ACCA Strategic Professional · Advanced Performance Management · Management reports
Zentra Hotels' board pack for its regional managers contains only monthly revenue, operating profit and ROCE for each hotel. The new finance director argues the pack should also include guest satisfaction scores, staff turnover and repeat-booking rates. Which is the strongest reason for adding these non-financial measures?
The strongest reason is that non-financial measures like guest satisfaction, staff turnover and repeat bookings act as leading indicators of future financial results. Financial figures only report what has already happened, so adding these measures gives managers earlier warning of problems and a more balanced view of performance.
- AThey are leading indicators of future financial performance that financial results alone do not revealCorrect
- BThey are audited to the same standard as the financial statements
- CThey remove the need to set financial targets for managers
- DThey are easier to quantify and compare across hotels than profit figures
Explanation
Non-financial measures such as satisfaction and repeat bookings tend to drive future revenue and profit, so they give early warning that historic financial results do not. They do not replace financial targets, are generally not audited, and are often harder, not easier, to measure consistently.
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