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

Orion Software reports strong profit this year, but customer complaints are rising, key developers are leaving and few new products are in development. The CEO argues that profit proves strategy is working. Which statement best explains why this view is flawed?

Financial measures are lagging indicators that report past results. Rising complaints, staff departures and a thin product pipeline are leading indicators of future decline that current profit does not yet capture, so profit alone cannot prove the strategy is working.

  1. AFinancial measures are historic and lagging, so they report past outcomes and give little warning of the drivers of future performanceCorrect
  2. BProfit is not reliable because it is audited
  3. CNon-financial measures are always more accurate than profit
  4. DProfit only reflects the performance of shareholders

Explanation

Financial results report the consequences of past decisions. Complaints, staff turnover and a weak pipeline are leading indicators of future problems that profit does not yet show. Auditing does not make profit unreliable, and non-financial measures are not inherently more accurate.

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