Performance Management Flashcards
What does feedback control describe?
Plans and targets
Plans into operation
Actual results recorded
Actual results fed to management
Management compare results to plans
Management take control
What are the 3 ways of using budgetary information to evaluate performance?
Budget constrained - manager performance evaluated on ability to meet budget
Profit conscious - evaluated on ability to generate profits
Non-accounting - budget not importnant
What is divisionalisation?
Splitting company into divisions and giving the managers authority to make decisions
What is decentralisation?
Managers have freedom to make decision, set prices etc
What factors affect decentralisation?
Management style
Size
Extent of activity
Effective communication
Ability of management
Speed of technological advancement
Geography
What are the advantages/disadvantages of decentralisation?
Senior management free from detailed involvement, improvement on decision making, motivational, decisions quick
Coordination difficult, lack of goal-congruence, senior managers lose control over day-to-day activities, duplication of roles
What are the 4 types of centre and what does the manager have control over?
Cost centre - controllable costs
Revenue centre - revenues only
Profit centre - controllable costs, sales prices
Investment centre - controllable costs, sales prices, output volumes, investments
What is Return On Investment?
Controllable divisional profit /divisional capital employed x 100
centrally controlled assets excluded
What is Residual Income?
Controllable divisional profit - imputed interest cost of capital
What are the advantages and disadvantages of RI vs ROI?
Residual income increases when investments undertaken, residual income more flexible
Does not facilitate comparisons, does not relate to size of centre’s income
What are the 4 areas of the balanced scorecard?
Financial perspective - sales growth, profit margins
Customer perspective - time, quality, satisfaction
Innovation and learning perspective - revenue, staff training
Internal business perspective - efficiency
What is the difference between a fixed and flexible budget?
Fixed - prepared for the expected level of production and then not adjusting
Flexible - recognised different behaviour patterns and changes as the volume of activity changes
What are the behaviours of total cost and cost per unit as activity levels increase?
VC increases, FC constant, SVC increases
VC constant FC reduce, SVC reduce
What are the advantages and disadvantages of shared service centres?
Reduced headcount, reduction in premises, improvement in quality, standard approaches
Loss of business specific knowledge, removed from decision making, weakened relationships, cost inefficiencies
What are the 4 pillars of ESG metrics from the WEF?
Principles of governance
Planet
People
Prosperity
What is the taskforce on climate related financial disclosures?
A set of voluntary now mandatory recommendations after growing demand by stakeholders
Governance, strategy, risk management, metrics and targets
What are transition risks and physical risks?
Risk to social and economic shifts to lower-carbon economy
Risks from the physical effects of climate change
