ACCA Paper P5 (INT) Advanced Performance management - Pocket notes - Kaplan - 2010
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Current developments in performance management
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Total quality management
A system which integrates the quality management efforts of all groups in an organisation.•
The costs of getting things right first time are less than the costs of correction.•
Less than 100% quality is acceptable as the costs of reaching 100% outweigh the benefits.•
Measuring the costs of quality
Costs of ensuring quality Costs of quality failure
Prevention costs
Cost incurred to reduce appraisal cost to a
minimum.
Internal failure costs
Cost arising from inadequate quality before
the transfer of ownership from supplier to
purchaser.
Appraisal costs
Cost incurred in initially ascertaining and
ensuring conformance of the product to quality
requirements, such as inspection and testing.
External failure costs
Cost arising from inadequate quality
discovered after the transfer of ownership
from supplier to purchaser such as complaints,
warranty claims and recall cost.
Recent exam question
June 2008 - Question 5 and December 2008 - Question 4b
Exam focus
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Current developments in performance management Chapter 11
Six Sigma
Six Sigma
A quality management approach derived •
from TQM which aims to achieve a
reduction in variations and the number
of ‘faults’ that go beyond an accepted
tolerance limit.
Six Sigma (6s) level of performance is •
no more than 3.4 defects per million
opportunities.
Exam focus
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Defect:
Failingtodelivery
whatthecustomer
wants.
SIx
SIGMA
Stable Operations:
Ensuringconsistent,
predictable
processes.
Design for Six
Sigma:
Designingto
meetcustomer
needs&process
capability
Critical to Quality:
attributesmost
importanttothe
customer.
Process capability:
Whatyourprocess
candeliver.
Variation:
Whatthecustomer
seesandfeels.
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Current developments in performance management Chapter 11
The Performance Prism
The Performance Prism has five facets with associated questions which enable the definition of
performance measures.
Stakeholder contribution
Whatcontributionsdowewantand
needfromourstakeholdersifweareto
maintainanddevelopthesecapabilities?
Performance
measures
Whoareourkey
stakeholdersand
whatdotheywantand
need?
Stakeholder satisfaction
Whoareourkeystakeholdersandwhat
dotheywantandneed?
Capabilities
Whatcapabilitiesdoweneedtoputin
placetoallowustooperate,maintain
andenhanceourprocesses?
Strategies
Whatstrategiesdowe
needtoputinplaceto
satisfythewantsand
needsofourkey
stakeholders,while
satisfyingourown
requirementstoo?
Processes
Whatprocessesdowe
needtoputinplaceto
enableustoexecute
ourstrategies?
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New developments in performance measurement
Performance management is continually evolving based on current issues and pressures.
Current issues and pressures
The broader picture
Considering•
non-financialissues.
useoftoolswhich•
lookatrangeof
perspectives.
Focusshiftingfrom•
outputstooutcomes.
Workingtogether•
acrossthe
supply-chain.
Governance issues
needtodemonstrategood•
management.
pressuretodemonstrate•
improvementsinperformance.
Externaldemandsfor•
accountability.
legislationandregulation•
relatingtoperformance
reporting.
Changing
technology
possibleto•
measuremore
indicators.
Faster,real-time•
accessto
information.
Directaccessto•
informationfor
allmanagers.
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Notes:
New approaches to performance management which:
providestheinformationrequiredbystakeholdersinsideandoutsidetheorganisation.•
supportsstrategicmanagement.•
Enablestheorganisationtomonitorprogressinallareascriticaltosurvivalandachieving•
sustainedcompetitiveadvantage.
Coversthewholeorganisationandthewidersupplychain.•
Encouragesinvolvementofallstaffintheorganisation.•
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i.1
Index
Index
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Index Index
3 Es approach 114
A
Activity-based budgeting 43
Activity-based costing 60
Ansoff’s product-market matrix 102
Appraisal costs 141
B
Balanced scorecard 118
Behaviour 49
Benchmarking 18
Best practice 18
Boston Consulting Group matrix 105
Budgetary control system 65
Budgeting 43
Budget slack 49
Burns and Scapens 134
C
Competition policy 32
Competitiveness 123
Controllability 102
Corporate failure 127
Corporate planning 6
Costs of information systems 80
Costs of quality 141
D
DCF analysis 86
Decision package 45
Developments in performance measurement
145
Dimensions 123
Divisional organisations 55
E
Earnings per share 85
EBITDA 86
Economic value added (EVA) 99
Environmental analysis 27
Environmental influences 25
F
Failure costs 141
Failure to adapt 127
Index
Index Index
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Financial measures of performance 84
Financial performance 123
Financial perspective 121
G
Gap analysis 5
Gearing 89
Goal congruence 107
Government policy 23
Government regulation 32
I
Information technology 129
Innovation 123
J
Japanese approaches 136
Johnson and Scholes three stage model 4
K
Kaizen 136
Kaplan and Norton 118
L
Learning and growth perspective 121
Likelihood of failure 128
Liquidity 89
M
Management accounting systems 72
Management styles 78
Managerial performance 102
Mendelow’s matrix 36
Multi-national companies 110
N
Non-financial performance indicators 125
O
Objectives 6
Open and closed systems 74
P
Performance evaluation models 118
Performance prism 144
Index
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Index Index
Performance pyramid (Lynch and Cross)
122
PEST(EL) analysis 28
Planning and control 4
Porter’s five forces 28
Portfolio analysis 102
Present value 87
Prevention costs 141
Pricing 38
Product life cycle 13
Profitability ratios 88
Profit centre 96
Profit-seeking organisation 82
Q
Qualitative issues 126
Quality of service 123
R
Remittance controls 110
Residual income (RI) 98
Resource utilisation 123
Return on investment (ROI) 97
Rewards 123
Reward schemes 78
Role of the management accountant 134
S
Shareholder wealth 82
Short- and long-term conflicts 16
Short-termism 77
Six Sigma 142
SMART 6
Sources of management accounting
information 79
Stakeholders 34
Standards 123
Strategic drift 127
Strategic management accounting 3
T
Tactical plans 13
Target costing 137
Total quality management 141