A company has decided to change one of its financial Key Performance indicators (KPIs). It has traditionally measured profit through its gross profit…

Changing a Key Performance Indicator (KPI) from 'gross profit margin' to 'Return on Capital Employed' (ROCE) represents a fundamental shift in how business performance is measured and managed. This event affects several related activities in the Business Activity Model (BAM):

1. b) Monitor performance targets: The process for monitoring performance must be updated. Data collection, calculation, and reporting will now focus on ROCE instead of gross profit margin.

2. a) Take control action: Control actions are triggered by the results of monitoring. Since the metric being monitored has changed, the corresponding control actions will also change. For example, a low ROCE might trigger actions to improve asset utilization, which is different from actions to improve a low gross profit margin.

3. d) Define target customers: This change is strategic. A focus on ROCE emphasizes capital efficiency. This may lead the business to re-evaluate its customer segments, prioritizing those that yield higher returns on the capital required to serve them, thus affecting how target customers are defined.

Activity 'c) Define performance targets' is the event itself, rather than an activity affected by the event. The question asks what the event would affect, implying consequential changes to other activities.

A. c only.

This is incorrect because changing a KPI definition has direct consequences for how performance is monitored and managed, affecting other linked activities.

B. a only.

This is incorrect as control actions (a) are dependent on monitoring (b). The monitoring activity must be affected before the control activity can be.

C. b, c and d.

This option incorrectly omits 'Take control action' (a). In any performance management system, monitoring (b) and control (a) are intrinsically linked activities.

1. Paul, D., Yeates, D., & Cadle, J. (2020). Business Analysis (4th ed.). BCS, The Chartered Institute for IT.

In Chapter 7, on Business Activity Modelling, the text describes the standard set of activity types: Planning, Enabling, Doing, Monitoring, and Controlling. It explicitly states, "The ‘control’ activities are those that take action as a result of the information received from the ‘monitor’ activities." (p. 149). This establishes the unbreakable logical dependency between monitoring (b) and control (a), meaning if monitoring is affected, control must also be affected.

2. Checkland, P. (1999). Soft Systems Methodology in Action. John Wiley & Sons.

This foundational text explains that a conceptual model (BAM) is a system of logically dependent activities. A key part of any such system is a monitor and control subsystem. The definition of performance measures (the KPI) dictates the nature of both the monitoring and the control activities. A change to the definition necessarily forces changes in the other two parts of the subsystem. (See Chapter 2, The Basic Shape of the Methodology).

3. Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Press.

This seminal work on performance measurement argues that strategic objectives are translated into a set of performance measures (KPIs). A change in a high-level financial KPI, such as from gross margin to ROCE, reflects a change in strategy. This strategic change must cascade down to influence operational activities and choices, including which customer segments to target. (See Chapter 5, "The Financial Perspective"). This supports the inclusion of 'd) Define target customers' as an affected activity.