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ACCA Strategic Professional · Advanced Performance Management · Performance and reward

Calder Energy wants its performance management system to support a strategy of continuous innovation in an uncertain market. Which approach to budgeting and control is most consistent with this strategy?

Rolling forecasts with flexible, regularly reviewed targets and innovation-focused measures best support a strategy of continuous innovation under uncertainty. They let the organisation adapt and encourage experimentation, whereas rigid fixed or incremental budgets and pure cost control would discourage it.

  1. ARigid annual fixed budgets with strict variance penalties
  2. BRolling forecasts and flexible targets reviewed regularly, with some measures focused on innovation outcomesCorrect
  3. CIncremental budgets based on last year's figures plus inflation
  4. DControls focused only on cost minimisation

Explanation

In an uncertain, innovation-driven setting, control needs to be adaptive. Rolling forecasts and regularly revised targets allow response to change, and innovation measures keep attention on the strategy. Rigid, incremental or cost-only controls discourage experimentation.

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