Advanced Performance Management · Non-financial performance measurement

Performance Pyramid and Building Block Model for ACCA APM

Updated 11 October 2026 · Fact-checked

The Performance Pyramid (SMART) links corporate vision to day-to-day operations through four levels of objectives and measures. The Building Block model (Fitzgerald and Moon) judges service businesses using six dimensions, then standards and rewards. To answer questions, name the model's parts, apply each to the scenario, then evaluate it.

Understand Performance Pyramid and Building Block Model

Financial measures alone tell you what happened. They do not tell you why, or whether the strategy is being carried out at every level. The Performance Pyramid and the Building Block model both try to fix this, in different ways.

The Performance Pyramid was developed by Lynch and Cross. It is also called the SMART system (Strategic Measurement Analysis and Reporting Technique). It has four levels. At the top is the corporate vision. Below it are business units, with market and financial objectives. Next is the business operating systems level, with customer satisfaction, flexibility and productivity. At the base are departments and work centres, with quality, delivery, cycle time and waste. Objectives flow down from vision to operations. Measures flow up from operations to the vision.

The pyramid also splits measures into external (customer-facing: market, satisfaction, quality, delivery) and internal (efficiency-focused: financial, productivity, cycle time, waste). This shows that each operating measure should connect to something a customer or shareholder cares about. Its main strength is that it links strategy to operations and sets measures that matter at each level of management.

The Building Block model by Fitzgerald and Moon was designed for service businesses, where output is intangible, varies from customer to customer and is produced and consumed at the same time. It has three blocks: dimensions, standards and rewards. The dimensions are what you measure. The standards are the targets set. The rewards are the incentives for reaching them.

There are six dimensions. Results are competitiveness and financial performance. They are the outcomes. The other four are determinants, which drive results: quality of service, flexibility, resource utilisation and innovation. The idea is that good scores on the determinants lead to good results later.

The standards must have three features: ownership (staff accept them), achievability (realistic) and equity (fair across different units, so no manager is given an easier or harder target without reason). Rewards must be clear, motivating and controllable by the person rewarded.

Key rules to remember

Performance Pyramid levels: Corporate vision → Business units (market, financial) → Business operating systems (customer satisfaction, flexibility, productivity) → Departments and work centres (quality, delivery, cycle time, waste); Objectives flow down. Measures flow up. Know which measure sits at which level.
Pyramid measure types: External (effectiveness): market, customer satisfaction, quality, delivery. Internal (efficiency): financial, productivity, cycle time, waste; Use this to show the link between customer outcomes and internal efficiency.
Building Block dimensions: Results: competitiveness, financial performance. Determinants: quality of service, flexibility, resource utilisation, innovation; Six in total. Results are outcomes. Determinants are drivers.
Building Block standards: Ownership, achievability, equity; Test each target against all three.
Building Block rewards: Clarity, motivation, controllability; Staff must understand the reward, want it and be able to influence the result.

How to solve Performance Pyramid and Building Block Model questions

Use this method for any question on either model, whether it asks you to describe, apply or evaluate.

1Read the requirement. Decide whether you must explain the model, design measures, assess existing measures or compare models.
2Identify the business type. A service business points to the Building Block model. A need to link strategy to operations points to the Pyramid.
3Set out the structure briefly: the four pyramid levels, or the six dimensions, standards and rewards.
4Apply each part to the scenario. Give a specific measure and a reason for it, using scenario facts and figures.
5For the Building Block model, separate results from determinants. Say which determinants should explain the results.
6Test standards and rewards using ownership, achievability and equity, and clarity, motivation and controllability. Point out any failures in the scenario.
7Evaluate. Give strengths and limitations, and say whether the model suits this business. Compare with the Balanced Scorecard if asked.
8Finish with a clear recommendation or conclusion that answers the requirement. This earns professional skills marks.

Quickest way: Five-line model plan

When to use it: Use when time is short and you need a quick plan before writing a 10 to 15 mark answer.

Write the model's skeleton in the margin: V-B-O-D for the Pyramid (vision, business units, operating systems, departments) or R-D / S / R for the Building Block.
Next to each part, jot one scenario fact that matches it.
Add one measure per part, and tag each as external or internal, or as result or determinant.
Note one strength and one limitation of the model for this business.
Write the answer in the same order as your plan, with one short paragraph per part and a closing recommendation.

Common mistakes in Performance Pyramid and Building Block Model

Treating the Pyramid as just another scorecard with four perspectives.
Both models are non-financial frameworks and students blur them together.
Fix: Remember the Pyramid is a hierarchy of levels linking vision to operations. The Balanced Scorecard has four perspectives that sit side by side.
Listing the six dimensions without separating results from determinants.
Students memorise the list and skip the logic.
Fix: State that competitiveness and financial performance are results, and that quality, flexibility, resource utilisation and innovation drive them. Then link them in the scenario.
Forgetting standards and rewards and only covering dimensions.
The dimensions get most of the attention in notes.
Fix: Always cover all three blocks. Use ownership, achievability and equity for standards, and clarity, motivation and controllability for rewards.
Giving generic measures that could fit any business.
Students recall textbook examples instead of reading the scenario.
Fix: Tie every measure to the scenario. For a hotel, quality of service might be guest complaints per 1,000 stays, not just 'customer satisfaction'.
Placing measures at the wrong pyramid level, such as cycle time at the business unit level.
Students do not learn which measures belong to which level.
Fix: Remember the base level holds quality, delivery, cycle time and waste. Operating systems hold customer satisfaction, flexibility and productivity.
Describing the model at length with no evaluation.
Description feels safe, and evaluation takes judgement.
Fix: Add at least one strength and one limitation, such as the number of measures, difficulty setting equitable standards, or lack of a clear link to strategy in Building Block.

Worked examples

Example 1

A chain of dental clinics measures only revenue and profit per clinic. The board wants a Building Block model to assess performance. Suggest one measure for each of the six dimensions and explain how results and determinants relate. (10 marks)

Show the solution

Results first. Competitiveness: growth in new patient registrations and share of local patients. Financial performance: operating profit margin per clinic.
Determinants next. Quality of service: patient complaints per 1,000 visits and treatment re-work rate.
Flexibility: speed of booking an emergency appointment and ability to handle varied treatments.
Resource utilisation: percentage of chair time booked and revenue per dentist hour.
Innovation: number of new treatments or digital booking features launched, and take-up by patients.
Explain the link. Clinics with strong quality, flexibility, utilisation and innovation should see more patients stay and recommend the clinic. Over time this should raise competitiveness and profit. A clinic with high profit but rising complaints is likely to see results fall later.
Note the limitation: the model needs many measures, so the board should pick a few key ones per dimension.

Answer: Use new patient registrations and profit margin as results. Use complaints per 1,000 visits (quality), emergency appointment speed (flexibility), chair time booked (resource utilisation) and new treatments launched (innovation) as determinants. The determinants drive future results, so the board can act early rather than waiting for profit to fall.

Example 2

A bank sets branch managers a sales target of 20% growth. Managers did not take part in setting it and branches in poor areas have the same target as those in rich areas. Bonuses are paid only on sales. Evaluate these standards and rewards using the Building Block model. (8 marks)

Show the solution

Recall the tests. Standards: ownership, achievability, equity. Rewards: clarity, motivation, controllability.
Ownership fails. Managers had no input, so they may not accept the target and may feel it is imposed.
Equity fails. Poor-area branches face the same growth target as rich-area ones, though their market potential differs. This is unfair and may demotivate.
Achievability is doubtful. A flat 20% may be unrealistic for weaker areas, so some managers will see it as out of reach.
Rewards: a sales-only bonus is clear, which is a strength. It may motivate sales effort.
Controllability is partly weak. Local economic conditions affect sales and are outside the manager's control.
The reward also ignores other dimensions such as quality of service and resource utilisation. This may encourage mis-selling or poor service.
Recommend involving managers in target setting, adjusting targets for local conditions, and adding quality and customer measures to the bonus.

Answer: The standards fail on ownership, equity and probably achievability. The reward is clear but weak on controllability and too narrow, as it ignores service quality. The bank should agree adjusted targets with managers and widen the bonus to cover several dimensions.

Exam tips

If the scenario is a service business, such as a hotel, bank, airline or consultancy, think of the Building Block model first and say why it suits services.
Use the exact terms in your answer: results, determinants, ownership, achievability, equity. They help the marker find your points.
Compare with the Balanced Scorecard only when asked, or briefly in an evaluation. The Pyramid stresses the flow from vision to operations. The Building Block model stresses service dimensions, standards and rewards.
Link measures to scenario facts and figures. Generic lists earn few marks.
End with a recommendation that tells the board what to do. This supports your professional skills marks.

Practice questions from Non-financial performance measurement

Performance Pyramid and Building Block Model in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalPerformance Pyramid, Building Block and Other Frameworks

Performance Pyramid and Building Block Model: frequently asked questions

What is the Performance Pyramid (SMART) in APM?

It is a framework by Lynch and Cross with four levels: corporate vision, business units, business operating systems, and departments and work centres. Objectives pass down the levels and measures pass up. It splits measures into external (effectiveness) and internal (efficiency).

What are the six dimensions of the Building Block model?

They are competitiveness, financial performance, quality of service, flexibility, resource utilisation and innovation. The first two are results. The other four are determinants that drive those results.

What is the difference between the Performance Pyramid and the Balanced Scorecard?

The Pyramid is a hierarchy that links vision to operations through levels, with measures moving up and objectives moving down. The Balanced Scorecard groups measures into four perspectives: financial, customer, internal process, and innovation and learning. The scorecard looks across the business, while the Pyramid looks up and down it.

Why is the Building Block model suited to service businesses?

Services are intangible, vary between customers and are consumed as they are produced. The model includes dimensions such as quality of service and flexibility that capture this. It also covers standards and rewards, which matter because service quality depends heavily on staff.