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ACCA Strategic Professional · Advanced Performance Management · Performance hierarchy

Kestrel Retail's mission states that it exists 'to provide ethically sourced clothing at fair prices'. The directors of a business unit are rewarded solely on quarterly operating profit, and the unit has recently switched to cheaper suppliers with weak labour standards to meet profit targets. What is the most appropriate conclusion about the performance hierarchy?

The unit's objectives and measures are misaligned with the mission, so goal congruence is lacking. Rewarding only quarterly profit encourages cheaper, less ethical sourcing that contradicts the stated purpose. The fix is to cascade the mission into objectives, measures and rewards, not to abandon the mission.

  1. AThe unit's objectives and measures are not aligned with the mission, so goal congruence is lackingCorrect
  2. BThe mission is flawed because it conflicts with profit
  3. CThe reward system is appropriate because profit is the only objective that matters to shareholders
  4. DThe vision should be replaced with a short-term profit target

Explanation

The hierarchy requires objectives, measures and rewards to cascade from the mission. Here a profit-only measure drives behaviour that contradicts the mission's ethical sourcing purpose. The problem is misalignment and weak goal congruence, not a defect in the mission itself.

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