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ACCA Strategic Professional · Advanced Performance Management

Performance Improvement Models and Techniques for ACCA APM

Performance improvement models and techniques are tools that help an organisation cut cost, raise quality, speed up processes or remove bottlenecks. In APM you must pick the right tool for the scenario, apply it to the facts, explain its limits and recommend action. Listing theory without application earns few marks.

What this chapter covers

This chapter covers the main tools a business uses to improve how it works. They include business process re-engineering (BPR), Lean, Six Sigma, total quality management (TQM), benchmarking, value chain analysis, activity-based management (ABM), target costing, kaizen costing, life cycle costing, throughput accounting and the theory of constraints (TOC). The last topic asks how these tools change across sectors such as services, not-for-profit and public bodies.

Each tool answers a different problem. BPR redesigns a process from scratch. Lean removes waste. Six Sigma cuts defects and variation. Benchmarking compares you with others. Target costing starts from the market price. Throughput accounting focuses on the constraint that limits output. Your job in the exam is to match the tool to the problem in the case.

The chapter links to the rest of APM in several ways. Performance measurement systems tell you what to improve. Strategic performance links (such as the balanced scorecard) show whether improvement supports strategy. Risk, governance and information systems affect whether a change can work. Section A case studies often ask you to recommend an improvement approach and then judge it, so this chapter feeds directly into long written answers.

Improvement techniques are a regular source of requirements in both the Section A case study and the 25-mark Section B questions. They suit scenario-based questions because there is always a real business problem to diagnose. Candidates who can name a tool but cannot tie it to the facts lose technical marks, and weak recommendations lose professional skills marks for analysis, commercial acumen and evaluation. Because the topics are mostly discussion-based with some short calculations, steady practice here is a reliable way to build marks.

Performance improvement models and techniques: topics in the order to study them

  1. 1Business Process Re-engineering and Process ImprovementIt sets the basic idea of redesigning how work flows, which the later tools refine or challenge, and it introduces the radical versus incremental contrast.
  2. 2Lean, Six Sigma and Total Quality ManagementThese are the incremental, quality-led alternatives to BPR, so you learn them straight after to compare the two approaches.
  3. 3Benchmarking and Best PracticeIt shows how you find out what to improve and what good looks like, and it supports every tool you have just covered.
  4. 4Value Chain Analysis and Activity-Based ManagementIt moves from process quality to cost and value, helping you see which activities add value and which only add cost.
  5. 5Target Costing, Kaizen Costing and Life Cycle CostingThese cost tools build on value analysis and bring in the market price and the whole product life, with calculations you must practise.
  6. 6Throughput Accounting and Theory of ConstraintsIt is the most numerical topic and needs a clear head, so it is easier after you understand cost-based thinking and its limits.
  7. 7Performance Improvement in Different Sectors and ContextsIt comes last because it asks you to adapt every earlier tool to services, public sector, not-for-profit and international settings.

How to prepare Performance improvement models and techniques

Treat this chapter as a toolkit. For each tool you need to know what it is, when it fits, how it works, what it costs and where it fails.

  1. Make a one-page summary for each tool with four headings: purpose, how it works, benefits, limitations. Keep each to a few lines.
  2. Learn the calculations early: target cost gap, life cycle cost, throughput accounting ratio, cost per activity and bottleneck analysis. Redo them until the steps are automatic.
  3. Practise matching tools to problems. Read a short scenario and decide which tool fits and which does not, then say why in two sentences.
  4. Write answers in the exam pattern: make a point, apply it to the scenario facts, then explain the impact. Avoid generic definitions.
  5. Practise comparing tools, such as BPR with kaizen, Lean with Six Sigma, or ABC with throughput accounting. Comparison questions test judgement.
  6. Attempt full past-style requirements under time. Aim for roughly 1.95 minutes per mark and check that each recommendation is practical and reasoned.
  7. Before the exam, review sector examples so you can adapt each tool to services, public bodies and not-for-profit organisations.

Common mistakes in Performance improvement models and techniques

  • Writing textbook definitions without using the scenario.

    Fix: After every point, add a sentence using a fact from the case, such as a figure, a department or a stated problem.

  • Recommending a tool without checking it fits the problem.

    Fix: First name the problem in one line, then pick the tool that targets it and say why alternatives fit less well.

  • Ignoring limitations, risks and implementation issues.

    Fix: Always include costs, staff resistance, data needs and timing. Evaluation earns marks and shows professional scepticism.

  • Mixing up Lean, Six Sigma, TQM and kaizen.

    Fix: Fix one key focus for each: Lean is waste, Six Sigma is variation and defects, TQM is culture and quality, kaizen is small cost steps.

  • Making errors in target costing and throughput calculations, or not interpreting the result.

    Fix: Set out each step, check the units, then say what the result means and what management should do next.

  • Treating sector contexts as an afterthought.

    Fix: For services, public sector or not-for-profit scenarios, adjust for non-financial goals, intangible outputs and stakeholder views.

Last-day revision: Performance improvement models and techniques

  • BPR is radical redesign of processes to get large gains; it carries high risk and disruption.
  • Lean aims to remove waste and focus on what the customer values.
  • Six Sigma uses data to cut defects and variation, often through the DMAIC approach.
  • TQM is a culture of continuous quality improvement involving all staff, covering prevention, appraisal and failure costs.
  • Benchmarking compares performance or practice with others; types include internal, competitor, functional and generic.
  • Value chain analysis separates primary and support activities to find where value is created or lost.
  • ABM uses activity cost information to manage cost drivers, not just to allocate overheads.
  • Target cost = target selling price − target profit margin; compare it with the current cost to find the gap.
  • Kaizen costing seeks small, continual cost reductions during production.
  • Life cycle costing includes costs before, during and after production, so early design decisions matter.
  • Throughput = sales revenue − direct material cost; the aim is to maximise throughput through the bottleneck.
  • In every answer, apply the tool to the scenario and state at least one limitation.

Performance improvement models and techniques practice questions

Performance improvement models and techniques in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Performance improvement models and techniques: frequently asked questions

How much of APM does this chapter cover?

ACCA does not publish a fixed weighting for each chapter, so do not rely on a set figure. Improvement techniques can appear in Section A and Section B, so treat the chapter as a core area.

Do I need to memorise formulas for this chapter?

You need to know the main calculations, such as target cost gap, life cycle cost and throughput measures, and apply them quickly. Most of the marks, however, come from explaining and applying the results to the scenario.

What is the difference between BPR and continuous improvement?

BPR is a radical redesign of a process, usually in one major change, with high risk and high potential gain. Continuous improvement approaches such as kaizen, Lean and TQM make small, steady changes that carry less disruption.

How do I earn professional skills marks in these questions?

Analyse the facts, challenge weak assumptions, give commercially sensible recommendations and present them clearly in the format asked. Balanced evaluation of benefits and drawbacks supports several of these skills.

Which topic in this chapter should I practise most?

Practise throughput accounting and target costing calculations, since small errors are costly. Also practise choosing between tools in a scenario, as that skill is tested across many topics.