13 - Strategic Control and performance management Flashcards
Fourfold approach to control
Analysis
Audit
Assessment
Assurance
4 suggested dimensions for understanding of analysis
Effectiveness
Efficiency
Qualitative
Quantitative
What does audit perspective of strategic control relate to?
Control methods
2 dimensions of how controls can be inserted into systems (control methods)
Internal awareness (single-loop system)
External awareness (double-loop system)
What is meant by internal awareness (single-loop system of internal control)?
The control sits as part of the problem solving and is built into the system itself
Example of internal awareness (single-loop system of internal control)?
Machine automatically switching off after set production volume is met
What is meant by external awareness (double-loop system of internal control)?
External sense checks are built into systems
Example of external awareness (double-loop system of internal control)?
Machine alerts operator when certain criteria are met, who can decide whether to proceed or not
3 stages (and order) of traditional single feedback loop for strategy
Develop strategy
>
Implement strategy
>
Control strategy
>
back to develop
What does GAP analysis assess?
The differences between the expected path and the actual path from A to B - how and why various influences and forces delivered the variations
4 core requirements for a KPI to be used for measurement, assessment and control
- KPI must be Key: closely defined measures agreed by all parties
- KPI based upon accurate and reliable data and info
- Business management aspect covered by a KPI must be relevant to core strategic drive
- KPI must have forward impact (simple measure of the past is not useful)
Why should a balanced scorecard be used when measuring performance?
Allows for an optimal combination of quantitative and qualitative measures
4 standard perspectives (elements) of balanced scorecard
- Customer perspective
- Internal business perspective
- Innovation and learning perspective
- Financial perspective
What is the balanced scorecard used for?
Balanced set of metrics that better align with strategy than pure financials can become targets and can be effectively used by managers and directors to direct activity and justify performance
How should a balanced scorecard look - what are the 3 aspects of each perspective?
Objective
KPIs
Strategic initiatives
Balanced scorecard - customer perspective - objective
Enhance customer satisfaction and loyalty to drive business growth
Balanced scorecard - customer perspective - KPIs (3)
- Customer satisfaction index
- Customer retention rate
- Number of customer complaints
Balanced scorecard - internal business perspective - objective
Improve operational efficiency and internal processes to support business objectives
Balanced scorecard - internal business perspective - KPIs (3)
- Process cycle time
- Quality control metrics
- Employee productivity
Balanced scorecard - innovation and learning perspective - objective
Foster a culture of innovation and continuous learning to maintain competitive advantage
Balanced scorecard - innovation and learning perspective - KPIs (3)
- Number of new products developed
- R&D expenditure as a percentage of sales
- Employee training hours
Balanced scorecard - financial perspective - objective
Achieve financial sustainability and growth to enhance shareholder value
Balanced scorecard - financial perspective - KPIs (3)
- Revenue growth rate
- Profit margin
- Return on investment
Step by step answer for balanced scorecard question (5)
- Discuss difficulty of selecting metrics to measure success of strategy
- Discuss weaknesses of profit and loss method
- Why use a balanced scorecard? extending analysis beyond financial
- List each perspective, with objective, KPIs and potential strategic initiatives
- Conclude and state ‘not a tick box exercise’
