ACCA Strategic Professional · Advanced Performance Management · Performance optimisation in specific contexts
Almera Retail has a profit-related bonus for store managers and a corporate sustainability target set by the board, which the CEO links to investor ESG ratings. Store managers are not rewarded for sustainability. Packaging costs would rise if recycled materials were used. Which action best resolves the goal conflict while retaining accountability?
The best resolution is to add controllable sustainability measures, such as recycled packaging percentage, to store managers' bonus scorecards with sensible weighting. This aligns local incentives with board and investor objectives, preserves accountability, and avoids managers sacrificing sustainability to hit profit-only targets.
- ARemove the sustainability target since profit is the primary measure
- BInclude controllable sustainability measures, such as recycled packaging percentage, in the store managers' bonus scorecard with appropriate weightingCorrect
- CReward only the CEO for ESG ratings
- DReplace the profit bonus with a fixed salary
Explanation
Aligning managers' rewards with the board's sustainability goal removes the conflict, and using controllable measures keeps accountability fair. Removing the target ignores investor stakeholders, rewarding only the CEO leaves managers' incentives unchanged, and fixed salary removes motivation.
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