ACCA Strategic Professional · Advanced Performance Management · Financial performance measurement
Halden Logistics reports strong profit growth for three consecutive years, yet customer complaints have risen, staff turnover has doubled and investment in new vehicles has been postponed. Which conclusion about the role of financial performance measures is most appropriate?
Financial measures are lagging indicators that summarise past results and miss the drivers of future success, such as customer satisfaction, staff retention and investment. Halden should supplement profit with non-financial measures in a balanced framework rather than rely on profit growth alone.
- AFinancial measures are lagging indicators that report past results and do not reveal the drivers of future performance, so they should be supplemented by non-financial measuresCorrect
- BFinancial measures are leading indicators and the complaints must therefore be ignored
- CProfit growth proves the strategy is working, so non-financial data adds no information
- DFinancial measures should be abandoned entirely in favour of customer measures
Explanation
Profit is a lagging measure that summarises past outcomes; it does not capture deteriorating customer satisfaction, staff morale or asset renewal that will affect future results. A balanced approach adds non-financial drivers. Abandoning financial measures altogether is excessive and not the recommended response.
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