RELEVANT TO ACCA QUALIFICATION PAPERS P3 AND P5
© 2012 ACCA
Benchmarking
Benchmarking can be defined as: 'The establishment, by the collection of data,
of comparators that allow relative levels of performance to be identified.’
Benchmarking can be thought of as a scientific way of setting objectives that
will act as targets before and during the operating period, and comparators
during and after the period. The phrase ‘by the collection of data’ is crucial:
anyone can establish objectives without the collection of data, but these will be
of little use because they are likely to be arbitrary and without any validity.
Benchmark data validates objectives.
The sources of data that can be used include internal data (for example,
comparing the results of different branches), data about other companies (for
example, those in the same industry) and government data (for example, data
about employee sick days). We will examine the sources of data in more detail
later.
Benchmarking and the strategic planning process
Benchmarking can be used in all three steps of the classical, rational model of
strategic planning:
• Assess the strategic position (internal and external factors)
Frequently, strategic planning starts by defining the mission or mission
statement. For example, BMW states that its mission is: ‘The BMW
Group is the world’s leading provider of premium products and premium
services for individual mobility.’
So, without comparison through benchmarking, how does BMW know
that it is delivering premium products and services?
Assessment of an organisation’s current strategic position can be
summarised in a SWOT analysis. However, the use of comparators is
inherent in a SWOT analysis: if you can say that something is a
‘weakness’ or a ‘strength’ you must be carrying out some sort of
comparison when making that value judgement. Similarly with
opportunities and threats. A factor is a threat to us only because it is
better or stronger than we are in that area – whether it is an organisation
that is better financed, or one that produces products more cheaply, or a
technological development that promises a better product in terms of
cost-benefit, or an organisation that has a stronger brand name.
Showing posts with label P5. Show all posts
Showing posts with label P5. Show all posts
Open tuition
EVA
Non financial performance measures
Information needs of different business structures
Different approaches to budgeting; beyond budgeting
BPP
Performance analysis:
The new examiner has indicated that his questions will require more skill in interpreting data and discussing strategies to improve performance rather than performing calculations. You may be asked to analysis performance vs budget to identify underlying problems that a company needs to address. This analysis could include the use of activity-based approaches, learning curves or non-financial performance measures.
‘Beyond budgeting’ is an important area that can be tested either as a discussion or a numerical question.
Performance appraisal requires effective information systems, expect to be asked to identify the key strategic, tactical and operational information requirements of a business.
Risk analysis:
Analysis of the risk of a new proposal could include numerical techniques such as expected values and probabilities; but strategic frameworks such as PEST analysis could feature here.
Strategic performance measures in the private sector:
Divisional performance measurement is another key area; ROI, RI , EVA, NPV or even cost of quality could feature here and transfer pricing could feature as an aspect of these questions.
EVA is especially likely given the recent articles published in this area – make sure you have read them. Modified IRR is new to the syllabus so make sure that you are comfortable with this area.
Reward systems:
HR issues are new to the syllabus from June 2011; the examiner is interested in the impact of reward systems on performance management.
Alternative views of performance measurement:
Questions are commonly set that require a good understanding of the balanced scorecard, the building blocks model and the performance pyramid. Questions will often require you to analyse data that has been collected using one of these models. The balanced scorecard and performance pyramid were tested heavily in June 2011.
Performance hierarchy:
Linking strategic decisions to mission statements or suggesting strategic options using models such as Ansoff’s matrix or the BCG matrix lend themselves to questions containing a mixture of financial and discursive elements that could easily include a simple NPV or profit analysis.
Kaplan tips
•CSFs and KPIs
•Strategic analysis tools
•Ethics / CSR
•Budget preparation/forecasting
•League table and targets in the public sector
•Evaluation of financial and non-financial performance
First Intuition
Performance pyramid
Performance management hierarchy
Quality costs
EV and risk
Impact of external factors on performance
Activity based principles
Icount
•Quality measurement
•PEST/Porters 5 forces
•Incremental Budgeting
•Public sector performance measurement
•Activity Based Costing
ATC
The examiner has warned candidates against relying on tips, and the dangers of question spotting, so I do not propose to try to provide a list of my best guesses.
Many of the topics in P5 were covered in other papers, so for a student at the final level, it is more important to focus on applying your knowledge to real life situations, or more specifically, the case studies in the P5 exam, than accumulating new knowledge.
Exam Tips
Rather than tipping specific topics therefore, I would just like to give some general advice.
The examiner for P5, Alex Watt, only took over as examiner for the December 2010 session. His style is different from that of his predecessor, so it is important that you work through all the questions in the December 2010 exam and June 2011, and also the sample question that Alex published ahead of the December 2010
exam – this is available on the ACCA web site.
Alex has also mentioned that candidates appear to focus too much on the area of performance evaluation- and ignore the other important areas – particularly management accounting systems. These are likely to feature more often in Alex’s papers. Alex’s advice for a management accounting systems type question is to
focus on the objectives of the organisation, before deciding on what type of management accounting system would be most appropriate for that type of
organisation.
Alex has said that his case studies will be very wordy – you will have to digest a lot
of information in a short space of time. Practicing past exam paper questions is clearly important- although try to avoid those that contain a lots of number-crunching. So question 1 from the December 2010 and June 2011 exams and the examiner’s sample question are most important. Two other good case studies to practice are The Superior Business Consultancy (June 10 exam) and the Glasburgh Trust (June 2009).
Exam Technique
− Spend at least 15 minutes planning the long Section A questions. Read the requirement first, before reading the scenario. As you read the scenario, underline key pieces of information and relate these to the requirement of the case study. Finally, do a quick plan of what you will write, taking into account the marking guide. Then start writing.
EXP
Paper P5 is described as a “high-level performance management exam” and that is exactly what the exam itself demands of participants. Adopting a stratetegic/managerial approach to performance management, you will be expected to write good, focused, relevant answers to discursive questions, while processing and interpreting data provided in Section-A (long scenario)-type questions.The topics that are key in the syllabus include:
• Budgetary forecasting (including learning curve effects):There may be mention of “beyond budgeting” issues.You certainly need to be ready to handle scenarios that involve “dysfunctional” behaviorand require an assessment of reward systems and impact on motivation;
• Quality concerns: This can range from the costs of quality to six sigma measurement (in a descriptive way).The identification of CSFsand the design of suitable performance metrics (KPIs) may also be tested;
• Management information systems design: Taking a high-level approach to specifying what constitutes a suitable and effective managerial accounting system able to capture relevant data and process it in a way which relevant for performance benchmarking and target costing;
• Non-financial performance indicators: The Balanced Scorecard and the Performance Pyramid remain favourites (and don’t forget Fitzgerald and Moon!);
• Non-profit and public sector organisations: It is important that you are prepared to assess performance management metrics to schools, charities and hospitals;
• Transfer pricing (possibly also in an international taxation context) is likely to remain a “popular” topic. Don’t forget to relate this also to inter-divisional performance measures, such as ROCE, RIand EVA (also, check out the ACCA website for articles on EVA);
• Do you remember Ansoffand the BCGmatrices?Above all, make sure that your answers are well-organised and neatly presented. Remember that answers in the exam kit are often comprehensive and exceed (in length) the possibility to reproduce them in an exam. Writing concise answers (but full sentences please!) without repetition and verbosity is preferable. Avoid copying entire tables of data from the question as this is a waste of time.
EVA
Non financial performance measures
Information needs of different business structures
Different approaches to budgeting; beyond budgeting
BPP
Performance analysis:
The new examiner has indicated that his questions will require more skill in interpreting data and discussing strategies to improve performance rather than performing calculations. You may be asked to analysis performance vs budget to identify underlying problems that a company needs to address. This analysis could include the use of activity-based approaches, learning curves or non-financial performance measures.
‘Beyond budgeting’ is an important area that can be tested either as a discussion or a numerical question.
Performance appraisal requires effective information systems, expect to be asked to identify the key strategic, tactical and operational information requirements of a business.
Risk analysis:
Analysis of the risk of a new proposal could include numerical techniques such as expected values and probabilities; but strategic frameworks such as PEST analysis could feature here.
Strategic performance measures in the private sector:
Divisional performance measurement is another key area; ROI, RI , EVA, NPV or even cost of quality could feature here and transfer pricing could feature as an aspect of these questions.
EVA is especially likely given the recent articles published in this area – make sure you have read them. Modified IRR is new to the syllabus so make sure that you are comfortable with this area.
Reward systems:
HR issues are new to the syllabus from June 2011; the examiner is interested in the impact of reward systems on performance management.
Alternative views of performance measurement:
Questions are commonly set that require a good understanding of the balanced scorecard, the building blocks model and the performance pyramid. Questions will often require you to analyse data that has been collected using one of these models. The balanced scorecard and performance pyramid were tested heavily in June 2011.
Performance hierarchy:
Linking strategic decisions to mission statements or suggesting strategic options using models such as Ansoff’s matrix or the BCG matrix lend themselves to questions containing a mixture of financial and discursive elements that could easily include a simple NPV or profit analysis.
Kaplan tips
•CSFs and KPIs
•Strategic analysis tools
•Ethics / CSR
•Budget preparation/forecasting
•League table and targets in the public sector
•Evaluation of financial and non-financial performance
First Intuition
Performance pyramid
Performance management hierarchy
Quality costs
EV and risk
Impact of external factors on performance
Activity based principles
Icount
•Quality measurement
•PEST/Porters 5 forces
•Incremental Budgeting
•Public sector performance measurement
•Activity Based Costing
ATC
The examiner has warned candidates against relying on tips, and the dangers of question spotting, so I do not propose to try to provide a list of my best guesses.
Many of the topics in P5 were covered in other papers, so for a student at the final level, it is more important to focus on applying your knowledge to real life situations, or more specifically, the case studies in the P5 exam, than accumulating new knowledge.
Exam Tips
Rather than tipping specific topics therefore, I would just like to give some general advice.
The examiner for P5, Alex Watt, only took over as examiner for the December 2010 session. His style is different from that of his predecessor, so it is important that you work through all the questions in the December 2010 exam and June 2011, and also the sample question that Alex published ahead of the December 2010
exam – this is available on the ACCA web site.
Alex has also mentioned that candidates appear to focus too much on the area of performance evaluation- and ignore the other important areas – particularly management accounting systems. These are likely to feature more often in Alex’s papers. Alex’s advice for a management accounting systems type question is to
focus on the objectives of the organisation, before deciding on what type of management accounting system would be most appropriate for that type of
organisation.
Alex has said that his case studies will be very wordy – you will have to digest a lot
of information in a short space of time. Practicing past exam paper questions is clearly important- although try to avoid those that contain a lots of number-crunching. So question 1 from the December 2010 and June 2011 exams and the examiner’s sample question are most important. Two other good case studies to practice are The Superior Business Consultancy (June 10 exam) and the Glasburgh Trust (June 2009).
Exam Technique
− Spend at least 15 minutes planning the long Section A questions. Read the requirement first, before reading the scenario. As you read the scenario, underline key pieces of information and relate these to the requirement of the case study. Finally, do a quick plan of what you will write, taking into account the marking guide. Then start writing.
EXP
Paper P5 is described as a “high-level performance management exam” and that is exactly what the exam itself demands of participants. Adopting a stratetegic/managerial approach to performance management, you will be expected to write good, focused, relevant answers to discursive questions, while processing and interpreting data provided in Section-A (long scenario)-type questions.The topics that are key in the syllabus include:
• Budgetary forecasting (including learning curve effects):There may be mention of “beyond budgeting” issues.You certainly need to be ready to handle scenarios that involve “dysfunctional” behaviorand require an assessment of reward systems and impact on motivation;
• Quality concerns: This can range from the costs of quality to six sigma measurement (in a descriptive way).The identification of CSFsand the design of suitable performance metrics (KPIs) may also be tested;
• Management information systems design: Taking a high-level approach to specifying what constitutes a suitable and effective managerial accounting system able to capture relevant data and process it in a way which relevant for performance benchmarking and target costing;
• Non-financial performance indicators: The Balanced Scorecard and the Performance Pyramid remain favourites (and don’t forget Fitzgerald and Moon!);
• Non-profit and public sector organisations: It is important that you are prepared to assess performance management metrics to schools, charities and hospitals;
• Transfer pricing (possibly also in an international taxation context) is likely to remain a “popular” topic. Don’t forget to relate this also to inter-divisional performance measures, such as ROCE, RIand EVA (also, check out the ACCA website for articles on EVA);
• Do you remember Ansoffand the BCGmatrices?Above all, make sure that your answers are well-organised and neatly presented. Remember that answers in the exam kit are often comprehensive and exceed (in length) the possibility to reproduce them in an exam. Writing concise answers (but full sentences please!) without repetition and verbosity is preferable. Avoid copying entire tables of data from the question as this is a waste of time.
ACCA Audio Success CDs | P5 Advanced Performance Management | BPP | Mp3|
Audio revision CD covering the key syllabus areas in less than 90 minutes.
- Extend your study time by using Success CDs in the car, at the gym, or anywhere you can listen to your stereo
- Written and updated by subject experts, to focusing you on the exam
- Use to learn and revise the topics, improving your chances of success
- Choose your topic area quickly and easily
Download :
BPP P5 Audio CD
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