The Influence of human, spiritual, customer, innovation, and structural capital on non-financial performance measures of a firm

Abstract

There is a growing acceptance among scholars and practitioners that non-financial performance [NFP] measures may be better predictors of long-term survivability of a firm than the financial performance measures. In spite of this growing acceptance of NFP measures, many firms still underestimate, understudy, under-test, and undermine NFP measures as credible performance indicators. As a consequence, firms that poorly apply non-financial measures as credible performance indicators do not get a complete prognosis of the firm. Hence, the understanding of factors influencing non-financial performance becomes necessary as it affects the long-run survivability of a firm. The primary purpose of this study is to build a model, using structural equation modeling that explains factors influencing non-financial performance measures of a firm. In particular, the influence of human, spiritual, customer, structural, and innovation capital on nonfinancial performance measures of a firm was studied in selected commercial bank organizations in Tanzania. The independent variables selected for the study were spiritual capital, human capital, customer capital, innovation capital, and structural capital with non-financial performance measures of a firm as the dependent variable. A survey questionnaire consisting of 6 instruments was utilized. A total of 254 employees from 4 selected commercial bank organizations in Tanzania were used as respondents. The model developed as a result of this study explained 61% of variance in nonfinancial performance measure of a firm. The model explains that human capital (r = 0.52, p < 0.001) and innovation capital (r = 0.31, p < 0.001) have a significant direct influence on non-financial performance measures of a firm. Additionally, spiritual capital through innovation capital (r = 0.24, p < 0.001) had a significant indirect influence on non-financial performance measures of a firm. Among the variables in the study, human capital was the best predictor of non-financial performance measures. The model developed is significant as it provides empirical evidence that links human capital, spiritual capital, and innovation capital to non-financial performance measures. Further, it explains that by embracing distinctive non-financial performance measures of a firm may consequently have quality goods and services, satisfied customers, and outstanding reputation, thus, building a long-term survivability of a firm. Among others, this study recommends that the future research surveyor may use a qualitative approach to explore the understanding of the influence of human, spiritual, customer, structural, and innovation capital on non-financial performance measures of a firm.