Advanced Performance Management Terms

• The following is a summary of terms related to advanced performance management (APM).
• These notes are intended for exams from September 2024 to June 2025.

Performance

• A task or operation seen from the viewpoint of how successfully it is performed.

Control

• The process ensures an entity's activities align with its plan and objectives.

SWOT Analysis

• A critical assessment of an organization's internal strengths and weaknesses, as well as external opportunities and threats, to establish its condition before long-term planning.

Strategic Business Unit (SBU)

• A part of an organization that serves a distinct external market or niche within the broader market for goods or services.

Cost Leadership

• This is a firm's characteristic of having the lowest cost structure within its industry

Niche (Focus)

• A segment of the broader market suitable for a specialized product addressing specific needs.

Benchmarking

• It is a process used in management, especially strategic management, where organizations evaluate their processes against best practices to improve performance.

Critical Success Factor (CSF)

• An organizational activity is central to future success.
• CSFs may change over time and include product quality, employee attitudes, manufacturing flexibility, and brand awareness.
• Refers to product features particularly valued by customers, where the organization must excel to outperform competitors.

Rolling Budget

• A budgeting system is continuously updated
• The budget horizon is kept constant by adding another month or quarter as each expires.

Variances

• Differences between actual and standard, prices and quantities

Variance Analysis

• Requires calculating and interpreting variances.

Planning Variance

• It happens when an original budget is revised with the benefit of hindsight.

Operational Variance

• Arises when actual performance differs from a revised standard.

Business Process

• A set of linked activities transform an input into a more valuable output for the recipient.

Business Process Re-engineering

• The fundamental rethinking and redesign of business processes achieve great improvement in critical performance measures.

Business Automation

• Speeding up existing tasks using computerised working methods.

Business Rationalisation

• The streamlining of operating procedures eliminates inefficiencies.

Business Integration

• Viewing an organization as a linked group of business processes adding value to the customer, rather than separate functional departments.

Stakeholder

• A person or group of people with an interest in or affected by an organization.

Corporate Behaviour

• The behaviour of a company or group acting together as a single body.

Environmental Management Accounting (EMA)

• EMA involves identifying, collecting, analysing, and using physical and monetary information for internal decision-making.
• It uses information on energy, water, materials, environment and related costs, earnings, and savings.

Enterprise Resource Planning (ERP) system

• A group of integrated software applications providing smooth information flow across an organization, using a shared database.

Lean

• Achieving perfect workflow by getting the right things to the right place at the right time in the right quantity, while minimizing waste and being flexible.

Contingency Theory of Management Accounting

• No universally perfect accounting system exists for all organizations in all circumstances.
• Specific accounting system aspects suit certain defined circumstances.

Unified corporate database

• It is a database that stores information from all functions rather than multiple applications or separate databases.

Process Automation

• Using technology to automate business processes to sequentially transition from one task to the next with minimal human intervention.

Internet of Things

• A system of web-enabled smart devices that can transfer data without human intervention.

Cloud Technology

• It enables IT departments to increase capabilities as needed without additional equipment, training, or resources.

Artificial Intelligence

• Using machines to copy human cognitive functions in learning and problem-solving.

Organizational Knowledge

• The collective and shared experience accumulated through systems and routines.

Customer Relationship Management (CRM)

• Practices, strategies, and technologies are used to manage customer interactions and data to improve customer service, retention, and drive sales growth.

Data Warehouse

• A central data store used for reporting and analysis, providing a historical data repository from various operational and external sources.

Big Data

• Extremely large data sets analyzed computationally to reveal patterns, trends, and associations.

Drill-down Facility

• An interactive feature shows more detailed information about a particular item or number.

Data Visualisation

• The graphical representation of data efficiently conveys insights to clients and stakeholders.

Misrepresentation

• Giving a false or misleading account.

Integrated Report

• Communication about creating value in the short, medium, and long term.

Target Costing

• Subtracting a desired profit margin from a market price to determine the target cost.

Residual Income

• Pre-tax profit less imputed interest charge for capital invested.

Transfer Price

• The price at which goods or services are transferred within a company or group.

Arm's Length Principle

• Transactions are valued as if carried out between unrelated parties acting in their own interest.

Brand Awareness

• The ability of customers to recognize and recall a brand.

Total Quality Management (TQM)

• Continuous improvement in activities involving everyone to improve performance at every level.

External Failure Costs

• Costs from inadequate quality are identified after the transfer of ownership from supplier to purchaser.

Appraisal Costs

• Costs incurred to ensure output meets required quality standards.

Prevention Costs

• Costs incurred to prevent defective products or services from being produced.

Just-in-Time (JIT) Manufacturing

• A production method produces required items in the needed quantities when required.

Human Resource Management

• HRM is a strategic approach to managing employment relations, leveraging employee capabilities for competitive advantage.

Reward Scheme

• All monetary, non-monetary, and psychological compensations an organization provides to employees for their work.

Objective

• A specific, measurable statement of what will be done to achieve goals within a defined time frame.

Key Performance Measure (KPI)

• A quantitative or qualitative characterisation of performance is used to evaluate outcomes toward an objective.

Activity-Based Management

• It is a view of business is a set of linked activities that add value to the customer.
• Focus on managing the activities that make up the organization.
• The actions taken using ABC information achieve the same output with lower costs.

Joint Venture

• A business arrangement to pool resources for a specific project or activity, typically as a separate business entity.

Strategic Alliance

• An agreement between two organisations undertaking a mutually beneficial project while remaining independent.

Internal Failure Costs

• Costs from inadequate quality identified before the transfer of ownership.

Risk Appetite

• The amount and type of risk an organization is willing to pursue or retain.

Return on Investment (ROI)

• The profit or gain on an activity for a period relative to the invested amount.

Fiscal Policy

• The use of government taxation and spending to influence the economy.

Aggregate Demand

• Total or overall demand is for goods and services in an economy.

Monetary Policy

• Monetary authority measures adjust the money supply in the economy.

Beyond Budgeting

• A set of guiding principles to enable an organisation to manage its performance and decentralise its decision-making process without traditional budgets.

Stretch Goal

• A goal requires an organization or person to push themselves to their limits.

Management Information System

• A specific category of information system providing reports on organisational performance to help middle management monitor and control the business.

Electronic Data Exchange (EDI)

• A service which allows data to be passed from one process to another often coded in a common language such as Extensible Markup Language (XML) to enable transfer and operations on data to occur between processes without human intervention.

Data Silo

• A collection of data held by one group in an organization that is not easily accessible by other groups in the same organisation.

Batch Processing

• Processing multiple transactions in a single operation run, usually without human intervention once the batch process starts.

Real-time Processing

• Performing operations on data or transactions as soon as they are received continuously.

Data Mining

• Discovering useful patterns and relationships in large data volumes, using tools from statistics, AI, and database management.

Tacit Knowledge

• Knowledge stored in the mind, gathered through personal experience, insight, intuition, emotions, and observations.
• It is created highly specialized to the individual that has it, making it difficult to explain or codify for dissemination.

Explicit Knowledge

• Knowledge that is in base form and may be codified and transferred into a medium (such as documents, videos, manuals, etc) for dissemination to other individuals.

Data Governance

• Data governance is the specification of decision rights and an accountability framework to ensure the appropriate behaviour in the valuation, creation, consumption and control of data and analytics.

Data Protection

• Safeguarding data from corruption, compromise or loss, and providing data restoration capability.

Data Privacy

• Handling sensitive data properly meeting regulatory requirements and protecting confidentiality and immutability

Data Security

• Protects digital information throughout its entire lifecycle via physical and logical security, administrative and access controls, and organizational policies.

Operational Gearing

• The ratio of fixed costs to variable costs of a firm; higher ratio indicates higher gearing.

Critical Success Factor (CSF)

• An outcome must be accomplished to achieve the objective.

Machine Learning

• Artificial intelligence systems analyse large data sets and identify relationships, trends and is used to make predictions.

Black Box Algorithms

• Machines make decisions (often based on machine learning) where humans are not involved in formulating or explaining the algorithms.