems that are used to evaluate both individual and organizational

performance. Until recently, companies concentrated on the use of

financial performance measures as the foundation of performance

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measurement and evaluation purposes. As such, management

accounting researchers have criticized relying solely on financial

performance measures (Zuriekat et al, 2011). As a result, companies

started to include key non-financial measures within their performance

measurement systems to provide managers with the appropriate

information about their overall company situation (Zuriekat et al,

2011).

Research on performance measurement has investigated the

impact of participation on performance and satisfaction (Zuriekat et al,

2011). The participation in decision making provides the base for a

comprehensive framework of performance measurement systems

(Zuriekat et al, 2011). The selection of performance measures depends

on organization’s objectives, a clear calculation method to compare, and

these should be selected through people who are involved in the

organization (Zuriekat et al, 2011).

Allowing employees to participate in the setting of performance

targets has the following advantages: (1) Employees are more likely to

accept the targets and be committed to achieving it when they are part

of target setting process. (2) Participation can reduce the information

asymmetry gap that applies when standards are imposed from top

management. (3) Imposed targets can encourage negative attitudes and

result in demotivation and poor performance (Zuriekat et al, 2011).

Measurement of performance can offer significant invaluable

information to allow management’s monitoring of performance, report

progress, improve motivation and communication and pinpoint

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problems (Al-Matari et al, 2014). Accordingly, it is to the firm’s best

interest to evaluate its performance. Nevertheless, this is a management

area characterized by lack of consistency as to what constitutes

organizational performance. The importance of business performance

in strategic management can be categorized into three dimensions;

theoretical dimension, empirical dimension and managerial dimension

(Al-Matari et al, 2014).

The process improvement is not possible without measuring the

outcomes. Hence, organizational performance improvement requires

measurements to identify the level to which the use of organizational

resources impact business performance (Al-Matari et al, 2014). The

firm’s success is basically explained by its performance over a certain

period. Researchers have extended efforts to determine measures for

the concept of performance as a crucial notion. Finding a measurement

for the performance of the firm enables the comparison of performances

over different time periods. Nevertheless, no specific measurement with

the ability to measure every performance aspect has been proposed to

date (Al-Matari et al, 2014).

As identified, performance measurement is a structured system

and a process of gathering, monitoring, and assessing the information

about an organization’s activities, to achieve the proposed goals and

objectives. In this study, the goals and objectives concern an

organization’s strategic objectives, a business unit’s business goals and

objectives, and personal business commission.

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Non-financial performance

Non-Financial performance measures the non-financial aspects

of the firm. Examples of non-financial performance measures are

measures such as workforce development, product quality, customer

satisfaction, on time delivery, innovation measures, attainment of

strategic objectives, market share, efficiency, productivity, leadership

and employee satisfaction (Ibrahim & Lloyd, 2011). Measuring

performance is challenging because firms often consider financial

performance measures to be confidential, and guard them from public

scrutiny (Sabana, 2014).

One important limitation of non-financial performance measures

is that they may be biased, that their computation may change over

time and often differs between firms, which hamper comparison of

performance between firms (Gisjel, 2012).

There are also arguments that these non-financial performance

measures are easier to manipulate than the financial measures since

they are rarely subjected to public verification (Gisjel, 2012). As both

financial and non-financial performance measures have advantages

and disadvantages, combining both types of measures are often the best

option. combining financial performance measures with non-financial

performance measures leads to a significant higher mean level of return

on assets and a higher level of market return (Gisjel, 2012).

An important characteristic of non-financial performance

measures is that they positively affect future performance (Gisjel, 2012).

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Non-financial performance measures are also often considered as the

process measures that should lead to good financial performance. There

is a lot of ambiguity and debate surrounding the actual impact of

measuring and focusing on non-financial performance.

Firms making use of a wide range of financial and non-financial

indicators have higher measurement system satisfaction and stock

market returns find that (Aluc, 2017). A different approach is looking

at how confident organizations are about their performance measures

and their predictability for future performance (Anthony et al., 2014).

Reliance on non-financial performance measures is associated with an

increase in performance if the level of environmental uncertainty is high

(Hoque, 2005).

Nonfinancial measures of are associated with future financial

performance and contain additional information that is not reflected in

past financial measures (Aluc, 2017). On the other hand, found that

there is no positive and significant links between using non-financial

measures financial performance (Aluc, 2017).

Generally, non-financial measures have no intrinsic value for the

director. Rather, they are leading indicators that provide information on

future performance not contained in contemporaneous accounting

measures. Empirical studies (quality – growth in profit margin customer

satisfaction – future accounting performance), (customer satisfaction –

future accounting earnings) support the role of non-financial

performance measures as a leading indicator of future financial results.

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Such leading indicators are especially necessary for performance

measurement and management compensation when current

managerial actions influence the firm’s long-term financial return but

are not reflected in the contemporaneous accounting measures.

Examples refer to delaying costly maintenance activities at the expense

of the future availability of the machinery and, therefore, a lower future

financial return (Yuliansyah & Razimi, 2015).

Theoretical Framework

Businesses were build up to accomplish a specific objective. So,

business performance is the ability of a firm to achieve their planned

goals (Sabana, 2014). In today’s business environment where

companies compete based on non-financial indicators, they need

information on how they are performing across a broader spectrum of

dimensions, not only financially but also factors on the customers,

employees, supplier and the wider community (Neely, 1999). Financial-

based performance measures are no longer relevant to supply

important information to the firms. This is due to the claim that this

traditional approach which mainly focuses on financial-based

measures fails to respond to developments in the technological and

competitive environment, with the result that internal accounting

information is frequently inaccurate and misleading (Drury et al.,

1993).
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The current techniques provide more relevant, accurate and

appropriate information within a proper time to reconcile the inherent

deficiencies contained in traditional performance measures or financial

performance measures (Preda & Watts, 2004). Though the combination

of both financial and non-financial indicators can lead to a balanced

performance measurement in the business environment (Kaplan &

Norton).

Firm performance can be measured by financial and non-

financial indicators. Non-financial measures include job satisfaction,

organizational commitment, entrepreneur satisfaction (Mayer et al,

1992) and customer satisfaction (Fitzgerald et al.1991; CIMA 1993;

Hasket et al. 1994).

Conceptual Framework

Presented in Figure 1 is the conceptual framework. The

independent variable is the non-financial performance with the

following indicators: job satisfaction, entrepreneur satisfaction,

organizational commitment (Mayer et al, 1992; Sabana, 2014) and

customer satisfaction (Fitzgerald et al.1991; CIMA 1993; Hasket et al.

1994; Zaman 2004 Harif, Hoe & Ahmad, 2013).

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Independent Variable

Non-Financial
Performance

 Job Satisfaction
 Organizational
Commitment Strategy
 Entrepreneur Formulation
Satisfaction
 Customer
Satisfaction

Figure 1. Conceptual Framework Diagram

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Job satisfaction different authors have different approaches

towards defining job satisfaction. Some of the most commonly cited

definition on job satisfaction are analyze in the text that follows. Job

satisfaction, any combination of psychological, physiological and

environmental circumstances that cause a person truthfully to say I am

satisfied with my job (Hoppock, 1935). Job satisfaction focuses on the

role of the employee in the workplace thus it is affective orientations on

the part of individuals toward work roles which they are presently

occupying (Vroom, 1964). Job satisfaction has to do with the way how

people feel about their job and its various aspects. It has to do with the

extent to which people like or dislike their job. Therefore, it represents

a combination of positive or negative feelings that workers have towards

their work (Davis et al.,1985).

Customer satisfaction is an indicator to measure companies’

performance (Zaman, 2004; CIMA, 1993; Fitzgerald et al, 1994). All four

authors in their research had stated that the quality of product or

services provided by companies are tools used to measure performance

of the companies.

Organizational Commitment is the relative strength of an

individual’s identification with and involvement in particular

organization (Mowday Porter & Steers, 1982). Other researchers have

defined organizational commitment as the psychological attachment

that individuals developed towards an organization (Fiorito et al.,2007;

Wright & Kehoe, 2007).

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Entrepreneurial satisfaction is influenced mainly by venture

performance, but may also be affected by personal characteristics,

motives for start-up and venture characteristics (Cooper and Artz,

1995).

Significance of the Study

The aim of the study is to contribute to a better understanding

on the development of the Strategy Formulation on non-financial

performance among printing press in Tagum City. Managers can get a

glimpse of the business’s progress well before a financial verdict is

pronounced and the soundness of their investment allocations will

become moot. Employees can receive better information on the specific

actions needed to achieve strategic objectives. And investors can have

a better sense of the company’s overall performance, since nonfinancial

indicators usually reflect realms of intangible value, such as R&D

productivity, that accounting rules refuse to recognize as assets. (Ittner

& Larcker 2003).

The findings of this research study are anticipated to be of benefit

to Researchers and Academicians. This study will be an important

addition to the existing repository of knowledge and hence will be of

interest of both researchers and academicians who seek to explore or

investigate the Assessment of Non-Financial Performance: Basis for

Strategy Formulation Among Printing Press in Tagum City. It will also

be beneficial to the entrepreneurs, through this study, they will find

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out more about the satisfaction level of customers and employees and

what are the factors that affects it. Employees could also benefit from

it because they will know more about how satisfied other employees are

in Tagum City. The study findings will be used be used for academic

purposes only.

Definition of Terms

Non-financial Performance. Refers to any quantitative measure

of either an individual’s or an entity’s performance that is not expressed

in monetary units. This includes any ratio-based performance measure

in that a non-financial performance measure that is ratio-based omits

any monetary metric in either the numerator or denominator of that

ratio. Non-financial measures include job satisfaction, organizational

commitment, employee turnover and entrepreneur satisfaction (Mayer

et al, 1992; Sabana, 2014).

Strategy Formulation. Refers to the process by which an

organization chooses the most appropriate courses of action to achieve

its defined goals. This process is essential to an organization’s success,

because it provides a framework for the actions that will lead to the

anticipated results. Strategic plans should be communicated to all

employees so that they are aware of the organization’s objectives,

mission, and purpose. Strategy formulation forces an organization to

carefully look at the changing environment and to be prepared for the

possible changes that may occur. It is part of strategic planning and it

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refers to the process through which an organization defines its long-

term direction and scope (Gimbert et al., 2010). Formulation process

consists of performing a situational analysis, self-evaluation and

competitor analysis, while setting the objectives concurrent with the

assessment (Hadighi et al., 2013).

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Chapter 2

METHOD

Research Design

A quantitative descriptive method was applied in assessing this

study. It is designed to observe, describe and document the features of

a situation as it takes place naturally. The term descriptive entails the

attempt to describe the non-financial performance among printing

press in Tagum City.

According to the study, descriptive research “is designed to

provide a picture of a situation as it naturally happens” (Burns & Grove,

2003:2011). The study is descriptive in nature it is because we need to

evaluate the non-financial performance of Printing Press in Tagum City.

It attempts to identify possible strategy formulation for the said

variable.

This descriptive survey dealt with quantitative data about the

said phenomenon. The quantitative aspect is an appropriate schedule

for gathering the data designed for the target respondents to answer the

questions. The process of gathering the data will be based using

questionnaires.
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Research Subject

Respondents of this study are those owners and employees of

Printing Press. It is composed of 60 to 70 respondents which were

subgroup to assess the non-financial performance of the business in

their own perspective.

Research Instrument

This study will use a research-made questionnaire which will be

subjected for corrections and suggestions for improvement.

Researcher-made questionnaire instrument will be used in this

study and the rated performance evaluation of Printing Press through

the owners and employees to gather the data needed in the study. The

proponent will prepare 2 set of research-made questionnaire. The first

set of questionnaires dealt with perspective aspect of owners in terms

of entrepreneurial satisfaction. The second set will deal with the

perspective of employees in terms of job satisfaction, organizational

commitment and customer satisfaction.

The two parts of questionnaire consist the following: Part 1 seek

the background characteristics of the respondents. Part 2 determined

the development of Strategy Formulation among Printing Press in

Tagum City.

The survey employed the five-point scale in the interpretation of

data is as follows:
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Mean Level Description

4.30-5.00 Very High This means that non-financial

performance of Printing Press

is very much impressive.

3.50-4.20 High This means that non-financial

performance of Printing Press

is much impressive.

Moderate This means that non-financial

performance of Printing Press

2.70-3.40 is moderately impressive.

1.90-2.60 Low This means that non-financial

performance of Printing Press

is fairly impressive.

1.00-1.80 Very Low This means that non-financial

performance of Printing Press

is not impressive.

Data Gathering Procedure

Researchers did the following steps in conducting the study. First

there has been a construction of the research instrument. Items of the

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questionnaire on the non-financial performance was based on the

researcher made questionnaire. The first graph of the said instrument

will be shown to the research adviser for any corrections and comments.

After checking, the test will be presented to panel members for

validation, then after the validation and refinement, it will be finalized

and reproduced.

A letter of request will be to the Office of the City Mayor to have

an official list of registered Printing Press located in the locality. The

research questionnaires and rated performance evaluation will be then

collected, tallied, tabulated, and interpreted confidentially and

accordingly and will be used only for the purposed of the study.

Statistical treatment of the Data

The following statistical tools will be used in the study:

Mean. This tool will be used to determine the extent of non-

financial performance among Printing Press in Tagum City.

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REFERENCES

Cooper, A. C., & Artz, K. W. (1995). Determinants of satisfaction for

entrepreneurs. Journal of Business Venturing, 10, 439–457.

Creswell, J. W. (2003). Research design: Qualitative, quantitative, and

mixed methods approaches (2nd ed.). Thousand Oaks, CA: Sage

Publication.

Hoffman, C. (n.d.). Balancing Financial and Non-Financial Performance

Measures.

Niven, R. (2005). Driving focus and alignment with the Balanced

Scorecard: Why organisations need a Balanced Scorecard. The

Journal of Quality and Participation, 28(4), pp. 21–43.

Sabana, B. M. (2014, November). Entrepreneur financial literacy,

financial access, transaction costs and performance of micro

enterprises in Nairobi City County, Kenya.