Skip to content

ACCA Strategic Professional · Advanced Performance Management · Non-financial performance measurement

Harbour Logistics, a freight company, assesses its divisional managers solely on quarterly operating profit. One manager has deferred vehicle maintenance and cut driver training to hit the quarterly target, and breakdowns are now rising. Which limitation of purely financial measures does this best illustrate?

The scenario shows short-termism. Judging managers only on quarterly profit encourages them to cut discretionary spending like maintenance and training, which lifts current results but harms long-term capability and value. Financial measures are monetary and simple, so the other options are wrong.

  1. AThey encourage short-termism at the expense of long-term valueCorrect
  2. BThey are always too complex for managers to understand
  3. CThey cannot be expressed in monetary terms
  4. DThey only measure external stakeholder satisfaction

Explanation

Cutting discretionary spending such as maintenance and training boosts current profit but damages future capability. This is the classic short-term focus problem of financial-only measures. The other options misdescribe financial measures, which are monetary and usually simple.

Did you get it right without looking?

One question tells you little. A timed set on Non-financial performance measurement shows your real accuracy, how long you take and where you lose marks.

Practise Non-financial performance measurementFree diagnostic mock

More Non-financial performance measurement questions