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CMA Final · Strategic Performance Management and Business Valuation · Introduction to Performance Management

Which of the following is the best example of a leading (driver) performance indicator rather than a lagging (outcome) indicator for a software services firm aiming at higher client retention?

Hours of client-specific training completed this quarter is a leading indicator because it measures an activity that influences future client retention. Net profit, last quarter's revenue and return on capital employed record results already achieved, so they are lagging outcome measures.

  1. ANet profit for the last financial year
  2. BRevenue earned in the previous quarter
  3. CHours of client-specific training completed by delivery staff this quarterCorrect
  4. DReturn on capital employed for the year

Explanation

Leading indicators measure activities that drive future results, such as staff training that should improve service quality and retention. Net profit, past revenue and ROCE report outcomes already achieved, so they are lagging indicators.

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