## **Learning Outcomes**

After reading this article, you will be able to explain how strategic planning and control work together to drive long-term organisational success, recognise how change impacts performance management systems, and identify methods of managing performance risks during change implementation. You will understand the distinction between strategic and operational planning, how to align controls with strategy, and the main approaches for minimising risk and resistance to change within modern organisations.

## **ACCA Advanced Performance Management (APM) Syllabus**

For ACCA Advanced Performance Management (APM), you are required to understand the importance of aligning strategic planning with effective control and managing the risks that arise during organisational change. This article specifically addresses:

- The relationship between strategic planning, control processes, and organisational performance
- Ways that change affects performance management systems and reporting
- Approaches for managing performance risk when implementing strategic and operational changes
- How to evaluate and modify control systems to manage risk and enable successful change

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the key difference between strategic and operational planning activities?
2. Why is it essential to adjust performance measures when an organisation changes strategy or structure?
3. Name two common risks to performance management systems during a major organisational change.
4. Briefly explain how control systems should respond to emerging risks during the implementation of new strategies.

## **Introduction**

Effective organisations do not simply create strategic plans—they also ensure that control systems and performance measures support the achievement of those strategies, especially during times of change. Strategic planning sets direction and long-term objectives. Control translates these objectives into actions, monitors progress, and manages deviations. When change occurs—such as restructuring, adopting new business models, or transforming key processes—existing controls and performance indicators must be revised to address new risks and to enable, rather than hinder, success.

This article explores how to integrate strategic planning and control in changing environments, focusing on performance management, change management, and performance risk. You'll learn about aligning plans with controls, recognising risks introduced by change, and updating systems to manage both ongoing and emerging risks.

> **Key Term: strategic planning**
> The process by which senior management determines long-term goals and sets direction for the entire organisation.
>
> **Key Term: control**
> The ongoing process of measuring progress, comparing results to plans, and taking corrective action to achieve objectives.

## Strategic Planning and Control: The Need for Alignment

Organisations operate in fast-moving markets, where change is common and often necessary. For success, it is not enough to simply plan; controls must both support the strategy and help steer through the risks that come with change.

### Why Planning and Control Must Be Integrated

- Strategic planning provides direction and defines what is to be achieved over the long term
- Control systems set targets, allocate resources, and monitor actual performance against plans
- Successful organisations align their control activities (budgets, KPIs, reporting structures) to support strategic aims, not just short-term results

When a strategy changes—such as entering a new market, digital transformation, or shifting focus to sustainability—existing controls and measures may no longer be appropriate. Failing to update these can cause conflict, obscure real performance, or even drive unwanted behaviours.

> **Key Term: performance management**
> The coordinated activities and systems that ensure organisational goals are being achieved efficiently and effectively.

## Managing Change in Performance Management Systems

Strategic change often requires new ways of measuring and managing performance. If controls remain static, they can become barriers, encourage resistance, or increase risk.

### Impact of Organisational Change on Performance Management

1. **Structural changes:** Moving from functional to divisional, or introducing networks/joint ventures, alters information flows and accountability. Existing measures must adjust to track performance at the right level.

2. **Process changes:** Adopting new technologies or business processes often brings different success factors and risks. Performance indicators should change to reflect these factors.

3. **Cultural change:** Changing from a risk-averse to an innovative culture may require not only different KPIs but new reward systems, reporting structures, and tolerance for failure.

4. **External drivers:** Regulatory shifts, market pressures, or sustainability commitments can necessitate new control activities and measures.

A failure to realign controls with the new strategy can cause confusion, inefficiency, or even undermine strategic goals.

### **Worked Example 1.1**

**A financial services company has traditionally measured success based on cost reduction and tight budget control. After a merger, its strategy shifts to rapid product innovation. Senior management does not update performance controls or incentives. What problems may arise?**

> **Answer:**
> Old controls focused on minimising cost may discourage managers from investing in new ideas, slowing innovation and conflicting with the new strategic aims. Employees may avoid risk, stifle creativity, and focus on cost targets rather than developing market-leading products. This control-strategy misalignment increases the risk of failing to deliver on new strategic objectives.

## Performance Risk During Change

Any significant change introduces risks to performance, as existing measures, systems, and controls may become outdated or irrelevant.

### Common Performance Risks in Change

- **Misaligned KPIs:** Performance indicators continue to measure outdated objectives, resulting in behaviour that is not supportive of the new strategy.
- **Inadequate reporting:** New activities or business units may not be captured in existing reports, reducing management visibility and control.
- **Resistance to change:** Staff or managers may feel threatened by new measures, roles, or targets, leading to decreased motivation or passive non-compliance.
- **Loss of control:** Removing controls (e.g., decentralising decisions) without establishing effective new ones can increase the risk of errors, fraud, or missed targets.
- **Information gaps:** Legacy information systems may not provide timely, relevant, or accurate data for new processes or structures.

### **Worked Example 1.2**

**An electronics manufacturer introduces a digital transformation programme, automating much of production. Its previous performance measures focused on labour efficiency and manual rework rates. What risks exist if no new performance measures are introduced?**

> **Answer:**
> Measures of manual labour efficiency and rework rates are no longer relevant. If new KPIs for equipment uptime, digital process quality, or technology utilisation are not developed, management will lack visibility into actual process performance, increasing the risk of undetected problems, inefficiencies, or equipment failures.

## Adapting Controls to Manage Change and Risk

To reduce performance risk during change, organisations should:

- Review and update KPIs and targets to ensure they align with new strategic goals
- Assess where existing controls or reporting lines may create risks or bottlenecks
- Involve key stakeholders (including front-line managers) in redefining measures and systems
- Provide training and communication to explain the purpose of new controls and why old measures may be retired
- Monitor for unintended side effects—for example, whether new controls lead to reduced collaboration or gaming of targets

> **Key Term: change management**
> A structured approach to transitioning individuals, teams, and organisations from a current state to a desired future state to achieve strategic objectives.

### Managing Stakeholder Risk

Different groups may have different attitudes to risk. Senior managers might want rapid change, while operational teams value stability. A clear change management process includes communication, stakeholder engagement, and phased implementation to limit disruption and build commitment.

### Approaches to Reporting During Change

- Use rolling forecasts and adaptive targets where uncertainty is high
- Supplement internal reports with external benchmarking to gauge progress
- Monitor both leading and lagging indicators—e.g., measure employee engagement or process delays before they impact final results

### **Worked Example 1.3**

**A retailer launches an online channel, changing its operating model. Traditional controls focus on store sales and foot traffic. List two updated KPIs that the retailer should consider, and explain why.**

> **Answer:**
> (1) Website conversion rate—measures how effectively online visitors become customers, a key driver for the new channel. (2) Online order fulfilment time—captures the efficiency of delivering products to online buyers, which affects customer satisfaction. These KPIs match the new strategic focus on digital growth and improved online performance.

### **Exam Warning**

> In the exam, failure to recognise the need to update performance measures and control systems after strategic change is a common error. Always check that controls and targets are consistent with current objectives and risks.

## **Summary**

Strategic planning and control must work together, especially during times of change. Controls, including performance measurement systems, must align with strategic aims and be regularly reviewed and updated to keep pace with new risks and objectives. Change introduces performance risk—these need to be mitigated by proactive adaptation of measures, controls, and reporting systems. Organisations that ignore the impact of change on performance management risk missing objectives and reducing competitiveness.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Define strategic planning, control, and performance management
- Explain why change requires update of control systems and KPIs
- Identify risks to performance management systems during change
- Recommend approaches for updating controls and measures to match new strategies
- Understand stakeholder management and communication in change
- Apply these principles to scenario-based exam questions

## **Key Terms and Concepts**

- strategic planning
- control
- performance management
- change management

Strategic planning and control alignment - Managing change and performance risk