Chapter 13 - Strategic control and performance management

Question 1

Strategy, risk and control

What should an organisation do after deciding upon a strategy and setting goals and objectives?

Answer 1

The organisation needs to determine how it will measure the success of these strategic plans.

Question 2

Strategy, risk and control

According to the UK Corporate Governance Code, what should the board establish to manage risk and internal controls?

Answer 2

The board should establish procedures to manage risk, oversee the internal control
framework, and determine the nature and extent of the principal risks the company is
willing to take in order to achieve its long-term strategic objectives.

Question 3

Strategy, risk and control

What role do directors play in monitoring the organisation’s strategy?

Answer 3

Directors need to reflect on, consider, debate, and challenge the strategic objectives, monitor performance, and make changes if necessary to achieve the goals.

Question 4

Strategy, risk and control

What are the four key perspectives suggested by Wearden (2019) for monitoring and controlling the business?

Answer 4

Analysis: Understanding what is happening and why.

Audit: Reporting on what has happened

Assessment: Evaluating how well controls align with goals.

Assurance: Ensuring accountability to stakeholders.

Question 5

Strategy, risk and control

Why is analysis important in the context of monitoring strategy?

Answer 5

It helps the organisation understand what is happening and why, providing insights into performance and decision-making.

Question 6

Strategy, risk and control

What does the audit perspective focus on?

Answer 6

The audit perspective focuses on reporting what has already happened, giving an objective overview of past performance.

Question 7

Strategy, risk and control

What is the purpose of the assessment perspective?

Answer 7

The assessment ensures that controls are aligned with strategic goals and helps evaluate their effectiveness.

Question 8

Strategy, risk and control

What does assurance refer to in monitoring strategy?

Answer 8

Assurance refers to the organisation’s accountability to stakeholders, ensuring that it meets its obligations and commitments.

Question 9

Performance effectiveness – concepts, issues and
approaches

What are the two interchangeable phrases used to assess performance in relation to strategic goals?

Answer 9

Organisational effectiveness: Are we meeting our strategic goals? (Are we the market leader?)

Organisational efficiency: How well are we utilising resources to meet the strategic plan?

Question 10

Performance effectiveness – concepts, issues and
approaches

What is the difference between qualitative and quantitative measures of performance?

Answer 10

Qualitative measures: Subjective, based on human views and opinions (e.g., public perception).

Quantitative measures: Objective, based on numbers (e.g., market share percentage).

Question 11

Performance effectiveness – concepts, issues and
approaches

What are goals in the context of performance effectiveness?

Answer 11

Goals are output measures used to assess both progress and ultimate success, though they can sometimes conflict (e.g., profitability vs. social responsibility).

Question 12

Performance effectiveness – concepts, issues and
approaches

What is the resource-based approach to performance?

Answer 12

he resource-based approach looks at the organisation’s ability to acquire and manage scarce and valuable resources effectively, such as human capital.

Question 13

Performance effectiveness – concepts, issues and
approaches

How do finance organisations use the resource-based approach?

Answer 13

Finance organisations often monitor employee timesheets to ensure the successful utilisation of valuable human resources.

Question 14

Performance effectiveness – concepts, issues and
approaches

Why are stakeholder expectations important in performance assessment?

Answer 14

Different stakeholder groups have different expectations, and to satisfy them, an organisation must measure performance against criteria that reflect each group’s interests.

Question 15

Performance effectiveness – concepts, issues and
approaches

What are some stakeholder groups and their effectiveness criteria?

Answer 15

Owners: Financial return

Employees: Worker satisfaction, pay, supervision

Customers: Quality of goods and services

Creditors: Creditworthiness

Community: Contribution to community affairs

Suppliers: Satisfactory transactions

Government: Compliance with laws and regulations

Question 16

The nature of management control

What is the importance of control measures in management?

Answer 16

Control measures need to be effective and efficient, with confidence in the integrity of the data and information used to control performance.

Question 17

The nature of management control

What is single-loop learning?

Answer 17

Single-loop learning refers to constantly adjusting actions until the desired results are achieved without questioning underlying assumptions.

Question 18

The nature of management control

What is double-loop learning?

Answer 18

Double-loop learning involves questioning the fundamental assumptions and considering the commercial benefits of changes, such as challenging the validity of original targets.

Question 19

The nature of management control

What are organisational metaphors, and why are they useful?

Answer 19

Organisational metaphors simplify and abstract observations of organisational behaviour, helping inform decisions and actions.

Question 20

The nature of management control

What are the five metaphors described by Flood (1991) to view organisations?

Answer 20

Machine metaphor: Organisation as a closed system with predefined inputs and outputs.

Organic metaphor: Organisation as an open system that adapts and responds to stimuli.

Brain metaphor: Organisation as a learning system that evolves based on external stimuli.

Culture metaphor: Organisation as a society with acceptable values, norms, and rituals.

Political metaphor: Organisation as a system driven by power dynamics and office politics.

Question 21

The nature of management control

What leadership skills are needed to achieve effective control and assessment?

Answer 21

Experience to understand the situation.

Ability to think beyond the obvious.

Ability to listen and understand others.

Willingness to challenge others and ask difficult questions.

Independence, bias-free thinking, and objectivity (especially for non-executive directors).

Question 22

The nature of management control

How has the approach to control shifted in modern organisations?

Answer 22

Control has shifted from being top-down in autocratic organisations to being distributed across hierarchical levels, placing control closer to the source of the problem for faster, more responsive action.

Question 23

Strategic control, concept and models

What are the four main characteristics of an effective control system, according to Simons (1995)?

Answer 23

Capture of information for control

Information must attract managers’ attention

Managers must be able to interpret, challenge, and discuss the information

The control system must bring about action

Question 24

Strategic control, concept and models

What are the six core control questions that challenge aspects of strategy, according to Wearden?

Answer 24

Who can make changes to the process?
What do we need to review?
When should we collect the data?
Where do we need to look?
How do we distinguish fact from fiction and prioritise stakeholder expectations?
Why do we need to introduce control measures?

Question 25

Strategic control, concept and models

What is gap analysis and how is it used in strategic control?

Answer 25

Gap analysis is a method of assessing the difference between the current position and the desired future position, helping to identify what steps are needed to close the gap and meet business requirements.

Question 26

Strategic control, concept and models

What does the gap in gap analysis represent?

Answer 26

The gap represents the difference between ‘where we are’ (today) and ‘where we want to be’ (the future).

Question 27

Strategic control, concept and models

What is a Key Performance Indicator (KPI)?

Answer 27

A KPI is a quantifiable measurement that shows how well a business is performing against a predetermined goal or objective.

Question 28

Strategic control, concept and models

Why are Key Performance Indicators (KPIs) important in strategic control?

Answer 28

KPIs are important because they help measure progress and performance against goals, allowing businesses to assess their effectiveness and take corrective actions when needed.

Question 29

Balanced Scorecard

What is the purpose of the balanced scorecard in strategic management?

Answer 29

The balanced scorecard aligns business activities with the vision statement and helps measure financial performance, customer satisfaction, internal processes, and learning and innovation to support long-term strategy.

Question 30

Balanced Scorecard

What are the four key perspectives measured in the balanced scorecard?

Answer 30

Financial perspective
Customer perspective
Internal business perspective
Innovation and learning perspective

Question 31

Balanced Scorecard

What performance measures are typically used under the financial perspective of the balanced scorecard?

Answer 31

Measures might include cash flow, profitability, or cost per unit.

Question 32

Balanced Scorecard

What is assessed under the customer perspective of the balanced scorecard?

Answer 32

Customer satisfaction, complaints, product choice, and safety records are key metrics to measure customer contentment.

Question 33

Balanced Scorecard

What is measured under the internal business perspective in the balanced scorecard?

Answer 33

Operational goals such as re-work rates in manufacturing, response times in administration, and delivery times in logistics.

Question 34

Balanced Scorecard

What does the innovation and learning perspective focus on in the balanced scorecard?

Answer 34

It focuses on developing long-term capabilities, such as new product releases, recruitment, staff turnover, and customer acquisition.

Question 35

Balanced Scorecard

What are the two categories in the results and determinants framework?

Answer 35

Results – lagging indicators like financial performance and competitiveness.

Determinants – leading indicators like quality, flexibility, resource utilization, and innovation.

Question 36

Balanced Scorecard

What is the European Foundation for Quality Management (EFQM) model?

Answer 36

The EFQM model links business processes and leadership to results, helping organizations understand the cause and effect relationship between what they do and the results they achieve.

Question 37

Balanced Scorecard

What are the key elements of the EFQM model?

Answer 37

Enablers – factors that help achieve objectives.

Results – specify the intended objectives, such as satisfied people, satisfied customers, and a positive impact on society.