Chapter 3 - Planning And Control Flashcards
Strategic planning covers what time range?
3-10 years
What does the tactical plan cover?
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.
What is the timescale for tactical plans?
One to three years
What do operational plans look at?
Routine day to day matters
The Operationalpaln timescale will usually be?
Current year
Give a list of 8 control models
- Management accounting
- Budgeting
- Critical success factors
- Key performance indicators
- Key risk indicators
- Balanced scorecards
- Benchmarking
- Management by objectives
The practice of management accounting is based on the concept that information should be made available to…
Managers to enable them to track the progress of the financial performance of the business throughout the financial year.
Critical success factors are usually derived from a what
SWOT analysis ( strengths, weaknesses, opportunities, threats )
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 what?
Critical success factor
Key performance indicators are quantifiable points in the development of a company’s strategy that show…
Whether or not the company is reaching its targets and objectives.
Key performance indicators can be in what two types?
Result orientated and effort orientated
Give examples of result orientated key performance indicators
- sales
- rates of return in investment
- market share
- asset growth
Give examples of effort orientated key performance indicators
- number of potential customers contacted
- number of debtors pushed
Give some examples of key risk indicator measures
- it downtime
- examples of fraud
- complaints
- property loss or damage
- employee injury or illness
How does balanced scorecards measure an organisations performance? List them also.
Looking at the activities of the organisation from four perspectives. These are internal perspective, financial perspective, learning and growth and customer perspective.
Defined, benchmarking is a process that allows a company to what?
Compare its own progress with that of a comprehensive standard.
With benchmarking, what needs to be established to be compared?
Establishment of performance measures to be used
What are the three types of benchmarking?
- Internal - compares the performances of divisions and departments within the same organisation
- External - contrasts the company’s overall performance with competing firms e.g growth, profitability, roce
- 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.
Management by objectives is the process of…
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.
What are some of the important features and advantages of management by objectives?
- 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
The direction for a company will come from who in the organisation?
CEO
What can a budget be defined as?
A financial or quantitive statement prepared in advance of a specified accounting period.
What is the process where by departments and or individuals provide reasons for any significant variances on the budget called?
Variance analysis
Identify three areas that forecasting will cover?
- levels and types of business that will be transacted
- the turnover the business produces
- income, such as investment returns
What are the main four advantages of budgeting and explain why?
- Unification of effort - budgets unify managers and employees to work towards the goals of the company, and create a sense of purpose
- Planning - budgets encourage planning and help managers know what resources they need to get to the plan
- Financial awareness - makes people more efficient and use resources wisely
- Basis of comparison - gives management consistent view of organisation as a whole
What is a top down budget?
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.
What is a bottom up budget?
This is the opposite of top down and is when department managers pass their own constructed budgets up to senior management.
What is zero based budgeting?
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.
What are rolling budgets?
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.
The difference between actual and budgeted performance is known as what?.
Variance
What is a negative or unfavourable variance, and what is a positive or favourable variance?
An unfavourable variance is when budgets are not met, and a favourable variance is when budgets are exceeded
Identify five causes of variances?
Inadequate pricing, higher expenses than planned, random events, operating efficiency
In regards to management information, management needs to consider which 4 areas when considering essential information?
- Information that a manager needs
- How the information is structured
- Collection and collation of information
- Presentation of information
Gives examples of information that a manager needs
What resources are available
What level of productivity is being met,
Sales data,
What are the three levels of information?
Strategic, tactical and operational
What is strategic Information?
Used by senior managers to plan the objectives of their organisation and to asses whether the objectives are being met in practice.
What is tactical information?
Information used by middle management. This information ensures the resources of the business are employed to achieve objectives.
What information is operational?
Information used by front line managers such as supervisors to ensure that specific tasks are planned and carried out properly.
The majority of management information systems will be for which type of information, strategic, tactical or operational?
Tactical. Although it will have many sub systems up to strategic
What is the control cycle?
Comparison of actual results against a plan and the production of exceptional reports to show where control action may be needed.
What are two main approaches to knowledge management in financial service organisations, these are:
Codification strategy and personalisation strategy
What is the codification strategy?
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.
What is the personalisation strategy?
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.
