August 2020
Geoff Cordwell explains what the advanced performance management examiners wants from exam sitters.
Have you ever wondered how an examiner thinks? What is their overall attitude to the setting and indeed the marking of their paper?
Examiners no doubt vary and bring their own flavour to a paper, emphasising what they see as important and taking ‘angles’ that interest them or that will help develop and protect the profession. On becoming the ACCA performance management examiner in 2007 (F5 in old money) I had a view or attitude to the paper, and this influenced the type of questions I created. The current advanced performance management examiner is probably no different, but what is that attitude? Here is my take on that vital question…
Advanced performance management (APM) concerns the various performance management systems that can exist in organisations. So, you will study budgetary systems, reward systems, target setting systems and so on.
These performance management systems will all be set in a context, a business environment and, mainly, they will not fit! There will be a discord.
The underlying attitude is that in industry there are too many organisations where the performance management system is out of line with the business and its environment and it isn’t hard to understand why.
• There is no regulatory force to compel businesses to update their management accounting systems.
• Inertia is depressingly common in many businesses and an attitude prevails that the argument that ‘we’ve always done it this way’ is in some way an acceptable one.
• Changing a system is tricky to get right with culture, technological fear and communication all issues to overcome.
• Accounting staff are very busy working against this month’s deadline such that the changing horizon is often ignored.
• Accounting staff may not want to ‘make waves’ introducing new systems, whilst others might not see the point.
This may paint too dark a picture and certainly there are many organisations where the accountants have embraced the concept of becoming a financial business partner and been progressive in suggesting much needed change.
What this means for students
Certainly, you need to learn about the systems that exist or indeed could exist in an organisation. If you walk into the exam room (or your front room now that the prospect of virtual invigilation is being mooted by the ACCA at least) not knowing your onions (as my Mum would say) then you’re in trouble. You must know what incremental budgeting is, zero based budgeting, the building block model, the balanced scorecard, economic value added, the Z and A score models and so on, BUT this knowledge alone will not be enough to pass APM.
The magic ingredient is being able to assess whether the performance management system in place in an organisation is appropriate for its people and its environment.
Consequently, you must study APM through that lens.
What is zero based budgeting? You need to know that! But go on to ask yourself when should this be used and when is it not appropriate? What do you think about the model? Have an opinion even!
It is simply not possible to do this from afresh on the exam day, you must have gone through that thinking during your preparation.
Of course the precise model that you get tested on will vary from exam to exam as will the environment in which the questions will be placed, and so having good reading and analytical skills are important, but if you’ve trodden the path before you are less likely to get lost.
By way of example a look at the past exam question Dargeboard Services (DS) (March/ June 2017) shows how the above idea was tested.
The scenario explained the business, outlining its mission and existing strategic performance reporting system. The first requirement is typical of this examiner in that it asks whether the existing performance reporting system is appropriate given the mission of the business. Your default setting is that the performance management system will not wholly tie into the mission and that is the case here.
For example, the mission states that DS wants to deliver a world class service but none of the performance metrics even touch on that concept. Also, the mission purports to demand maximum efficiency from the business, but aside from a mention of ROCE the performance metrics are again silent.
The question did not, in this case, ask for suggestions on improving the performance metrics to better fit the mission, so as long as you can spot weaknesses and critique the existing system you are well placed to score well.
Knowing how the examiner thinks is important. You can attempt to do this yourself since the examiners all produce examiner’s reports providing valuable insight, but clearly your tutor should be well aware of the angles taken and so should be able to add significant value on any course you attend virtually or otherwise.
• Geoff Cordwell is an ACCA APM Online Tutor with FME online. A new course for December 2020 exam launches in August.
Individual topic support is available now at www.geoffcordwell.com
