Chapter 3 - Planning And Control Flashcards
1
Q
Strategic planning covers what time range?
A
3-10 years
2
Q
Strategic management and planning is about …
A
Deciding a strategy for an organisations long term future
3
Q
At corporate level, planning can include things like…
A
Setting objectives, setting budgets, allocating management duties, setting sales targets
4
Q
What does the tactical plan cover?
A
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.
5
Q
What is the timescale for tactical plans?
A
One to three years
6
Q
What does operational plans look at?
A
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.
7
Q
Operational timescale will usually be?
A
Current year
8
Q
Objectives of plans should be what word…
A
SMART - specific, measurable, achievable, relevant and time defined.
9
Q
It is important that plans are monitored, to see if original objectives are being achieved. At the planning stage SMART objectives are set to form the basis of monitoring. It is important that the factors can be measured and these include…
A
Sales revenue, overheads, turnover, profitability, customer surveys
10
Q
Strategic planning determines the…
A
Future direction of the business
11
Q
The importance of the ability to effectively monitor the implementation of business plans has lead to the use of…
A
Control models
12
Q
Why is control (control models etc) important to managers?
A
They can see that the staff conform to managements plans and polices. Milestones can be identified and tracked and monitored over time to provide early warning of deviations from the expected outcome.
13
Q
Give a list of 8 control models
A
- Management accounting
- Budgeting
- Critical success factors
- Key performance indicators
- Key risk indicators
- Balanced scorecards
- Benchmarking
- Management by objectives
14
Q
The practice of management accounting is based on the concept that information should be made available to…
A
Managers to enable them to track the progress of the financial performance of the business throughout the financial year.
15
Q
Managers use analysis of the performance of factors such as sales levels, expenses ratios, staff costs, raw material costs, property managements costs and other operational costs. The analysis will show recent historical development and serve as a mechanism for predicting income and costs for…
A
The remainder of the financial year
16
Q
What might the management accounting team within an insurance operation also take responsibility for?
A
Regulatory reporting of financial transactions and the firms balance sheet date.
17
Q
Critical success factors are usually derived from a …
A
SWOT analysis ( strengths, weaknesses, opportunities, threats )
18
Q
How will a company find its critical success factors?
A
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.
19
Q
Critical success factors a lot of the time are concerned with…
A
Surviving competition from rival organisations
20
Q
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?
A
Critical success factor
21
Q
Critical success factors need to be…
A
SMART
22
Q
Key performance indicators are defined as…
A
Expressions that mirror measurable objectives
23
Q
If a company decides it needs to have an Internet presence to survive and then appoints an Internet manager and devises a technical specification, which of these things is the actual critical success factor
A
The need to have an Internet presence
24
Q
Key performance indicators are quantifiable points in the development of a company’s strategy that show…
A
Whether or not the company is reaching its targets and objectives.
25
Key performance indicators can be in what two types?
Result orientated and effort orientated
26
Give examples of result orientated key performance measures
- sales
- rates of return in investment
- market share
- asset growth
27
Give examples of effort orientated performance measures
- 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
28
What do result orientated measures usually represent as oppose to effort orientated measures?
Result orientated usually represent the bottom line whereas effort orientated measures indicate the level of effectiveness being achieved.
29
What is it important to realise when working with key performance indicators? They are not just...
Information. They are measures that show the performance, so if unfavourable position is shown Action must be taken.
30
In regards to key risk indicators, firms carry out exercises to gather information on the risks inherent to the business and the type and effectiveness of the controls in place. Managers and directors will review any changes to the status of risks and controls likely at...
Monthly board meetings
31
Give some examples of key risk indicator measures
- it downtime
- examples of fraud
- complaints
- property loss or damage
- employee injury or illness
32
Very very simply, key performance indicators look at performance measures and key risk indicators look at...
Risk measures
33
When was the balanced scorecard devised and by whom?
Kaplan and norton two Harvard business school academics in 1996
34
A balanced scorecard is defined as?
A strategic planning and management system used to align business activities to the vision statement of an organisation.
35
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.
36
Briefly explain how balanced scorecards help. Go through each perspective.
Balanced scorecards identity the knowledge and skills (learning and growth) that employees need in order to innovate and build the right strategic capabilities and efficiencies (the internal processes) that deliver specific value to the marketplace (the customers) which will eventually lead to higher shareholder value (the financials)
37
Which approach aims to take a holistic view of an organisation and coordinates its resources so that efficiencies are experienced by all departments and in a joined up fashion?
Balanced scorecards
38
To embark on the balanced scorecard path, an organisation must know and understand its...
Strategic plan first of all. And then in line with the four perspectives, it's current financial status, customer satirisation, level of expertise by the employees and how the company is currently structured and operating.
39
Balanced scorecards can show a company's subsidiary objectives. From the bottom level (learning and growth objectives) to the top, (improving shareholder value). Balanced scorecard strategy maps can be used as blueprints for...
The achievement of a company's aims
40
Defined, benchmarking is a process that allows a company to...
Compare its own progress with that of a comprehensive standard.
41
With benchmarking, what needs to be established to be compared?
Establishment of performance measures to be used
42
What are the three types of benchmarking?
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.
43
To ensure benchmarking is successful it is essential that:
- 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
44
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.
45
Management by objectives is suitable for companies such as insurance companies, why is this?
Because these are knowledge based organisations
46
In regards to management by objectives, key management factors are that:
- each job must be focused on the business as a whole not just one part of it
- each managers targeted performance must be derived from targets of the business as a whole
- a managers result must be measured in terms of their contribution to the business as a whole
What are the last two points?
- each manager must know what their targets of perfomance are
- a managers superior must know what to demand from the manager and how to judge their performance
47
Management by objectives requires managers and employees to have a...
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.
48
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
49
Management by objectives kind of reminds you of...
Mid term reviews etc
50
What are important things in management by objectives to avoid?
Some employees may distort results so they appear to hit goals, goals should also avoid being too onerous and distracting form work.
51
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
- 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
52
In many company's today, management by objectives will be apart of their...
Employee appraisal programme
53
Management objectives must link to the ...
Corporate plan
54
Corporate objectives can't be linked with mangement objectives mechanistically, it depends on...
Contribute of flexible and skilled management team
55
The best managers may not always be the ones with the stand out personalities, it is important to get the most out of managers to...
Identify and develop their potential through training. And win their commitment through participation in planning decisions, salaries and career prospects.
56
The direction for a company will come from who in the organisation?
CEO
57
In order to link management objectives to the corporate plan, the objectives of sub units and departments, branches etc must be...
Clairifed
58
Managers key objectives will be agreed between themselves and ...
Managers superiors
59
Top management asses the objectives for each unit of the business, and the key results for each manager. Because resources will likely be scarce priorities for...
Improvements will need to be decided
60
Priorities for improvements for resources effectiveness and getting the most out of these will be had by top management in a...
Formal unit development plan. A timescale for achievement must also be decided
61
There will be systematic performance reviews for each manager as well as performance review for the unit...
As a whole
62
In management by objectives, what must be continual?
A development programme e.g training etc
63
In management by objectives, there must be cyclical revision of the unit and job improvement plans. Annual budgets provide one method of continuity, although at a lower level of mangement a shorter...
Cycle may be more appropriate
64
In an insurance broker, what things will make up the budget?
Brokerage, fee income, salary costs, operational costs including IT, monthly marketing outlay.
65
Budgets will be created for the whole firm and specific...
Divisions and departments
66
What can a budget be defined as?
A financial or quantitive statement prepared in advance of a specified accounting period.
67
How long does a budget usually cover?
A short period of months, up to a year
68
When budgeting work is done, it is important for this work to take into account the company...
Strategic objectives within its corporate plan.
69
In practical terms, a budget is...
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.
70
As mamagers need to hit the strategic objectives of the company, the budget is not only a plan but a...
Tool that managers can use
71
Managers should monitor budgets and take ????? If events are unexpected
Action
72
Variance is an important part of budgeting. If say for example the costs have gotten out of control and raised e.g a new office, the manager must take some action such as ???? To the get position back to ?????
Must take action such as raising premiums to combat the increase costs and get the position back to normal.
73
What is the process where by departments and or individuals provide reasons for any significant variances on the budget?
Variance analysis
74
Who in the organisation determines what constitutes a significant variance?
Senior managers and directors
75
Revised estimates of the final outcome of a budget is known as?
Re forecasting
76
The method by which budgets are put together by directors and senior managers is known as?
Forecasting
77
Which areas does forecasting cover?
- levels and types of business that will be transacted
- the turnover the business produces
- income, such as investment returns
78
Forecasts of the budget are an important part of planning for which specific resoucre?
Capital
79
A firm will need to ensure that cash flow is managed so that funds are available to meet expenses as they arise. The forecast cash flow will form part of the budget...
Plan
80
As the period for the budget under review progresses, the forecast income and expenses are looked at again, if the business environment changes, then the plan is...
Reforecast
81
The longer the budget time in the future the harder it will be to...
Predict, as there can be changes and such that can't be foreseen
82
What are the main four advantages of budgeting and explain why?
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
83
Budgets are expressed in what terms?
Monetary
84
Budgets are drawn up from individual departments and ...
Functions. As well as for capital expenditure such as IT and cash flow.
85
All the budgets are interelated and and Icorpoated into the ???????, which includes a budgeted profit and loss account and balance sheet for the organisation as a whole.
Master budget
86
The chief executive will issue guidelines for the master budget, to principal head of departments. In larger organisations, a budget ????? May be formed
Committee
87
The chief executives guidelines on budgets may include...
Commentary on the organisations performance in the financial year just finishing, and an explanation of differences between actual perfomance and budgeted performance. As well as their view on the business environment for the coming year
88
In budgeting, there is a lot of what between people first?
Consultation
89
Once departmental budgets are complete, they will be submitted to the board of directors or...
Budget committee
90
The departmental budgets are reviewed to show they ...
Conform to the policies of they master master budget, show how objectives see being achieved, recognise any constraints, are realistic
91
The budgets are communicated to managers before the start of the financial period so that....
They know what their plans are and how to implement them
92
Once the budget is agreed on all different levels, departments or cost centres ( where money is spent). The budget will be continually,..
Monitored to identify any variances from the budget so Action can be taken
93
What are the 4 types of budgets?
1. Top down
2. Bottom up
3. Zero based budgeting
4. Rolling budgets
94
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.
95
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.
96
Both top down and bottom up budgeting can be...
Fixed or flexible. Fixed is when it is not changed when established, regardless of any changes in perfomance etc. this is in reality not as useful as it is rare to know exactly how the business will go. And the other type os flexible where the budget is changed in accordance to the organisations real activity over time.
97
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. 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.
98
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. Managers are always looking 12 months ahead and are making alterations to the future budget on a regular basis.
99
The difference between actual and budgeted performance is known as a...
Variance
100
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
101
Favourable and unfavourable variances can be inter..
Linked
102
What are some causes of variances?
Inadequate pricing, higher expenses than planned, random events, operating efficiency
103
Which concept saves the allocation of unnecessary Management time to investigate minor variances?
Management by exception
104
Having a minor variance set at 3% is because that..
Variances will occur naturally no matter what. This ensures time is only spent investigating when variance is deemed to be worthy.
105
On the budget spreadsheets, variance will be shown, the analysis will include comments on...
The reasons for variances and actions to address the causes of changes.
106
The best descions are ones which are ...
Informed, with the relvant information.
107
When making descions, it is important that options are considered for different options available. At this point what sorts of plans should be put in place?
Contingency
108
When deciding the most appropriate decision, advantages and disadvantages must be weighed up. Descions can affect many people, it is important to recognise the most appropriate descions may not always appear to be....
The most obvious one
109
Once a descion is taken, to be effective, it must be fully...
Supported
110
Past descions can be reviewed to...
Learn for the future
111
The industrial society propose the...
5 c's of descion making.
112
What are the 5 c's of descion making?
1. Consider - the preparation stage at which the problem is considered
2. Consult - the stage at which initiatives are taken to involve those affected.
3. Crunch - the need to ensure that something is done
4. Communicate - the stage at which what has been decided and why is communicated to staff
5. Check - the need to go back and monitor the results of the descion
113
Descion making can vary by organisation, some head of departments may have descions up to a certain monetary limit, and power to discipline at a certain level. In smaller organisations this can vary, the CEO may have a different ...
Management style in a smaller organisation.
114
In Regards to partnerships, there may be a formal...
Agreement about descion making.
115
Rational descions are hard to make without ?????? Managers need this relevant ?????? To be successful.
Information.
116
In regards to information, organisations will have to decide...
How it will be gathered, whom such information is available to and how and when it should be given out.
117
What type of information is not essential but interesting? Give an example
Reports about markers that do not directly affect the business.
118
In regards to management information, management needs to consider which 4 areas when considering essential information?
1. Information that a manger needs
2. How the information is structured
3. Collection and collation of information
4. Presentation of information
119
Gives examples of information that a manager needs
What resources are available, what level of productivity is being met, are objections being met, sales data, foreign competition law to decide on overseas expansion, property market to consider moving offices etc.
120
Managers need to know how information is structure and how it should be structured in the future. Examples of this are?
- does the information come in the form of a ready made system report from say a trusted member of staff, external consultancy or national statistical body?
- does it come in writing, a graphic or some other format?
- how easy is it for managers to interpret the data as presented?
121
What will be the questions asked in regards to collection and collation of information?
- how often does it arrive?
- does it come by Internet, email, fax or Phone?
- is it in a consistent format?
- is it collected automatically for a reliable source or is it collected manually?
122
A manager needs to consider the best way of presenting information, they should consider...
- should it be simplified or left as raw data?
- should it be entirely in graphic form?
- should it form the subject of a meeting?
- should it be sent out to all interested parties in written form?
123
With regards to management information, the requirements will vary form organisation to organisation, many marketing, sales and operation ?????? Allow managers to devise sophisticated, tailor made reports that draw on the organisations internally generated data.
Software packages
124
What are the three levels of information?
Strategic, tactical and operational
125
What is strategic Information?
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.
126
What is tactical information?
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.
127
What information is operational?
Information used by front line managers such as supervisors to ensure that specific tasks are planned and carried out properly.
128
The provision of information occurs by means of a?
Mangement information system.
129
One of the features of management information systems is that information can flow horizontally and ....
Vertically
130
Management information systems will be concerned with both top management and lower ...
Lower level management and their control
131
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
132
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.
133
A precise and carefully drawn up specification of the areas of management responsibility is....
Essential
134
Management information systems must help measure actual results against the plan, so that descions can be made. Cars must also be available to enable senior management to plan for the future, and computers are..
Of special value in preparing forests from large quantities of data.
135
Within insurance, topic of management information is linked to...
Information technology.
136
Information must be assed whether to share or withhold as..
Can cause problems if gets in to the wrong hands. You wouldn't want competitiors knowing too much.
137
The quality and quantity of information is often better by those who...
Give it out rather than those who receive it.
138
As people can interpret things in different ways, mamagers should....
Tailor down their communication of information to their recipients.
139
Information that is written has the advantage of...
Being clear and evidenced
140
Disadvantage of information that is written is that...
Impersonal
141
Information about future strategy should be brought about by...
More than words alone.
142
What is an advtange to giving information out at meetings?
People can ask questions, managers willing to communicate, issues discussed etc.
143
Information that effects employees should always be given out...
As early as possible
144
What is knowledge management?
Complications and redistribution of an organisations collective skills and experience for the benefit of the organisation as a whole.
145
Knowledge management is not a new concept as.. Give examples
A master tradesman will teach his apprentice, family firms pass wisdom down to children etc.
146
Advances in information technology has mad it easier to...
Compile, codify, store, and share certain kinds of knowledge more easily and cheaply than ever before.
147
Provision of services and creation of intellectual property has made executives...
Examine the knowledge of their own businesses and how that knowledge is used.
148
There are two main approaches to managing knowledge in financial service organisations, these are:
Codification strategy and personalisation strategy
149
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.
150
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. In these organisations computers are used to chiefly help people communicate knowledge to others rather than to store it.
151
Codification useful in what type of insurance?
Personal lines because using information to deal with queries etc.
152
Syndicates can use personalisation strategy by...
Having dialogue between individuals, employees share knowledge between each other.
153
Developments in IT have expanded the opportunities and challenges for organisations seeking to provide effective knowledge management systems. These relate to development of...
Online learning, document management, stilumation tools, learning management systems.
154
Sharing of unstructured knowledge brought about from things like...
Wikis, bookmarks and blogs.
155
Which two benefits does knowledge management bring to an organisations strategy?
- 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.
156
Claim handling, tax services and underwriting admin are easy to fit into knowledge...
Management systems
157
Codification is more appropriate for mature services, while personalities strategy better for...
Innovative services
158
It is easier to did it explicit knowledge such as historical claims data, whereas personal experience is likely to be the ???????? Strategy
Personalisation
159
The control cycle in management information is?
Comparison of actual results against a plan and the production of exceptional reports to show where control action may be needed
