This case study shows a typical situation in which management accounting can be helpful.

Read the case study now but only attempt the discussion points after you have finished studying the chapter.

Overall performance – Shell scorecard Shell uses a number of key performance indicators to evaluate the overall performance of Shell from a financial, efficiency, social and sustainable development perspective and collectively they represent the Shell scorecard. In addition, Shell monitors and manages the businesses by means of detailed parameters. The scorecard highlights four key performance indicators which together provide a summarised overview of Shell’s performance. These are measured on a quarterly and annual basis. As explained on page 86 in the Directors’ Remuneration Report, the scorecard is also used to determine remuneration for staff, Senior Management and Executive Directors.

Total shareholder return (25 per cent scorecard weighting)

Total shareholder return (TSR) is measured as the sum of the difference between the share price at the start of the year and the share price at the end of the year, plus the cash value of dividends paid during the calendar year (gross and reinvested quarterly). The TSR is compared against other major integrated oil companies and provides therefore a benchmark of how Shell is performing against its industry peers.

Net cash from operating activities (25 per cent scorecard weighting)

Net cash from operating activities is a measure that reflects Shell’s ability to generate cash for investment and distributions to shareholders. The Consolidated Statement of Cash Flows on page 117 shows the components of cash flow. The net cash from operating activities for scorecard purposes is adjusted for taxes paid on divestments.

Questions 1 What is the mix of financial and non-financial performance measures mentioned in this extract?
2 How easy would it be to measure the performance of an individual against these targets?