Non-financial performance measurement in the Libyan commercial banking sector: four grounded theory case studies

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 in developed countries. This research project is an exploratory study in Libya to investigate the use of non-financial performance measurements (NFPMs) in a developing country's commercial banking sector. The Libyan service sector is the second contributor to the Libyan Gross Domestic Product (GDP) after the oil sector. Within the service sector, the commercial banking sector has been playing a significant role in the development of the Libyan economy. This research project aims to: 1) explore the current use of NFPMs in the Libyan commercial banking sector (LCBS); 2) determine the environmental factors influencing the use of NFPMs in the LCBS; and 3) explore the impact of NFPMs on financial performance measurements (FPMs) in the LCBSA grounded theory methodology was adopted and four case studies (two State owned banks and two private banks) were conducted. Each case study was analysed according to a structured set of coding procedures (based on the grounded theory approach of Strauss and Corbin, 1990) and substantive hypotheses emerged for each case study. A cross-case analysis of the four case studies gave rise to the following nineteen formal hypotheses which (together with the model developed from the four case studies) are the main findings of this study:H1 The limitations of FPMs are one of the major motives leading to a bank's use of NFPMsH2 A more competitive environment is one of the main motives for managers in a bank using NFPMs.H3 Management's knowledge of the relationship between NFPMs and FPMs is one of the major motives leading to the use of NFPMs in a bank.11H4 Demanding customers are one of the major motives leading to the use of NFPMs in a bank.H5 The nature of the banking industry as a service oriented industry is one of the major motives leading to the use of NFPMs in a bank.H6 Lower level managers in a bank tend to use NFPMs more than middle and higher level managers do.H7 Operational experience of management, competence of management, management with more authority, top management's interference, stability of management, and collective working group positively affect a bank's use of NFPMs.H8 New regulations and strategies of the Central Bank and the uncertainty of the economic environment positively affect a bank's use of NFPMs.H9 Some of the Central Bank's old regulations, over-control and interference of the Central Bank, information shortage, weakness of infrastructure, traditional educational system, State ownership and the general public's lack of bankingknowledge negatively affect a bank's use of NFPMs.H10 The development of human resource strategies to be more service-oriented is associated with a bank's use of NFPMs.H11 The development of the reward system to be linked with non-financial performance and to be more service-oriented is associated with a bank's use of NFPMs.H12 The development of the banking system (operating, information and reporting system) is associated with a bank's use of NFPMs.H13 The development of a bank's management accounting information is associated with its use of NFPMs.H14 The development of a bank's organisational structure is associated with its use of NFPMs.H15 The adoption of advanced management practices is associated with a bank's use of NFPMs.H16 Use of NFPMs encourages a bank to diversify and improve its range of services.H17 Use of NFPMs encourages a bank to adopt advanced technology.H18 Use of NFPMs improves a bank's profitability, customers' deposits and other FPMs in the long-term.H19 Use of NFPMs leads to an increase in a bank's capital expenditure.