ACCA Strategic Professional · Strategic Business Leader · Enabling success: performance excellence
Zephyr Utilities is a regulated water company. Its performance is judged by the regulator, customers and investors. Management proposes measuring only return on investment and cost per cubic metre delivered. Which criticism is most valid in terms of stakeholder-based performance measurement?
The main criticism is that return on investment and unit cost reflect mainly financial and efficiency concerns and ignore outcomes that matter to regulators and customers, such as water quality, leakage and reliability. A stakeholder-based set of indicators is needed for a rounded assessment.
- AThe measures give too much weight to customers
- BThe measures do not capture outcomes valued by multiple stakeholders, such as leakage, water quality and service reliability, so performance is only partly assessedCorrect
- CCost measures cannot be used by regulated companies
- DReturn on investment cannot be calculated for utilities
Explanation
A stakeholder approach requires indicators that reflect each important group's needs, such as regulatory compliance, quality and reliability for a water utility. ROI and unit cost reflect mainly investor and efficiency concerns. The other options are factually incorrect as both measures can be calculated and used by utilities.
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