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 do operational plans look at?

Answer 4

Routine day to day matters

Question 5

The Operationalpaln timescale will usually be?

Answer 5

Current year

Question 6

Give a list of 8 control models

Answer 6

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 7

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

Answer 7

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

Question 8

Critical success factors are usually derived from a what

Answer 8

SWOT analysis ( strengths, weaknesses, opportunities, threats )

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 what?

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 indicators

Answer 12

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

Question 13

Give examples of effort orientated key performance indicators

Answer 13

• number of potential customers contacted

- number of debtors pushed

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

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

Answer 15

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

Question 16

Defined, benchmarking is a process that allows a company to what?

Answer 16

Compare its own progress with that of a comprehensive standard.

Question 17

With benchmarking, what needs to be established to be compared?

Answer 17

Establishment of performance measures to be used

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

Management by objectives is the process of…

Answer 19

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 20

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

Answer 20

• 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 21

The direction for a company will come from who in the organisation?

Answer 21

CEO

Question 22

What can a budget be defined as?

Answer 22

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

Question 23

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

Answer 23

Variance analysis

Question 24

Identify three areas that forecasting will cover?

Answer 24

• levels and types of business that will be transacted
• the turnover the business produces
• income, such as investment returns

Question 25

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

Answer 25

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 26

What is a top down budget?

Answer 26

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 27

What is a bottom up budget?

Answer 27

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

Question 28

What is zero based budgeting?

Answer 28

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.

Question 29

What are rolling budgets?

Answer 29

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.

Question 30

The difference between actual and budgeted performance is known as what?.

Answer 30

Variance

Question 31

What is a negative or unfavourable variance, and what is a positive or favourable variance?

Answer 31

An unfavourable variance is when budgets are not met, and a favourable variance is when budgets are exceeded

Question 32

Identify five causes of variances?

Answer 32

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

Question 33

In regards to management information, management needs to consider which 4 areas when considering essential information?

Answer 33

1. Information that a manager needs 2. How the information is structured 3. Collection and collation of information 4. Presentation of information

Question 34

Gives examples of information that a manager needs

Answer 34

What resources are available What level of productivity is being met, Sales data,

Question 35

What are the three levels of information?

Answer 35

Strategic, tactical and operational

Question 36

What is strategic Information?

Answer 36

Used by senior managers to plan the objectives of their organisation and to asses whether the objectives are being met in practice.

Question 37

What is tactical information?

Answer 37

Information used by middle management. This information ensures the resources of the business are employed to achieve objectives.

Question 38

What information is operational?

Answer 38

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

Question 39

The majority of management information systems will be for which type of information, strategic, tactical or operational?

Answer 39

Tactical. Although it will have many sub systems up to strategic

Question 40

What is the control cycle?

Answer 40

Comparison of actual results against a plan and the production of exceptional reports to show where control action may be needed.

Question 41

What are two main approaches to knowledge management in financial service organisations, these are:

Answer 41

Codification strategy and personalisation strategy

Question 42

What is the codification strategy?

Answer 42

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 43

What is the personalisation strategy?

Answer 43

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.