APM Mock A - Answers S20 PDF

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Advance Performance Management Mock A - Answers S20...

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ACCA APM Advanced Performance Management September 2020

Mock A – Answers

To gain maximum benefit, do not refer to these answers until you have completed the mock A questions and submitted them for marking.

ACCA APM: AD V AN CE D P E R FOR MAN CE MAN AGE ME N T

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SECTION A 1

PRISEC

Key answer tips (i)

PEST is examined in a number of ACCA papers. In the context of APM, the PEST model looks at the macro-environment and its influence on organisational performance. It is used to identify key performance management issues (and not simply as a tool for strategic analysis).

(ii)

This is book knowledge and should provide some relatively easy marks. Be sure to answer both parts of the requirement.

(iii)

Don’t be overwhelmed by this. There are 16 marks available here but that means just 4 marks for each perspective. Be sure to use the information in the scenario. Your answer should be succinct and focused (an answer plan will assist with this).

(iv)

There are 3 marks available for each strategy. Begin by planning your answer – brainstorm 3 to 4 points for each strategy – there may be a natural tendency to focus on the negatives but try to also (briefly) mention some of the positives of the suggestions put forward.

Report To: Board of Prisec Group (Prisec) From: A Accountant Date: January 20X3 Subject: Prison tender, performance appraisal and performance improvement Introduction This report used PEST analysis to discuss the environment in which Prisec operates and the impact this may have on its tender to run the prisons. It then describes the balanced scorecard, the steps to use when implementing it and appraises Prisec’s performance using the balanced scorecard. Finally, it evaluates the suggestions for performance improvement. (i)

PEST analysis and the impact of the environment on the prison tender Prisec is operating at a difficult time for privately run prisons in Mayland and will need to use and manage its resources carefully to be sure of securing and profiting from the contract from the MNPS when the bids are considered. Political factors Prisec is reliant on the government of Mayland for much of its current business and with the contract to run the prisons up for renewal, the influence of the government over the way it does business cannot be understated. The most obvious influence is that the government, via the MNPS, sets targets which must be achieved by all private prisons, and if Prisec is to be confident of securing the contract for the continued running of those prisons in the North West it will need to focus its resources on achieving them.

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However, on a more general level, private prisons are operating in Mayland because of the current government policy of outsourcing prison provision to the private sector. The current poor publicity surrounding these private sector providers, whilst it not directed at Prisec specifically, could bring about a policy change that would have far reaching implications for current providers. Whilst this is unlikely to happen immediately, if the current government lose the next election, the new government may decide not to renew existing contracts when they end. This risk must be considered when Prisec is deciding what price to charge for the contract over the next few years. Another factor affecting Prisec is the changes to sentencing guidelines which impact the number of offenders sent to prison. Prisons are judged in part on levels of overcrowding within the jails yet this may be difficult to avoid if they are required to accept higher numbers of prisoners. Prisec will need to consider what, if any, provision can be made if prisoner numbers continue to rise. Economic factors For all companies operating in a recession, the risk of a downturn in revenues leading to reduced profits and a loss of liquidity has to be considered. The financial problems of other private providers have clearly worried the Mayland government and led to financial targets for the companies with which it contracts. Whilst Prisec appears to be financially stable it will need to investigate what action (such as the payment of penalties) will be triggered should it cease to meet the targets in future years. It has been suggested that the economic downturn is in part responsible for the increase in prison numbers. If this situation were to worsen, the pressure on space within all Prisec’s prisons would become more intense. This could cause practical problems like cell overcrowding and reduced opportunities to provide purposeful activity and training, and may lead to an increase in disorder and violence. The recession has also put Prisec under pressure to reduce its costs in order to keep the tender price at a competitive level. Making the required cuts in energy consumption and carbon emissions may help to reduce costs. However, the government targets for prisons’ performance cover a whole range of areas – from staff sickness to prisoner training, which will make spending reductions difficult to achieve without affecting performance in a key target area. It will therefore be necessary for the management of Prisec to think creatively about how outcomes can be achieved for less (using techniques such as business process reengineering for example). Social factors As the demographic of the prison population changes, so the way in which prisoners are managed will need to be adapted. Higher numbers of young people could for example impact the way in which purposeful activity should be organised – with games and sport perhaps being more suitable for young people than sedentary activities. An increase in the numbers from deprived backgrounds is likely to impact the types and levels of training required to ensure prisoners achieve basic skills awards and have a job, education or training set up for after their discharge as they may have had more educational problems before arriving in the prison system.

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An additional issue for Prisec is the growing prevalence of drug usage amongst prisoners. Clamping down on the use of drugs in prisons and reducing the associated violence will require greater investment in expensive technologies such as the mobile tracers that have become available. It is also likely to have implications for the wellbeing of prisoners affecting the medical care provided. Prisec will need to be able to demonstrate that it has strategies in place to manage these drugs related issues within its prisons. Environmental targets have become ever more important and as a private company working for the government, Prisec is being set environmental targets similar to those which govern public sector businesses, as illustrated by the MNPS 20X3 targets requiring reductions in carbon emissions and energy consumption. To achieve these targets Prisec may need to work with its consortium partner BB who retains responsibility for the maintenance of the buildings and probably therefore manages their heating and insulation. As BB is set to return the buildings to the state in just a few years it is unlikely to want to invest heavily in green technologies, but basic improvements should be possible to assist Prisec in its efforts. Prisec will need to ensure that these issues have been discussed with BB before its final bid is submitted. Technological factors The new developments in video surveillance will clearly impact Prisec as targets have been set by MNPS concerning the use of 360o cameras. The cost implications must be carefully considered as acquiring the ability to monitor movement around the prison will not improve safety and behaviour unless the footage captured by the videos is either being watched by staff (which will mean additional recruitment), or monitored with software (which will also need to be acquired and staff trained to use the information it provides in a practical way). Techniques such as life cycle costing will enable Prisec to ensure all the costs are taken into account when budgeting for the cost of meeting the tender performance targets in this area. Prisec may also wish to take advantage of some of the other developments such as tagging of prisoners. However, there are also potential issues surrounding civil liberties and the impact on prisoner behaviour which may need to be taken into account, as well as the more obvious cost issues. One other key area which Prisec will need to consider is the adequacy of its management information system. To achieve each of the KPI targets will require the development of subsidiary targets in a range of specific areas (for example to ensure prisoners have the required level of skills awards may require targets for factors such as teacher days booked, hours of learning time per prisoner, acquisition of computer terminals etc.) Without an integrated information system, which captures the necessary data and allows management to monitor and correct performance as necessary, Prisec will struggle to meet its targets. (ii)

Description of balanced scorecard and implementation steps The balanced scorecard is a tool for evaluating performance and is based on internal and external information. It includes financial measures (these reveal the results of the actions already taken) and non-financial measures (these are drivers of future performance). The balanced scorecard will allow the government to look at the organisation from four important perspectives; financial, learning and innovation, internal and customer. Within each perspective there will be a series of goals (CSFs) and measures (KPIs). These should be aligned to Prisec’s overall strategy and vision.

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There are four essential activities which have to be executed rigorously if the implementation of the balanced scorecard is to succeed:

(iii)

1

Make the strategy explicit – Prisec’s strategic objectives will form the basis of the scorecard.

2

Choose the measures – these should be aligned with the strategy and the relationship between the measures should be understood.

3

Define and refine – Prisec’s management reporting systems need to track and report the measures regularly. The things being reported should be periodically refined.

4

Deal with people – the people in charge at Prisec should be properly managed and rewards should be linked to scorecard measures.

Performance appraisal using the balanced scorecard perspectives and additional information Financial perspective Financially Prisec appears to be stable. The current and quick ratios and the interest cover are all safely above the targets set by MNPS which suggest that liquidity is not a problem for the company. Its gearing ratio is significantly lower than that required by the Mayland government and may mean that Prisec has the potential to take out loan finance to help make the improvements it needs to meet targets in other areas. Further data from the past few years would be needed to give a clearer picture of the long-term financial stability of the company, such as: • • •

Revenues, broken down by private and public sector clients, along with the number of years left to run on any significant contracts. Profit margins for Prisec alongside other similar providers for comparison. Share price movements over the past few years.

Customer perspective – sponsors From the perspective of the sponsors of the prisons which would include the general public via the taxes they pay, Prisec appears to be providing an acceptable service. Prisoners rarely escape custody and increasing numbers attend behaviour programmes which may help to reduce their chance of reoffending once released. Although reoffending rates are currently higher than the targets set, they are close to the target and falling. However, reoffending rates are only given for the first six months after release and it would be useful to see how these change the longer prisoners are outside prison. This is of particular importance as so few prisoners are released to any job, training or education provision. This is an area which needs significant improvement – future opportunities for discharged prisoners will be vital to help reduce their need to reoffend once released. In common with what appears to be occurring in most of Mayland, drug use amongst Prisec’s prisoners appears to be on the rise – with over a third of prisoners testing positive for drugs. Clearly there is major work to be done if this is to be reduced. Unless drug use in prisons is eliminated, prisoners will leave prison likely to commit further crimes to obtain and pay for their drugs.

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Customer perspective – users The current experience of prisoners in Prisec prisons is not good enough. Not only is it some way below that required by the Mayland government, it appears to be moving further away from the targets. A quarter of the prisoners are living in cells designed to hold a smaller number of inmates. The percentage has increased over the past two years and given rising prison numbers in the population may yet get worse. These cramped conditions will make time spent by inmates out of their cells even more important. However, access to other activities appears to be well short of the targets set. Time spent in purposeful activity is less than 60% of the target level (14 hours rather than 24) and very few prisoners are currently provided with the ICT training and other basic skills which will occupy them (as well as being needed to improve their chances of work on release). Training levels are at least rising (which will be a challenge if the population of the prison is rising at the same time), suggesting that some action is being taken to improve performance in this area. Only 9% of inmates leave prison with a job or education or training programme to go to. More work must clearly be done in this area (the target is 25%) if prisoners are to have the chance of a better future after release. Internal business perspective Prisec appear to run the administrative side of the organisation efficiently, although it still needs to improve further to meet its 20X3 targets. Records are largely up-todate with levels still improving, most supervision is in-line with the assigned levels of supervision and a high percentage of prisoners do attend the required levels of offender behaviour programmes. Although supervision levels are not reviewed as often as the new targets require, this is also improving. However, there is one key area of weakness and this involves the crucial area of staffing. Staff sickness days are too high at over 2 weeks per year which suggest poor morale and staff training is below target and falling. Without proper training, staff cannot be expected to manage the complex and stressful environment in which they work. In addition, the ratio of prisoners to staff is rising (which is possibly because prison numbers are rising faster than staff can be recruited). This puts individual officers under more pressure and perhaps at risk of assault (assaults on others within the prison are also far higher than target). Levels of assaults are rising and although this may be in part the result of cramped conditions and drug use, it is likely to be made worse by poor handling of situations by overworked staff with low morale. Innovation and learning Prisec has clearly made an initial investment in the 360o surveillance cameras, and although this coverage needs to double, it can presumably be achieved if the funds are available. The area where clear improvements are required is in the reduction of carbon emissions and energy usage. Currently energy use is rising year on year and although carbon emissions decreased in 20X1, they did not reduce further during 20X2. As discussed above achieving these goals may require a joint effort with Prisec’s consortium partner BB.

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(iv)

Viability of suggestions put forward to improve performance Reducing staff leave Whilst reducing leave will mean more staff available during each shift, this is a shortterm solution which is fraught with difficulties: Staff morale is already low and it is likely that reducing leave will simply make this worse. This could lead to more sick days and a spiralling problem of understaffing. What’s more, if staff are not rested they are more likely to make poor decisions, or mishandle potentially dangerous situations leading to an increase in the number of assaults for example. If recruitment of more staff is not currently proving easy, it is also unlikely that reducing the package on offer will improve matters. Whilst cancelling leave during a crisis to ensure sufficient staff cover may be a reasonable response to a problem it is not a solution to an understaffed organisation and would be best avoided. Offering incentives for no days off sick This incentive scheme has the potential to be successful, subject to various factors. Vroom argues that a person will work to obtain a goal (here the incentive payment) provided that they 1) want what is offered (known as valence) and 2) believe they can achieve it (expectancy). For the incentive to work therefore, firstly the payment must be significant enough that the officers will believe it is worth having. Secondly the officers must believe they can avoid taking sick leave (i.e. the days taken at the moment do not involve genuine sickness which would lead to unavoidable absence) and that the payment will actually be forthcoming if they do. If Prisec can get the rate right and convince the staff the offer is genuine and the officers are able to avoid taking sick days, then the incentive scheme may work. It is worth bearing in mind that the incentive may also cause officers to come in to work when they are really unwell. This could lead to the spread of illness and to officers at work who cannot perform their tasks properly and care must be taken to avoid this. Appraisals for underperforming staff The problem with this strategy is that it is inappropriate to appraise only those staff where problems have been identified. Appraisals can be a valuable way of improving employee performance. By reviewing how an employee has performed over the past appraisal period, the appraiser can identify appropriate training and development needs and take action to meet those needs, whilst ensuring that good performance is rewarded. It also allows future performance objectives to be set. If this is done well it should motivate employees to work hard and in a way which supports the firm’s needs. However, if the appraisal process is handled...