ACCA Strategic Professional · Advanced Performance Management · Performance hierarchy
Brandt Retail's mission emphasises 'sustainable sourcing and fair treatment of suppliers'. The board's only objective is to maximise earnings per share this year, and the purchasing director is rewarded solely on cost savings. Which is the most significant concern arising from this situation?
The main concern is lack of goal congruence. The mission stresses sustainable sourcing and fair supplier treatment, but the objective and the reward scheme focus on earnings and cost cuts, so managers may act against the mission to hit their targets.
- ALack of goal congruence between the mission and the objectives and reward system, which may drive behaviour contrary to the missionCorrect
- BThe mission is too long to be useful in the performance hierarchy
- CEarnings per share cannot be used as an objective for a listed company
- DThe objective is too short-term to be used for strategic purposes because it is quantified
Explanation
The hierarchy requires objectives and measures to be consistent with the mission. Rewarding only cost savings may push the purchasing director to squeeze suppliers, which contradicts the mission. Quantification is a strength of objectives, and EPS is a permissible objective, so the other options are wrong.
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