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ACCA Strategic Professional · Advanced Performance Management · Performance hierarchy

Orlan Retail has four CSFs. The board proposes 35 KPIs, many of them reported weekly to all store managers. A consultant argues this will weaken performance management. Which recommendation best aligns with good practice for CSFs and KPIs?

The best recommendation is to limit KPIs to a few per critical success factor, make them relevant to each manager's controllable area and review them as strategy evolves. Too many measures dilute focus, while profit-only or annual reporting would not support the CSFs.

  1. ALimit KPIs to a small number per CSF, tailor them to the manager's level of control and review them as strategy changesCorrect
  2. BKeep all 35 KPIs and add targets for each so nothing is overlooked
  3. CReplace all non-financial KPIs with profit measures to simplify reporting
  4. DReport all KPIs only annually to avoid short-term focus

Explanation

Good practice is to have a few focused KPIs linked to CSFs, relevant to each manager's responsibility, and updated as strategy changes. Too many measures dilute focus and cause information overload. Using only profit ignores the CSFs, and annual reporting prevents timely action.

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