ACCA APM key terms

A small number of areas in which satisfactory performance is essential for an organisation to achieve its mission and compete effectively; each CSF is usually measured by one or more key performance indicators.

A quantifiable measure that tracks progress towards a critical success factor, chosen because it signals whether strategic objectives are being met and is reported regularly to management.

A short public declaration of the organisation's purpose and the stakeholders it serves, providing the starting point from which objectives, strategies and performance measures are derived.

The process of setting long-term objectives and choosing the broad course of action and resource allocation needed to reach them, typically covering a horizon of three to five years or more.

Monitoring whether the chosen strategy remains appropriate and is being implemented as intended, allowing corrective action or a change of direction before results are irreversibly damaged.

Control exercised before an activity takes place, using forecasts and predictive information to prevent problems rather than detect them after the event.

Control based on comparing actual results already achieved with a plan or standard, then taking corrective action to bring future performance back into line.

A performance measurement framework that combines financial measures with customer, internal process and learning and growth perspectives, linking measures to strategy through cause-and-effect relationships.

A diagram showing the cause-and-effect links between objectives across the balanced scorecard perspectives, explaining how improvements in enablers such as skills and processes ultimately drive financial outcomes.

A stakeholder-centred performance framework built on five facets: stakeholder satisfaction, stakeholder contribution, strategies, processes and capabilities, addressing stakeholders beyond the shareholders and customers of the scorecard.

Achieving the right balance of economy in inputs, efficiency in converting inputs to outputs, and effectiveness in meeting intended outcomes, commonly applied to public sector and not-for-profit organisations.

Obtaining inputs of the required quality at the lowest reasonable cost, focusing on the price paid for resources rather than on how they are used.

The relationship between outputs produced and the resources consumed in producing them, such as units per labour hour or cost per transaction.

The extent to which an organisation's outputs actually achieve the intended outcomes or objectives for the people it serves.

A profitability ratio expressing divisional or project profit as a percentage of the capital employed in it, widely used for comparing the performance of investment centres.

Divisional profit after deducting a notional interest charge on the capital employed, expressing performance as an absolute money amount rather than a percentage.

A measure of value created after deducting a charge for the full cost of capital employed, with accounting profit and capital adjusted to reflect economic rather than book values.

The blended required return on a firm's debt and equity, weighted by their market values, used as the discount rate for appraisal and as the capital charge in value-based measures.

The internal price charged when one division of a group supplies goods or services to another, affecting reported divisional profit, motivation and decisions about whether to trade internally.

The alignment of individual managers' and divisions' self-interest with the overall objectives of the organisation, so that decisions taken locally also benefit the group as a whole.

The idea that managers should be assessed only on revenues, costs and investments they can influence, so that performance reports do not penalise them for factors outside their control.

The appraisal of the results of a separable part of a business, such as a division or strategic business unit, using measures of profit and capital employed that reflect its own use of resources.

The comparison of actual revenue or cost with a standard or budget, breaking the total difference into its causes so that managers can investigate and act on significant deviations.

The part of a total variance caused by the original standard or budget being wrong, calculated by comparing the original standard with a revised standard reflecting current conditions.

The part of a total variance caused by actual performance differing from a realistic, currently achievable standard, and therefore the element more likely to be controllable by operational managers.

Comparing an organisation's processes, costs or performance measures with those of best-in-class internal or external operations in order to identify and close performance gaps.

A technique of continuous, incremental cost reduction applied during the manufacturing phase of a product, with small improvement targets set and pursued in each successive period.

A market-driven approach in which an allowable cost is derived by subtracting a required profit margin from an estimated selling price, and the product is then designed to meet that cost.

The accumulation of all costs associated with a product or asset over its whole life, from design and development through operation to disposal, to support decisions made early in that life.

The sequence of activities through which an organisation adds value, from inbound supply through production and marketing to after-sales service, used to identify where competitive advantage is created.

Any individual or group with an interest in, or affected by, the activities of an organisation, such as shareholders, employees, customers, suppliers, lenders, regulators and the wider community.

The conflict of interest that arises when managers acting as agents for owners pursue their own goals, such as growth or personal reward, rather than maximising the value returned to shareholders.

Reporting performance against three dimensions, namely economic or financial results, environmental impact and social responsibility, rather than on profit alone.

Disclosure of an organisation's environmental, social and governance impacts and targets, enabling stakeholders to assess long-term viability and non-financial performance alongside conventional financial statements.

Very large, fast-changing and varied data sets from sources such as transactions, sensors and social media that require specialised tools and analytical techniques to yield useful management information.

The process of examining raw data to uncover patterns, correlations and insights that inform decisions, typically classified as descriptive, diagnostic, predictive or prescriptive in purpose.

A measure of performance that is not expressed in money terms, such as customer satisfaction, defect rates, delivery time or employee retention, used to capture drivers of future financial results.

The combined processes, measures and reporting routines an organisation uses to set targets, monitor progress, reward achievement and drive continuous improvement towards its strategic objectives.