La Asamblea General tendrá las siguientes facultades:

O O

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The exam paper

Format of the paper

The P5 exam paper consists of two sections, and lasts 3 hours and 15 minutes.

Important note: The format of the exam paper changed in June 2013. If you are looking at past exams (on ACCA's website) from 2012 or earlier, it is vital that you remember this point.

Section A

Section A will contain one compulsory question comprising 50 marks in total. This question will comprise several sub-sections, and will usually assess and link a range of subject areas from across the syllabus. The Section A question will require students to demonstrate high-level capabilities to evaluate, relate and apply the information in the case study to the question requirements.

Section B

You need to answer two questions in Section B from a choice of three, comprising 25 marks each.

Section B questions are more likely to assess a range of discrete subject areas from the main syllabus section headings. However, they will still require evaluation and synthesis of information contained within the case study scenarios, and will require the application of this information to the question requirements.

A small number of professional marks will be available. The examination team has emphasised that in order to gain the marks available, candidates must write in the specified format (such as a report or memo). Reports must have terms of reference, conclusion, appendices and appropriate headings. Make sure you are familiar with how different types of documents are constructed to improve your chances of gaining maximum professional marks.

Syllabus and Study Guide

The P5 syllabus and Study Guide can be found on the following pages.

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Strategic planning and control

P A R T A

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Topic list Syllabus reference

1 Planning, control and decision making -

2 The role of performance management in strategic

planning and control A1(a), A1(b)

3 Planning and control at strategic and operational

levels A1(c)

4 Strategic planning vs short-term localised decisions A1(d) 5 SWOT analysis and performance management A1(e) 6 Strategic models and performance management A1(e)

7 Benchmarking A1(f)

8 The changing role of the management accountant A1(g)

Strategic

management accounting

Introduction

The syllabus for this paper develops key aspects introduced in Paper F5 Performance Management and draws on aspects of the material covered from a more strategic and operational planning perspective in Paper P3 Business Analysis.

The opening chapters of this Study Text look at strategic planning and control, which is the subject of Part A of the syllabus for P5.

However good an organisation's strategies may be, in principle, the ultimate test of them lies in their impact on an organisation's performance. As such, it is very important that organisations measure how well they are performing in key areas, so that they can take steps to improve performance if necessary.

In relation to this, it is also important that the performance measures

organisations focus on are appropriate for their strategies and their competitive position. In this chapter we highlight some of the key models (SWOT analysis;

BCG matrix; Porter's five forces) which organisations can use to help them identify which areas of performance it is important for them to measure.

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Study guide

Intellectual level A1 Strategic management accounting

(a) Explain the role of strategic performance management in strategic planning

and control. 2

(b) Discuss the role of performance measurement in checking progress

towards the corporate objectives. 2

within a business entity. 2

(d) Discuss the scope for potential conflict between strategic business plans

and short-term localised decisions. 2

(e) Evaluate how models such as SWOT analysis, Boston Consulting Group and

Porter may assist in the performance management process. 3 (f) Apply and evaluate the methods of benchmarking performance. 3 (g) Assess the changing role of the management accountant in today's

business environment as outlined by Burns and Scapens.

Exam guide

This paper is a Professional level paper and so there is an emphasis on application and evaluation, and not simply knowledge. You will be expected to know the models and techniques introduced in this chapter and to comment on their use in specific circumstances.

There are some key ideas to keep in mind when studying this syllabus. Firstly, we look at the organisation as a hierarchy from the top where plans are made (strategic level), to the bottom where these are acted out (operational level). Robert Anthony describes this in his hierarchy of information for planning, control and decision making. We look at this later on in the chapter.

Second, although we refer to the rational planning model as a framework for analysing the strategic planning process, it is important to remember that the focus of Paper P5 is on performance management, rather than strategic planning or business analysis in its own right. Whereas in P3 you might use models such as the BCG matrix or Porter's five forces in the context of helping an organisation evaluate different strategic options, the focus in P5 is on how managers could use those models to help understand an organisation's current performance, to identify key areas of performance to measure, or to evaluate the suitability of different performance measures.

Also, remember that although the models can be useful they do have limitations, and you will need to consider these limitations if you are asked to evaluate the models' usefulness in performance management.

As the Study Guide mentions, by name, three models which could assist the performance management process (SWOT analysis, the BCG matrix, and Porter's five forces), you should be prepared for these models to be specifically examined.

Similarly, the Study Guide also mentions Burns and Scapens' work on the changing role of the management accountant, so you should equally be prepared for a question which specifically refers to their work in the requirement.

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Performance objective 3 (PO 3) – Strategy and innovation – requires that you 'contribute to the wider business strategy of your organisation through your personal and team objectives, identifying innovative business solutions to improve organisational performance by making or recommending business process changes and improvements.'

Although, as we noted in the Exam Guide above, P5 is not about business analysis and strategy in the sense that P3 was, nonetheless trying to 'improve organisational performance' is a key part of performance management.

Similarly, the skills you need to demonstrate in order to achieve PO 3 include developing 'financial acumen and sound business judgement to anticipate potential business problems and recognise weaknesses that need to be addressed, recommending appropriate solutions.

Again, the notion of identifying potential problems or weaknesses and recommending solutions to them is a key theme throughout P5 so keep this Performance objective in mind as you are studying for your P5 exam.

1 Planning, control and decision making

Strategic planning is the process of deciding on objectives of the organisation, on changes in these objectives, on the resources to attain these objectives, and on the policies that are to govern the acquisition, use and disposal of these resources.

Management control is the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's objectives. It is sometimes called tactics or tactical planning.

Operational control (or operational planning) is the process of assuring that specific tasks are carried out effectively and efficiently.

Within, and at, all levels of the organisation, information is continually flowing back and forth, being used by people to formulate plans and take decisions, and to draw attention to the need for control action, when the plans and decisions don't work as intended.

Planning means formulating ways of proceeding. Decision making means choosing between various alternatives. These two terms are virtually inseparable: you decide to plan in the first place and the plan you make is a collection of decisions.

Strategic decisions are long-term decisions and are characterised by their wide scope, wide impact, relative uncertainty and complexity.

Control is used in the sense of monitoring something so as to keep it on course, like the 'controls' of a car, not (or not merely) in the sense of imposing restraints or exercising power over something.

Question

Planning, control and decision making This simple scenario may help you to understand how these terms are interrelated.

Mr and Mrs Average need to go to a supermarket to buy food and other household items. They make a list beforehand that sets out all the things they need. As they go round the supermarket they tick off the items on the list. If a particular item is not available they choose an alternative from the range on the shelves.

They also buy a bottle of wine and two bars of chocolate. These were not on their original list.

(a) What part or parts of this activity would you describe as planning?

(b) There are several examples of decision making in this story. Identify three of them.

Key terms

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Answer

We would describe making the list as planning, but it could also be an example of decision making because Mr and Mrs Average have to decide what items will go on the list. Ticking off the items is control and choosing alternatives is 'control action' involving further decision making.

You should be able to answer the various parts of this question without further help.

1.1 Information for planning, control and decision making

Robert Anthony, a leading writer on organisational control, suggested what has become a widely used hierarchy, classifying the information used at different management levels for planning, control and decision making into three tiers: strategic planning, management control and operational control.

Strategic planning. The process of deciding on objectives of the organisation, on changes in these objectives, on the resources used to attain these objectives, and on the strategies that are to govern the acquisition, use and disposition of these resources.

Management control. The process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's objectives. It is sometimes called tactics or tactical planning.

Operational control (or operational planning). The process of assuring that specific tasks are carried out effectively and efficiently.

This idea of a hierarchy between strategic and operational levels is an important theme in this Study Text – because an organisation needs to perform well at operational level in order to achieve its strategic

objectives. Equally, however, in order for an organisation to achieve its strategic objectives, it is important that the objective and goals at operational level are aligned to those strategic objectives. For example, if an organisation's underlying strategy is based on achieving competitive advantage through the quality of service that it provides its customers, then it needs to ensure that its customer-facing staff deliver the necessary high quality of service to the customers on a day to day basis (ie at operational level).

2 The role of performance management in strategic planning and control

Performance management systems help an organisation measure how well it is performing against its goals and objectives, and to identify where performance can be improved in order to help the organisation achieve those goals and objectives.

As business environments become increasingly dynamic and competitive, it is increasingly important for managers to develop coherent business strategies and to have tools and processes in place which provide relevant and reliable information to support strategic decision making, planning and control.

This need for information is linked to the importance of performance management in strategic planning and control. Performance management is a way of trying to direct and support the performance of employees and departments within an organisation, so that they work as efficiently and effectively as possible. Performance management is also a way of trying to ensure that individual goals are aligned with the organisation's overall goals and business strategy.

Performance management is essentially a set of management processes, often supported by technology, that enable organisations to define and execute their strategies and to measure and analyse

performance in order to inform strategic decision making. The central premise of performance management is to improve an organisation's performance.

Key terms

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Performance management systems are plans, with set guidelines and targets, to help organisations measure how efficiently goals are being met, and identify areas where performance can be improved.

Performance management systems can also be linked to reward programmes, such that employees are rewarded for helping an organisation to reach its goals (for example through profit-related pay schemes).

Historically, performance management has tended to focus on either people management (eg performance appraisals) or performance monitoring (eg reporting on key performance indicators). However, the concept of performance management is now much wider and includes: strategic planning; performance measurement and monitoring; key performance indicators (KPIs) (covered in Chapter 2); financial planning and budgeting (Chapter 3); business process re-engineering (Chapter 4); risk management (Chapter 6); business intelligence; data warehousing, data mining and analytics (Chapter 8); people management (Chapter 14); and dashboards and scorecards (Chapters 8 and 15).

The reference to KPIs indicates how performance management plays a crucial role in checking an organisation's progress towards its objectives. KPIs should monitor how well a business is performing against its critical success factors (CSFs). In turn, the CSFs are the aspects of an organisation's activity which are central to its future success.

A performance management system should be derived from the company's strategic objectives so that it supports those objectives. It should also change over time as the strategies of the organisation change and should be flexible enough to remain coherent with the objectives of the organisation.

A performance management system should have clear links between performance measures at the different hierarchical levels of the organisation so that all departments and areas strive towards the same goals. Examples of models of measurement that seek to capture this alignment include the performance pyramid and the balanced scorecard. These two models are considered later in the Study Text in Chapter 15 but we will look briefly here at how they link the organisation's strategies to its operations and reporting using a performance management system.

The performance pyramid is a model of performance management that sets out to relate strategies to operations by translating objectives from the top down and measures from the bottom up, the aim being that these are co-ordinated and support each other. At the top is corporate vision which moves down through market and financial objectives at business unit level, eventually becoming specific operational criteria including quality and delivery at the department and work centre level. The operational measures are reported upward.

The balanced scorecard allows top management to review the organisation using four perspectives which provide information on four strategic issues. The financial perspective seeks to resolve how the

organisation creates value for its shareholders. The innovation and learning perspective answers the question of how the organisation can continue to improve and create value. The customer perspective looks at what customers value from the organisation and finally the internal perspective considers what internal processes the organisation must do well at to achieve the financial and customer objectives.

Under each perspective goals are set, such as manufacturing excellence and specific measures used to monitor outcomes.

2.1 The link between performance management and strategic planning and control

Performance management can be defined as any activity designed to improve an organisation's performance and ensure that its goals are being met.

However, this highlights the fact that an organisation must first have established its goals and objectives, in order to then assess whether they are being met.

In this respect, strategic planning (establishing an organisation's mission, objectives and goals) is necessary before any performance management can take place. Once an organisation's goals have been set, and then its operational performance targets have been set, an organisation can begin to measure whether these goals and targets are being achieved.

In this way, performance measurement is an important control in the organisation. However, performance also needs to be managed via judicious target setting that reinforces strategic goals and objectives.

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Case Study

^Tesco

The Chairman's Statement in Tesco's 2015 Annual Report acknowledges that the 2014/2015 financial year had been 'a difficult year for the company' but he highlights 'As Chairman, my primary duty is to

shareholders, and I believe that the best way to deliver shareholder value is to regain our absolute focus on customers and on improving the shopping trip.'

The Annual Report goes on to highlight Tesco's aim is 'to make sure everything in the business is set up in the most efficient way to create value for customers.' Tesco also identifies that it has refocused its business under three operational headlines to try to help it achieve this aim:

 Listening to, understanding and reaching out to customers to create the best possible offer

 Working with growers and suppliers to make great products, and helping to deliver the best value to customers

 Working across different channels to get those products to customers in the most convenient way possible

Tesco acknowledges that the way that it measures performance and rewards success can also play an important part in its aim of creating value for customers. In the light of this it has identified six KPIs:

 Customers recommend us and come back time and again

 Colleagues recommend us as a great place to work and shop – this recognises that Tesco's staff play a key role in customers' shopping experience

 We build trusted partnerships – Tesco needs to build trusted partnerships with its suppliers in order to provide the best offer for its customers

 Grow sales

 Deliver profit

 Improve operating cash flow

The logic for the final three (financial) KPIs is that if Tesco does a better job for its customers, this will help it grow sales and achieve a stronger financial position.

www.tescoplc.com

2.2 The role of management accounting information in performance management

An important point to note from the first section is the fact that managers need information to help them plan and control their businesses effectively. As such, management accounting information can be used for a variety of purposes.

(a) To measure performance. Management accounting information can be used to analyse the performance of an organisation as a whole, and/or of the individual divisions, departments or products within the business. Performance reports provide feedback, most frequently in the form of comparison between actual performance and budget (as we will discuss in more detail in Chapter 3 of this Study Text).

(b) To control the business. Performance reports are a crucial element in controlling a business. In order to be able to control their business, managers need to know the following:

(i) What they want the business to achieve (targets or standards; budgets) (ii) What the business is actually achieving (actual performance)

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By comparing the actual achievements with targeted performance, and identifying variances,

In document REFORMAS Y ADICIONES A LA LEY DE PROPIEDAD EN CONDOMINIO DE INMUEBLES PARA LA CIUDAD DE MÉXICO EXPOSICIÓN DE MOTIVOS (página 36-39)