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CMA Final · Strategic Performance Management and Business Valuation · Introduction to Performance Management

A firm tracks only financial results such as profit and return on investment. Its CFO argues that performance management should also include customer satisfaction, internal process efficiency and employee learning measures. Which reasoning best supports the CFO's view?

Financial measures are lagging indicators that report past outcomes, so non-financial measures on customers, processes and learning are added to reveal the drivers of future performance. They complement rather than replace financial measures, which is why a broader, balanced set of measures is part of performance management's scope.

  1. AFinancial measures are lagging indicators, so non-financial measures are needed to show drivers of future performanceCorrect
  2. BNon-financial measures replace financial measures, which are no longer relevant
  3. CNon-financial measures are required by the Companies Act for all companies
  4. DFinancial measures cannot be quantified in rupees

Explanation

Financial results report outcomes of past decisions, so they lag. Non-financial measures such as customer satisfaction and process quality lead future results and give a balanced view. The aim is to complement, not replace, financial measures, so the replacement option is wrong.

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