ACCA Strategic Professional · Advanced Performance Management · Non-financial performance measurement
Marlow Logistics sets each depot a target of reducing cost per delivery. Managers meet the target by switching to cheaper, less reliable subcontractors, and late deliveries increase. Which action would best address this limitation while retaining the cost measure?
Add non-financial measures such as on-time delivery and complaints alongside cost per delivery. The single cost measure caused managers to sacrifice service quality, so a balanced set of indicators ensures cost savings are not achieved at the expense of customer outcomes.
- AAdd non-financial measures such as on-time delivery rate and customer complaints in a balanced set of indicatorsCorrect
- BReplace the cost target with a higher cost target
- CRemove all targets from depot managers
- DReport cost per delivery less frequently to the board
Explanation
The problem is that a single financial measure ignores quality and service, so managers trade them off. Adding balanced measures such as on-time delivery makes the trade-off visible and rewarded. Removing targets or reporting less often does not fix the imbalance.
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