February 2022
Geoff Cordwell explains why requirements to ‘evaluate’ and ‘justify’ are so common in the
Advanced Performance Management exam.
The ACCA APM examination is a lot about technique and not so much about pure knowledge. In some ways students might like that idea, as it means there is less to learn or memorise.
However, the flip side is that you need to be able to master these techniques to score well.
The examination’s common requirements include ‘evaluate’ and ‘justify’ among others.
An understanding of these verbs and an appreciation of why they are so common will really help you increase the marks you earn in a question.
At the heart of this paper is the view that accountants in industry, working with performance management systems, are slow to change, slow to reflect the current situation and too willing to take the road of repeating what is already in place despite its unsuitability. It isn’t hard to understand why this might be the case.
• Change is difficult, time consuming and expensive.
• There is a lack of regulatory pressure, a business is not obligated to change.
• The consequences of weak performance management systems are often not immediately obvious.
Consequently, in my view, the examining team are trying to build skills in the student and newly qualified ACCA population that will enable them to challenge the current norm and be able to encourage change. The hope is to improve the performance management systems of businesses and make ACCA qualified accountant more valuable to these businesses. Surely, everybody would want this!
Evaluate
The way to look at this verb is in the context above. Is the system or approach currently being used suitable for the business in its current environment? The exam question scenario will present the business situation and explain a variety of factors for you to consider. Your job will be to take these factors and discuss them. Is it a factor supporting the status quo or is it a factor supporting change? A balance is sensible, but unsuitability is far more likely given the context we are working with.
Example: Suppose you were asked to evaluate the suitability of the current incremental budgeting system in a marketing department.
The scenario might say that the existing system is popular, but the type of marketing undertaken is changing with ever increasing emphasis on social media-based approaches.
There are two obvious ‘factors’ in the scenario and all you need to do is identify them and comment by adding value.
A systems current popularity encourages resistance to change and while change may be necessary the staff may block progress and reduce the benefits of any new system.
The new social media-based approach makes incremental budgeting difficult since there will not be a ‘base’ on which to calculate next year’s budget. Equally, the budget could be based on activities or marketing approaches that are no longer used and this could lead to serious over budgeting or slack in some areas.
Justify
This verb is increasingly common in ACCA APM examinations. One must remember that performance management systems are not backed up by regulation and so every statement you make in the exam is merely your opinion. The examiner might expressly ask you to justify as he is trying to examine that you genuinely understand rather than have merely learnt the ‘textbook’ answer.
Again, it is useful to remember the context here. The examiner wants performance managers to be able to argue for necessary change and that means you must be able to justify your suggestions otherwise staff will not accept them.
Example: A common exam questions here is to be asked to justify a new KPI appropriate to a scenario. Suppose a restaurant wanted to encourage its waiters to sell more desserts.
You might be asked to justify a new KPI for three marks. Importantly it is worth pointing out that two-thirds of the marks will be for the justification rather than the KPI creation. On the other hand, a poor KPI might be difficult to justify, so beware!
KPI: Proportion of covers per waiter where a dessert is bought must exceed 50%.
Justification: You need to justify each idea that you have had. Proportion is used (as opposed to any absolute measure) to make the KPI scalable. It is measured per waiter so that performance can be measured on a granular basis identifying good and poor performers within the waiter population. The 50% target is considered reasonably achievable, since not every customer will want a dessert, but some will be persuadable with good sales tactics.
The ACCA APM exam is brilliant, it is relevant to most accountants and superbly examined. Understanding the context of it is crucial to a good learning experience, both for you and your tutor.
• Geoff Cordwell is an ACCA APM specialist tutor.
See GeoffCordwell.com and FMELearnonline.com
