Chapter 3 - Planning And Control

Question 1

Strategic planning covers what time range?

Answer 1

3-10 years

Question 2

What does the tactical plan cover?

Answer 2

Medium term company policies, implements key elements of the strategy such as new insurance products, recruitment, investing in services etc. project appraisal and project management important here.

Question 3

What is the timescale for tactical plans?

Answer 3

One to three years

Question 4

What does operational plans look at?

Answer 4

Routine day to day matters And is concerned with making sure strategic goals are met, for example hitting revenue targets, service levels etc. Detailed action plans are put in place to make sure objectives achieved. Action plans will show allocation of responsibility And resources. Budgets also important here.

Question 5

Give a list of 8 control models

Answer 5

1. Management accounting
2. Budgeting
3. Critical success factors
4. Key performance indicators
5. Key risk indicators
6. Balanced scorecards
7. Benchmarking
8. Management by objectives

Question 6

The practice of management accounting is based on the concept that information should be made available to…

Answer 6

Managers to enable them to track the progress of the financial performance of the business throughout the financial year.

Question 7

Critical success factors are usually derived from a …

Answer 7

SWOT analysis ( strengths, weaknesses, opportunities, threats )

Question 8

How will a company find its critical success factors?

Answer 8

These will be the factors that are critical to realising its mission, can be exploiting opportunities, fending of dangers posed by external threats and internal weaknesses.

Question 9

If an organisation decides it will only survive if say for example its distribution systems are improved, the improvement of these systems will be a?

Answer 9

Critical success factor

Question 10

Key performance indicators are quantifiable points in the development of a company’s strategy that show…

Answer 10

Whether or not the company is reaching its targets and objectives.

Question 11

Key performance indicators can be in what two types?

Answer 11

Result orientated and effort orientated

Question 12

Give examples of result orientated key performance measures

Answer 12

• sales
• rates of return in investment
• market share
• asset growth

Question 13

Give examples of effort orientated performance measures

Answer 13

• number of potential customers contacted
• number of complaints resolved within planned timeframe
• extent of relationships with customers
• effort applied to improving staff relations, such as surveys
• staff turnover or absence rates
• active pursuing of debtors

Question 14

Give some examples of key risk indicator measures

Answer 14

• it downtime
• examples of fraud
• complaints
• property loss or damage
• employee injury or illness

Question 15

A balanced scorecard is defined as?

Answer 15

A strategic planning and management system used to align business activities to the vision statement of an organisation.

Question 16

How does balanced scorecards measure an organisations performance? List them also.

Answer 16

Looking at the activities of the organisation from four perspectives. These are internal perspective, financial perspective, learning and growth and customer perspective.

Question 17

Defined, benchmarking is a process that allows a company to…

Answer 17

Compare its own progress with that of a comprehensive standard.

Question 18

What are the three types of benchmarking?

Answer 18

1. Internal - compares the performances of divisions and departments within the same organisation
2. External - contrasts the company’s overall performance with competing firms e.g growth, profitability, roce
3. Functional - covers an assessment of company’s main functions and processes and compares these against the same functions and processes in other organisations but not necessarily competitiors.

Question 19

To ensure benchmarking is successful it is essential that:

Answer 19

• use of comprehensive and accurate information on competing or comparable companies
• benchmarked based on industry best practice
• benchmarks used are flexible and can be altered if the external environment changes
• benchmarks relate to the company’s corporate strategies and plans
• there are sound internal audit processes in place

Question 20

Management by objectives is the process of…

Answer 20

Defining objectives within an organisation so that both management and employees agree to the objectives and understand what they need to do in order to achieve them.

Question 21

Management by objectives is suitable for companies such as insurance companies, why is this?

Answer 21

Because these are knowledge based organisations

Question 22

Management by objectives requires managers and employees to have a…

Answer 22

Clear understanding of the roles and responsibilities expected of them so that they can understand how their activities relate to the achievement of the organisations goals.

Question 23

What are some of the important features and advantages of management by objectives?

Answer 23

• motivation, by involving employees in the goal setting process they will be more satisfied and committed.
• better communication and coordination, having reviews and interactions with managers helps maintain relationships and solve problems
• clarity of goals using SMART methodology
• employees tend to have higher commitment to goals they set themselves
• managers can ensure the objectives of the employees are linked to the organisations objectives
• common goals for the organisation means it is a directive principle of management

Question 24

What are the remaining 3 essential features of management by objectives? The first are:

• clarification of results to be achieved
• agreement with each manager of job improvement plan
• provision of conditions which will help managers to achieve their results and job improvement plans e.g team spirit, effective management information systems
• performance review of managers results

Answer 24

• potential reviews to see which mamagers can advance in the company
• development of mangement training plans to improve management skills
• motivation of managers by effective salary, selection and career development plans

Question 25

Management objectives must link to the ...

Answer 25

Corporate plan

Question 26

What can a budget be defined as?

Answer 26

A financial or quantitive statement prepared in advance of a specified accounting period.

Question 27

How long does a budget usually cover?

Answer 27

A short period of months, up to a year

Question 28

In practical terms, a budget is...

Answer 28

A breakdown of anticipated income and expenditure usually month by month which will be earned and incurred when running the business over the period covered by the budget.

Question 29

What is the process where by departments and or individuals provide reasons for any significant variances on the budget?

Answer 29

Variance analysis

Question 30

The method by which budgets are put together by directors and senior managers is known as?

Answer 30

Forecasting

Question 31

What are the main four advantages of budgeting and explain why?

Answer 31

1. Unification of effort - budgets unify managers and employees to work towards the goals of the company, and create a sense of purpose 2. Planning - budgets encourage planning and help managers know what resources they need to get to the plan 3. Financial awareness - makes people more efficient and use resources wisely 4. Basis of comparison - gives management consistent view of organisation as a whole

Question 32

What are the 5 types of budgets?

Answer 32

1. Top down 2. Bottom up 3. Zero based budgeting 4. Rolling budgets 5. Flexible

Question 33

What is a top down budget?

Answer 33

This is when the top management like senior directors decide on the plans for the individual departments and then these,plans are given to the managers to implement.

Question 34

What is a bottom up budget?

Answer 34

This is the opposite of top down and is when department managers pass their own constructed budgets up to senior management.

Question 35

What is zero based budgeting?

Answer 35

This method relied on managers to justify their expenditure from a fresh stand point. Any amount a manager decides they need for something must be justified and will go through a formal challenge process. This type of budget setting involves senior managers rather than departments budget holders in making decisions about ZBB issues. ZBB is a method of budgeting usually employed for costing individual and self contained areas of work such as research, machine maintenance and legal services.

Question 36

What are rolling budgets?

Answer 36

These are budgets that constantly look forward. Unlike a conventional 12 month budget, as you come to the end of each month, a new month is added at the far end of the whole 12 month period. Managers are always looking 12 months ahead and are making alterations to the future budget on a regular basis.

Question 37

The difference between actual and budgeted performance is known as a...

Answer 37

Variance

Question 38

What are some causes of variances?

Answer 38

Inadequate pricing, higher expenses than planned, random events, operating efficiency

Question 39

Which concept saves the allocation of unnecessary Management time to investigate minor variances?

Answer 39

Management by exception

Question 40

What are the three levels of information?

Answer 40

Strategic, tactical and operational

Question 41

What is strategic Information?

Answer 41

Used by senior mamagers to plan the objectives of their organisation and to asses whether the objectives are being met in practice. Examples are knowing things like profitability, total cash needs, capital needs,manning levels. This information is used in the descion making known as strategic planning.

Question 42

What is tactical information?

Answer 42

Information used by middle management. This information ensures the resources of the business are employed to achieve objectives. This information looks at productivity control and variance analysis also. Examples are cash flow and profitability, manning levels etc of certain departments. A lot of this info will come from within the organisation. Tactical information is usually prepared perhaps weekly or monthly whereas strategic is more irregular.

Question 43

What information is operational?

Answer 43

Information used by front line managers such as supervisors to ensure that specific tasks are planned and carried out properly.

Question 44

The provision of information occurs by means of a?

Answer 44

Management information system.

Question 45

What is knowledge management?

Answer 45

Complications and redistribution of an organisations collective skills and experience for the benefit of the organisation as a whole.

Question 46

There are two main approaches to managing knowledge in financial service organisations, these are:

Answer 46

Codification strategy and personalisation strategy

Question 47

What is the codification strategy?

Answer 47

In most cases when knowledge is on the computer, it is carefully codified and stored in databases where it can be accessed and used easily by appropriate employees.

Question 48

What is the personalisation strategy?

Answer 48

In other more specialised financial service organisations, knowledge is closely tied to the person who developed it and is shared mainly through direct person to person contracts and structured training programmes. In these organisations computers are used to chiefly help people communicate knowledge to others rather than to store it.

Question 49

Which two benefits does knowledge management bring to an organisations strategy?

Answer 49

- creates value for customers as organisation will use reliable high quality information system and solutions proven to be successful. - operational economies, follow a codification strategy since they rely on economics of reuse. Once a piece of software developed can be used multiple times for a low cost.