Tackling performance evaluation questions

Performance evaluation is a regularly examined requirement in the F5 Performance Management exam, and is a topic that students tend to misunderstand and struggle with. Often examined as a full, 20 mark requirement, the task of crafting a free-form answer that incorporates both supporting calculations and a developed, written discussion is a daunting task. It’s unfamiliar territory moving up from F2, and requires a specific set of new skills.

This article is meant to help you successfully tackle this type of question. We will work through an approach for planning and answering this requirement, look at common mistakes and how to avoid them, and finally take you through a completed answer that demonstrates the points in this article.

Before you go further, please download Question 31, Jungle Co, from the September 2016 exam. It will serve as our model throughout this article.

The requirement

Discuss the financial and non-financial performance of Jungle Co for the year ending 31 Aug 2016.

Note: there are 7 marks available for calculations and 13 marks available for discussion. (20 marks)

As you see, this type of question can be examined as a single, 20-mark requirement – performance on this single answer can mean the difference between a pass or a fail. In order to gain passing marks on this requirement, it’s suggested to use and practice an approach that you can replicate under the stress of exam day.

A recommended approach is:

• Understand time management and use your time appropriately
• Effectively read the requirement and plan your answer
• Decide on your calculations and complete your workings
• Plan your discussion
• Write up your discussion using a standard approach to paragraph creation

Let’s now work through this approach step-by-step, using Jungle Co as an example.

Understand time management

Time management is critical skill to develop for passing ACCA exams – if you don’t grasp the concepts we talk about here, you will struggle not only with F5 but with all your future exams.

The idea is to set a time limit for everything you do in your exam. This keeps you on track, and helps you ensure that you cover all questions in the exam. The golden rule here is to spend 1.8 minutes per mark if you are on the paper-based exam, and 1.7 minutes per mark if you are on the CBE. This gives you a bit of buffer time in either case.

As question Jungle Co is 20 marks, you should spend either 34 or 36 minutes in your exam on this question. Do not exceed this time limit: if you run out of time, move to the next question and come back later if you manage to find extra time.

You will have a lot to do in this short window so the next step is to allocate the total time allowed to the different tasks you’ll complete in the question. With performance evaluation questions, you are usually given an important indication about this: the spread of marks between calculating and discussing.

For example, in question Jungle Co, it’s clearly stated that the calculations are worth a maximum of 7 marks and the discussion is worth 13 marks. This means that after reading and planning, you should spend 1/3 of the remaining time on your calculations, and 2/3 on writing your discussion.

When time is up for the calculations you need to move to your discussion, even if you feel you haven’t done enough. Most of the marks will come from your analysis, not your calculations. Students are often more comfortable performing calculations than writing up an essay, so there is a real risk that you will spend too much time on the numbers and fail to give enough attention to the discussion.

Avoid the common mistake of over-calculating and under-writing—use time management to properly split your time between the two tasks.

Effective reading and planning

For the scenario-based, section C questions, it’s critical that you carefully read the scenario as it will contain important information that you need to relate to your answer. Finding this important information is your job here. Bring a highlighter marker with you (or use the highlighter tool in the CBE) and highlight this information as you find it.

For example, in question Jungle Co, you will find important information about the company’s product lines, new services offered, and a big change in their approach to logistics.

Time management: you will need roughly 15-20% of your total question time to properly read and plan your answer. Spend this time and do a good plan here to save you time later in your answer.

Avoid the common mistake of not linking your answer to the scenario. Identifying the key issues in the scenario is the first thing you should do.

Go for the ‘easy marks first’

This is an important concept relevant to all your ACCA exams and one that successful students follow carefully. ‘Easy marks first’ means that you should always go for the easiest requirements in a question first, saving the difficult things for later, even if it means taking things out of order. It also applies to sections A and B of the exam: do the easiest OTs first; flag the difficult ones and come back to them later. If you are going to run out of time, do so while attempting the difficult parts of the question that you might not get anyway, rather than missing out on easy marks.

This is relevant to performance analysis questions. The easiest marks in this type of question (and also the logical starting place as you can’t evaluate performance without information) come from the calculations, so start here and get warmed up. But remember, don’t over-do it with calculations, move to the discussion when time is up.

Deciding what to calculate

After you’ve completed your reading and planning, the next step is to do your calculations. But before you start, you need to decide WHAT you are going to calculate. Your goal is to evaluate performance from a broad perspective. This means you should use as wide a range of data as possible.

For example, the requirement in question Jungle Co clearly states, ‘discuss the “financial” and “non-financial” performance of the company’. Linking these two perspectives is a core aspect of the Performance Management syllabus: it’s critical that you show, and contrast, both perspectives in your answer.

Also, in question Jungle Co, you are practically overloaded with data as there are five separate sections, 19 rows, and two columns of data. Don’t get bogged down here; find several relevant ratios from each section, rather than calculate everything possible from one section.

For example, after you identify that there are multiple sections of data, you could calculate some of the following indicators, touching on as many sections as you can:

These indicators are only some examples of what you could calculate – it also might be more than you can do in the allocated time. But don’t worry; you don’t need to calculate this full list of indicators to reach passing marks. What’s more important is to (a) not to over-do it calculating at the expense of your discussion (b) use data from all the sections (c) use the ratios effectively in your discussion.

Time management: when 1/3 of the time remaining after reading and planning is up, stop your calculations and move to the discussion. It’s normal to feel that there is more that you can do, but resist this urge; it’s time to move to the discussion part of your answer.

Avoid the common mistake of going no further than the calculations—the verb is ‘discuss,’ not ‘calculate.’ Only 7 out of 20 marks in this question are available for the numbers.

Understand the ‘own figure rule’ and how it works in your favour

In a time-pressurised situation like your F5 exam, occasional slips of the calculator can happen. While your section A and B answers need to be numerically correct to get marks, in section C constructed response questions, the ‘own figure rule’ applies. This means that any numbers you calculate incorrectly will be assumed correct when used later in your answer.

For example, if sales are increasing, but you accidentally show this change as decreasing, you will miss the mark for the working. However, in your narrative, if you correctly discuss the impact of sales decreasing, you will get full marks here even though your calculation was incorrect. But, make sure you show your workings.

In the computer based exam, your workings will be in spreadsheet cells and markers will look at your formulae if needed.

Avoid the common mistake of trying to get your numbers perfect in section C, scenario-based questions. Do your calculations and quickly move to the discussion when time is up – don’t waste valuable time double-checking everything. If there happens to be a mistake in your numbers, but you interpret this error correctly, you will get full marks in your discussion.

Moving on to the more challenging part: the discussion

Now that you’ve completed the calculations, it’s time to move to the part that many students dread: writing the discussion. This is the area where many students struggle. But, with the right approach to writing and enough practice, you can develop the skills to successfully handle this component of the requirement.

Time management: as noted above, make sure you give this part of your answer the full 2/3 of your remaining time after reading and planning – you will need it.

How to gain marks

It’s not enough to simply restate your calculation in words – for example, ‘sales increased by 20 percent’. It’s also not enough to only give short, generic statements – for example, ‘this is a good sign’. You’ll get no marks for either – you must say more.

To gain a mark, your discussion needs to add value to your calculation and be linked to business performance. This means you need to say WHY you think something has changed and LINK this to information in the scenario. You need to bring multiple pieces of information together to actually discuss, or assess, performance.

Avoid the common mistakes of (a) only restating your calculations as words, and (b) only providing short, one-phrase, generic comments.  Neither of these approaches will generate any marks.

How much should you write

There is no set rule for section C questions that says, ‘one mark = one point.’ Each question will have a different marking guide. But, you need some reference to help you decide how much you should write. Work with the general rule when the requirement is ‘discuss’ or ‘evaluate: 1 mark = 1 idea. To generate an idea that is linked to the scenario, use roughly 3 short sentences or independent clauses.

A good method for getting your ideas down quickly when discussing calculations is to use the writing and structuring tool, Calculate—Comment—Discuss. This approach to structuring paragraphs ensures that you write enough, link to the scenario, and efficiently generate marks.

‘Calculate-Comment-Discuss’ works like this.
 

One Paragraph

Click the diagram to view larger version

Avoid the common mistake of creating a ‘sea of words’—this means pages of writing without headings and structure. Use short, concise paragraphs, with headings and subheadings, in your answer.

Also, make sure you stick to the requirement, which is ‘discuss’. Don’t drift by giving recommendations or definitions—stay focused on the requirement.

Avoid the common mistake of ‘requirement drift’. You won’t get marks for answering invented requirements.

What to write about

Use your calculations as a guide to structure your answer: focus on the areas of performance that have changed the most and that seem to be linked to the important information in the scenario. It’s important to focus on the RELATIVE change of an indicator as this shows the significance of what you’re writing about.

Avoid the common mistake of producing and writing about absolute changes. Only relative changes will be awarded marks.

For example, in question Jungle Co, late Gold member deliveries increased from 2% to 14%. What’s important is that missed deliveries increased 700% in relative terms—this shows a major problem, coming from the move to in-house logistics, potentially threatening continued growth of the business. This is what you are going after in your discussion. To state the change simply as in increase of 14 percentage points misses the point and won’t generate marks.

Make sure your answer is linked to the scenario

In section C, it’s critical that you relate your answer to the scenario to gain marks.

For example, in question Jungle Co, you learned during reading and planning that the company took logistics in-house instead of using international delivery companies. You then see in your calculations that both missed deliveries and complaints have increased. It’s likely there is a cause-effect relationship here: moving to in-house logistics caused the quality to drop, which is driving the increase in complaints. Bring this kind of relationship out in your answer.

Avoid the common mistake of producing generic comments—link your ideas directly to the issues in the scenario to gain marks.

Include a summary

If time permits, include an overall summary at the end of your answer, tying the financial and non-financial perspectives together.

Example of a good answer

We’ve just looked a detailed approach to helping you construct an answer that can get you a comfortable pass on this type of question. Here is a worked example, demonstrating the points in this article. 

Workings

Click the table to view larger version
 

15% increase in total revenue
This is a good sign. It shows that Jungle Co is selling more units because ‘prices are stable’, and/or the new cloud service is expanding. But, we need a breakdown of revenue to understand this (see below).

32.7% increase in net margin
This is excellent sign. It’s linked to the lower cost of sales from Slabak imports and the launch of cloud computing, which is probably a higher-margin product (for example, no distribution costs for IT services).

60.5% increase in admin expenses
This is a problem because admin costs are usually fixed. This is linked to the big increase in customer service costs, which, in turn, is probably related to the lower quality of the new supplier which is causing more complaints (see below).

5.3% drop in household goods revenue
This is a worrying sign – it could be linked to the possible drop in quality from the Slabak imports.

28.3% change in electronic goods revenue
This is another positive signal. It shows that Jungle is outperforming the average market growth of 20%, which means they are gaining market share.

225% increase in late deliveries
This is a major problem. It‘s linked to the move to in-house logistics. Clearly Jungle Co can’t match the quality of the external, international suppliers. Jungle Co needs to address this as it threatens future growth of the business.

300% increase in % of customers who complain
This is another major problem. It’s linked to both the outsourcing of production to Slabak, and the move to in-house logistics (mentioned above). Clearly Jungle Co has serious internal process problems that will negatively affect their reputation.

Overall
We see mostly good news from the financial indicators: sales, margins, and profits are generally increasing. However, the non-financial information paints a different picture as we see serious problems emerging with Jungle Co’s quality and logistics. Jungle Co needs to address these issues if they want their financial success to continue in the long term.

Summary