## **Learning Outcomes**

After reading this article, you will be able to explain the Fitzgerald and Moon building block model for performance measurement in service organisations. You will understand the six key performance dimensions, how standards and rewards are designed, and how the model supports multidimensional, non-financial assessment. You will be able to apply this model to scenario-based exam questions and critically discuss its advantages and limitations.

## **ACCA Performance Management (PM) Syllabus**

For ACCA Performance Management (PM), you are required to understand frameworks that measure performance using both financial and non-financial indicators. In particular, revision for this topic should include:

- The role of non-financial and multidimensional performance frameworks in assessing business performance
- The structure and use of Fitzgerald and Moon’s building block model
- The identification and application of performance dimensions suited to service (and non-service) sectors
- The principles for setting standards and rewards in a performance measurement system

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which of the following is **not** one of Fitzgerald and Moon’s six building block dimensions?
   a) Quality of service
   b) Resource utilisation
   c) Stakeholder engagement
   d) Financial performance

2. What is the main purpose of the 'standards' block in the building block model?
   a) To allocate resources
   b) To set targets for performance measures
   c) To monitor competitors' results
   d) To automate rewards

3. True or false? In the building block model, rewards are most effective when they are achievable, clearly communicated, and under the individual's control.

4. Briefly list two examples of non-financial indicators that could be used within the quality of service dimension.

## **Introduction**

Traditional performance measurement systems have focused almost solely on financial metrics. However, in modern service organisations, financial outcomes alone do not capture overall performance. The Fitzgerald and Moon building block model offers a multidimensional approach, structured to capture both financial and non-financial drivers of success. This framework recognises that good performance results from the combined effect of outcomes and their key drivers, and that staff behaviour must be aligned with organisational aims through robust standards and rewards.

> **Key Term: building block model**
> A multidimensional performance measurement framework developed by Fitzgerald and Moon, particularly suited for service sectors, comprising performance dimensions, standards, and rewards.

## **THE BUILDING BLOCK MODEL EXPLAINED**

The building block model is built on three key blocks:

1. **Dimensions** – what is measured.
2. **Standards** – targets set for those measures.
3. **Rewards** – the incentives linked to achieving the standards.

> **Key Term: dimensions (building block model)**
> The six aspects of performance—competitiveness, financial performance, quality of service, flexibility, resource utilisation, and innovation—used to evaluate organisational results and drivers.
>
> **Key Term: standards (building block model)**
> The targets or benchmarks set for each performance measure, intended to be fair, achievable, and agreed upon by those assessed.
>
> **Key Term: rewards (building block model)**
> The system of incentives provided to encourage staff to meet or exceed set standards, designed to be clear, motivating, and based on controllable factors.

### The Six Performance Dimensions

The model divides performance into the following six dimensions:

- **Competitiveness:** e.g. market share, customer base, sales growth
- **Financial performance:** e.g. profitability, liquidity, risk
- **Quality of service:** e.g. reliability, customer satisfaction, complaints statistics
- **Flexibility:** e.g. ability to meet customised requests, delivery speed, adaptability to change
- **Resource utilisation:** e.g. efficiency ratios, output per staff member, use of assets
- **Innovation:** e.g. new products/services launched, process improvement, R&D activity

The first two (competitiveness and financial performance) are considered results dimensions—measures of what has been achieved. The remaining four are determinants—drivers that influence the results.

### The Standards Block

Setting appropriate standards is essential in any performance measurement system. Standards should be:

- **Owned:** employees feel they have contributed to their development and accept them.
- **Achievable:** realistic yet challenging, to incentivise performance without demotivating staff.
- **Equitable:** applied fairly across individuals or units for consistency and motivation.

### The Rewards Block

The reward system motivates staff to achieve (or exceed) standards and must have:

- **Clarity**—employees understand how their performance links to rewards.
- **Motivation**—incentives are meaningful and drive desired behaviour.
- **Controllability**—rewards are based on factors within the individual's or unit's influence.

Without clear, motivating, and controllable rewards, staff may become disengaged or focus their efforts elsewhere.

### **Worked Example 1.1**

A national car dealership sets up a performance measurement system based on the building block model. Suggest an example of a measure and a standard for each dimension.

> **Answer:**
>
> - **Competitiveness:** Measure – Local market share (percentage of car registrations in city area). Standard – Achieve minimum 30% annual local share.
> - **Financial performance:** Measure – Average profit per sale. Standard – At least \$1,200 net profit per vehicle.
> - **Quality of service:** Measure – Number of customer complaints resolved within 5 working days. Standard – 95% of complaints handled within timeframe.
> - **Flexibility:** Measure – Percentage of custom vehicle orders delivered on date promised. Standard – 99% on-time delivery.
> - **Resource utilisation:** Measure – Sales per square metre of floor space. Standard – \$2,000/year per sqm.
> - **Innovation:** Measure – Number of new financing or after-sales service products introduced each year. Standard – Minimum 2 per year.

## **BUILDING BLOCK MODEL IN THE EXAM**

You may be asked to apply the building block framework to different sectors or scenarios, explain why non-financial measures are needed, or discuss drawbacks. Ensure that, for scenario-based questions, you can:

- Suggest or interpret suitable measures for each dimension
- Explain the purpose and design of standards and rewards
- Comment on how well the system meets the characteristics of effective performance measurement

### **Worked Example 1.2**

A hotel group is considering its reward structure. What three features must rewards have according to the building block model?

> **Answer:**
>
> - Rewards should be clear (understood by staff)
> - Rewards should be motivating (valued by staff and linked to desired outcomes)
> - Rewards should be controllable (dependent on factors within the recipient’s influence)

### **Exam Warning**

> When proposing performance measures or rewards, always ensure they relate to aspects the employee or unit can actually affect. Rewarding people for results outside their control reduces effectiveness and may demotivate staff.

### **Revision Tip**

> When revising this model, create your own table listing example measures under each dimension for a typical service business. Focus on practical, measurable indicators.

## **Summary**

The Fitzgerald and Moon building block model is a flexible framework that supports performance measurement using both financial and non-financial metrics. It divides performance into six results and driver dimensions, and ties motivation to clear standards and rewards. The model aims for fair, achievable targets and incentivises behaviour aligned with organisational goals—features which examiners often test.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- The rationale for non-financial, multidimensional performance measurement in service businesses
- The three building blocks: dimensions, standards, and rewards
- The definition and use of each of Fitzgerald and Moon’s six dimensions
- Criteria for effective standards (ownership, achievability, equity)
- Principles for designing effective rewards (clarity, motivation, controllability)
- How to apply and discuss the model in exam scenarios, including typical pitfalls

## **Key Terms and Concepts**

- building block model
- dimensions (building block model)
- standards (building block model)
- rewards (building block model)


Non-financial and multidimensional frameworks - Fitzgerald and Moon building block model