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ACCA Applied Knowledge · Management Accounting · Performance measurement - application

A company uses a performance measure for its sales team based solely on the number of orders taken each month. Sales staff begin accepting small, unprofitable orders to increase their order count. Which performance measurement problem does this best illustrate?

This illustrates dysfunctional behaviour. The measure rewards the number of orders rather than profitable orders, so staff pursue small unprofitable sales to improve their own results, acting against the organisation's goals. The measure is therefore not goal congruent with the company's objective of profit.

  1. ADysfunctional behaviour caused by a measure that is not goal congruentCorrect
  2. BInformation overload caused by too many measures
  3. CLack of controllability of the measure by the manager
  4. DTime lag between action and reported results

Explanation

Staff act to improve the measured figure (order count) even though this harms overall profit. This is dysfunctional behaviour arising from a measure that is not aligned with organisational goals. The other options describe different problems, none of which are indicated by the scenario.

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