Week 5: Measuring Strategic Performance
ACCT5931
Sustainable Management Accounting
2Week 5:
Course content overview
Introduction to Sustainable Management Accounting
Analysing the
Internal
Environment
Conclusion to Sustainable Management Accounting
Analysing the
External
Environment
Developing
Strategy
Integrating
Sustainability in Strategy
Week 1
Week 4
Week 8
Week 2
Performance
Measurement
& Management
Managing Sustainability
Performance
Week 3
Week 10
Strategy
Analysis
& Development
Measuring Strategic
Performance
Week 5
Managing Performance
using a Balanced Scorecard
Week 7
Week 9
Recharge
Week
Week 6
Strategic
Management
Sustainable
Management
 Required readings:
– Simons, R, Kaplan, R., Davila, A., 2000 Performance measurement &
control systems for implementing strategy: text & cases, Prentice Hall
International, pp. 57-74 [via Leganto]
– Langfield-Smith, K., Thorne, H., Smith, D., and Hilton, R. 2015.
Management Accounting 7e: Information for Managing and Creating Value,
McGraw-Hill, pp. 530-532. [via Leganto]
 Case study:
– NB: The following case materials from prior weeks are assumed knowledge:
• Tania Bucic and Aura Garcia 2018. The Aldi Brand: Private-label
Success in Australia. Harvard Business School case [download from
Moodle]
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Week 5:
Required readings and case study
4Week 5:
Desired learning outcomes
 In Week 5 we aim to be able to:
– Appreciate the link between generic business level-strategy and
the design of strategic performance measures.
– Use the organisational process model to categorise
performance measures as relating to inputs, processes, or
outputs.
– Evaluate the appropriateness of possible performance
measures using the control framework.
– Evaluate the effectiveness of possible performance measures.
– Differentiate between lead measures and lag measures.
Week 5:
Measuring what matters
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• What activities incur costs?
• What are the drivers of costs?
• How are activities linked?
Cost advantage
• What activities support uniqueness?
• What are the drivers of uniqueness?
• How are activities linked?
Differentiation
Source: Grant et al 2021
Week 5:
A basic organisational model
• Information
• Materials
• Energy
• Labour
Inputs
• Transformation
of inputs into
outputs
Process • Intermediate
products
• Final products
• Services
Outputs
6Source: Simons, Kaplan and Davila (2000)
Week 5:
Designing performance measures
INPUT MEASURES PROCESS MEASURES OUTPUT MEASURES
Non-financial measures
a) New product development # of engineering hours # of product delivery
milestones achieved
# of new products
introduced
b) Order processing # of telephone
answering staff
Order completion time # of orders processed
c) Parts manufacture # of components
meeting specification
Set up time % of units meeting
standard
Financial measures
a) New product development $ labour and material $ cost of prototyping % of sales revenue
from new products
b) Order processing $ clerical labour $ cost of backorder
handling
$ cost per order
processed
c) Parts manufacture $ cost of components $ cost of rework $ cost per unit
7Source: Simons, Kaplan and Davila (2000)
Some examples of non-financial and financial measures for different types of activities:
 Lag measures  Lead measures 
Week 5:
Considerations in designing performance measures
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Technical
feasibility
Understanding of
cause and effect
Cost Desired level of
innovation
Source: Simons, Kaplan and Davila (2000)
Week 5:
Control framework for performance measures
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Measure Inputs
When:
• Cost of inputs is
high relative to
cost of outputs
• Quality and/or
safety is important
• Process or output
measures are not
available
Measure Processes
When:
• Processes can be
observed and/or
measured
• Cost of measuring
is low
• Standardisation is
important for
safety or quality
• Cause and effect
relationships are
understood
• Processes are
important for
delivering strategy
Measure Outputs
When:
• Outputs can be
observed and/or
measured
• Cost of measuring
is low
• Cause and effect
relationships are
not well
understood
• Freedom to
innovate is desired
Source: Simons, Kaplan and Davila (2000)
Week 5:
Features of effective performance measures
1. Link to strategy and the goals of the organisation
2. Recognise controllability
3. Embrace participation and empowerment
4. Be simple
5. Emphasise the positive
6. Be timely
Plus: For a set of performance measures:
7. Include benchmarking
8. Include only a few performance measures
9. Link to rewards
Source: Langfield-Smith, Thorne, Smith and Hilton (2015) 10
A suggestion:
Consider these points
when choosing a
performance measure
Week 5:
Announcements and reminders
 No seminar next week
– Recharge week is a chance to rest, reflect and make progress
on your assessments.
However!
 Your team case report is due before your normal enrolled
seminar time (even though seminars will not be running)
– One student per team to submit report via Moodle; then
– All students must complete the reflection and peer evaluation
• A 10% non-completion penalty will apply to individual students
who do not submit the peer evaluation by the end of Week 6
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