Chapter 13 - Strategic control and performance management Flashcards
Strategy, risk and control
What should an organisation do after deciding upon a strategy and setting goals and objectives?
The organisation needs to determine how it will measure the success of these strategic plans.
Strategy, risk and control
According to the UK Corporate Governance Code, what should the board establish to manage risk and internal controls?
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.
Strategy, risk and control
What role do directors play in monitoring the organisation’s strategy?
Directors need to reflect on, consider, debate, and challenge the strategic objectives, monitor performance, and make changes if necessary to achieve the goals.
Strategy, risk and control
What are the four key perspectives suggested by Wearden (2019) for monitoring and controlling the business?
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.
Strategy, risk and control
Why is analysis important in the context of monitoring strategy?
It helps the organisation understand what is happening and why, providing insights into performance and decision-making.
Strategy, risk and control
What does the audit perspective focus on?
The audit perspective focuses on reporting what has already happened, giving an objective overview of past performance.
Strategy, risk and control
What is the purpose of the assessment perspective?
The assessment ensures that controls are aligned with strategic goals and helps evaluate their effectiveness.
Strategy, risk and control
What does assurance refer to in monitoring strategy?
Assurance refers to the organisation’s accountability to stakeholders, ensuring that it meets its obligations and commitments.
Performance effectiveness – concepts, issues and
approaches
What are the two interchangeable phrases used to assess performance in relation to strategic goals?
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?
Performance effectiveness – concepts, issues and
approaches
What is the difference between qualitative and quantitative measures of performance?
Qualitative measures: Subjective, based on human views and opinions (e.g., public perception).
Quantitative measures: Objective, based on numbers (e.g., market share percentage).
Performance effectiveness – concepts, issues and
approaches
What are goals in the context of performance effectiveness?
Goals are output measures used to assess both progress and ultimate success, though they can sometimes conflict (e.g., profitability vs. social responsibility).
Performance effectiveness – concepts, issues and
approaches
What is the resource-based approach to performance?
he resource-based approach looks at the organisation’s ability to acquire and manage scarce and valuable resources effectively, such as human capital.
Performance effectiveness – concepts, issues and
approaches
How do finance organisations use the resource-based approach?
Finance organisations often monitor employee timesheets to ensure the successful utilisation of valuable human resources.
Performance effectiveness – concepts, issues and
approaches
Why are stakeholder expectations important in performance assessment?
Different stakeholder groups have different expectations, and to satisfy them, an organisation must measure performance against criteria that reflect each group’s interests.
Performance effectiveness – concepts, issues and
approaches
What are some stakeholder groups and their effectiveness criteria?
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
The nature of management control
What is the importance of control measures in management?
Control measures need to be effective and efficient, with confidence in the integrity of the data and information used to control performance.
The nature of management control
What is single-loop learning?
Single-loop learning refers to constantly adjusting actions until the desired results are achieved without questioning underlying assumptions.
The nature of management control
What is double-loop learning?
Double-loop learning involves questioning the fundamental assumptions and considering the commercial benefits of changes, such as challenging the validity of original targets.
The nature of management control
What are organisational metaphors, and why are they useful?
Organisational metaphors simplify and abstract observations of organisational behaviour, helping inform decisions and actions.
The nature of management control
What are the five metaphors described by Flood (1991) to view organisations?
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.
The nature of management control
What leadership skills are needed to achieve effective control and assessment?
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).
The nature of management control
How has the approach to control shifted in modern organisations?
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.
Strategic control, concept and models
What are the four main characteristics of an effective control system, according to Simons (1995)?
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
Strategic control, concept and models
What are the six core control questions that challenge aspects of strategy, according to Wearden?
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?
