Chapter 1 - Introduction to strategic management accounting

Question 1

What is performance management?

Answer 1

Any activity that is designed to improve the
organisation’s performance and ensure that its goals are met.

Question 2

What are the two things strategic planning is concerned with?

Answer 2

• Where an organisation wants to be.
• How it will get there.

Question 3

What are the three stages to the rational model for strategic planning?

Answer 3

• Strategic analysis
• Strategic choice
• Strategic implementation

Question 4

What is control concerned with?

Answer 4

Control is concerned with monitoring the achievement of objectives and suggesting corrective action.

Question 5

What are the three levels of the performance hierarchy?

Answer 5

-Strategic level
-Tactical level
-Operational level

Question 6

What does a mission statement do? (2 things)

Answer 6

• Outlines the broad direction that an organisation will follow
• Summarises the reasons and values that underlie that organisation.

Question 7

What are the 6 things a mission statement should be? (Gambes)

Answer 7

• A guide for employees
• Aligned with performance objectives
• Memorable
• Brief and clear
• Enduring
• Addressing stakeholder groups

Question 8

What are two potential conflicts between strategic plans and operational decisions?

Answer 8

• Divisional managers are rewarded on short term results. Therefore it will be difficult to motivate them to achieve long term objectives
• Divisional managers may need to take advantage of short term unforeseen advantages. Adherence to strategic plan may prevent this.

Question 9

What are four ways to avoid conflict between strategic planning and short term localised decisions? (PICA)

Answer 9

• Permit flexibility to allow for changes due to local decisions
• Involve managers in strategy formulation
• Ensure planning reflects a combo of short and long term objectives
• Agree strategies with business units within certain boundaries

Question 10

What do we mean by ‘what get measured gets done’?

Answer 10

Things that are measured get done more often than things that are not measured

Question 11

What are 7 problems with ‘what gets measured gets done’? (Misfire)

Answer 11

• Assumes staff have the motivation i.e rewards
• Assumes staff have been informed of measurement
• Creates focus on short term measures like profit
• Assumes fair and achievable goals
• Assumes can be influenced by staff
• Can foster rivalry instead of cooperation
• May focus on what is easy to measure

Question 12

What are critical success factors?

Answer 12

the vital areas ‘where things must go right’ for the business in order for them to achieve their strategic objectives.

Question 13

Give a description of the CSF below.

Internal

Answer 13

Deals with issues within managers control i.e inventory control

Question 14

Give a description of the CSF below.

External

Answer 14

Relates to issues outside of the managers control e.g material prices

Question 15

Give a description of the CSF below.

Monitoring

Answer 15

Used to continuously scrutinise current situations e.g performance verses budget

Question 16

Give a description of the CSF below.

Building

Answer 16

Looks into the future of the organisation ans its development i.e development of a new product

Question 17

What are the five main sources of CSF’s? (SCECTF)

Answer 17

• Structure of industry
• Competitive strategy, industry position and geographical location
• Environmental factors
• Temporary factors
• Functional managerial position