Performance and reward
Performance and reward systems link recognition or remuneration to selected achievements. They should support strategic goals, be understandable, reasonably controllable and motivating, and avoid rewarding harmful short-term actions. Consider affordability, fairness, time horizon and interactions between financial and non-financial targets. Strong incentives can improve effort but can also increase gaming or excessive risk when the measure is an incomplete representation of value.
Worked example
A bonus combines profit, service quality and safety with a deferred element, reducing the incentive to inflate this month’s profit by neglecting maintenance.
Common mistake
What gets measured may get manipulated. An incentive plan cannot be assessed solely by the size of the bonus or whether staff hit the headline target.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Direct | September 2026–June 2027 |
| ACCA | BT | Direct | September 2026–June 2027 |
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FBT | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |