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DUE DATE : 04/09/2023

ü Answer ALL questions.
ü Write neatly and legibly
ü NOTE: Marks will be awarded for theoretical knowledge, application of
the theory and use of relevant examples.
ü The general University of Johannesburg policies, procedures and rules
pertaining to written assessments apply to this assessment.

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‘We are doing well but we cannot afford to be complacent,’ said Peter Woodrow, the
Information Management Manager with Bristol & West Building Society. ‘To keep us on our
toes and help us keep improving what we do, I think we need to benchmark ourselves against
other organisations. Though the problems are which measures do we use and which
organisations should we benchmark ourselves against?’
With a head office in Bristol and 132 branches mostly focused in the south and south-west of
England, Bristol & West is one of the top 10 building societies in the UK. Bristol & West has
assets in excess of £13 billion and employs around 3000 staff. The Society specialises in
mortgages, savings and investments and manages over 200 000 mortgage accounts and over
one million savings and investment accounts. It does not offer services and accounts outside of
these categories. By specialising in these financial products the Society believes it can be more
responsive to customers’ needs. It also offers its customers convenience and provides specialist
sales and service teams who ensure that the highest levels of customer service are provided by
phone, post, Internet and in person.
Peter explained how the Society has been trying to develop its performance measurement
systems. ‘We are currently using the EFQM Business Excellence framework to help us develop
our measures and improvement activities and we have found, maybe not surprisingly, that we
have quite a few measures of “the results” but that we are less good at measuring “the enablers”.
‘We obviously have a lot of information in terms of volumes about all of our products,
mortgages, savings and investments, and details of all money flows on a daily basis – all the
“day-to-day measures” needed for running such a business. We use these performance
measures to compare the activities of our various branches. We also have lots of measures of
“competitiveness” and we send monthly returns to the Building Society Association (BSA) and
Building Society Commission (BSC). The material they produce allows us to com- pare
ourselves with the rest of the building society sector, though not on a one-to-one basis. We do
measure customer satisfaction and employee satisfaction but maybe not in a particularly
sophisticated way, though we are working on this at the moment.
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‘We want to do some benchmarking to see how we can improve what we are doing and also to
try to ensure that what we do is adding value to our customers and other stakeholders. Should
we look, for example, at the Cheltenham & Gloucester Building Society, it is very focused in
terms of its products and services, or should we look at the Halifax because it is the biggest, or
Midshires because it has a good reputation for customer service … or British Airways? I don’t
want us to waste our time creating measures for the sake of measuring things. I want us to
choose things that will help us improve and know how far in front or behind we are.’
1. Critically, demonstrate in your own words the main purpose of benchmarking
2. What advice would you give to Peter Woodrow? [5]
Prye, Byll and Runne (PBR), founded in 1880, is one of the large UK-based accountancy firms.
It has offices in 20 towns and cities and a staff of about 3000. The company’s largest office,
which includes the national office, is in London and has over 60 partners and 1000 staff. In
common with all the other large accountancy firms, PBR offers a range of specialised services
including accounting and auditing, taxation advice, management consultancy, business
investigations, insolvency, trust administration and technical training.
PBR recognises that in many ways it is no different from all other large accountancy firms. It
provides the same sort of services, in the same locations, with similar fee structures, and pays
about the same wages to staff as all other companies. However, PBR does pride itself on its
efficient, personal and friendly service. Every enquiry is directed through a partner who
becomes the account holder. The partner then always deals personally with that client. This
approach also rubs off on the firm’s recruitment of staff. One recently appointed junior member
of staff explained it attracted her into the firm
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‘There was really little to choose between the top companies, however PBR really stood out.
There was a better atmosphere, the people were informal and friendly and very helpful and
there were no great divisions between partners, managers and staff. It is a good place to work.’
PBR partners believe that this approach is the reason for the success and growth of the
company. Indeed the firm has opened up two new offices in the last three months and aims to
open at least three more within the next 12 months. Spencer Dobson, a senior partner, explained
the increases:
‘Most of our “new” offices are not new but are small independent firms which we buy out. We
then take over the existing client base, together with the partners, with the intention of attracting
new clients by using our name and reputation.’
Attracting new business
Most of PBR’s business is performing audits for companies. Once a company uses PBR they
would tend to use them each year and as a result there is a relatively stable client base. Spencer
‘We have never lost any clients by avoidable causes but sometimes we feel we have little
control over the size of the business as changes often happen in the market – mergers and
takeovers for example. If one of our clients is taken over by the client of another company, we
would tend to lose the business to our competitors because it makes more sense for all the
subsidiaries in a group to use the same firm. Clearly, you win some and you lose some.’
Spencer went on to explain how they attract business.
‘Organisations out looking for accountants are not too common. If they are, it is usually because
they are fed up with their current accountants or have grown out of the ser- vices that their
accountants are able to provide. Some firms may not be able to provide the degree of specialism
that the organisation may now require.
‘We are allowed to carry out advertising campaigns, but not only is this expensive, it also does
not seem to be necessary. You see, most of our new clients come from recommendation from
our other clients, bank managers or solicitors. Some new work is on the basis of competitive
tendering. This has been a fairly recent development. Sometimes we might be asked for a
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competitive proposal for a whole group of companies. This could be a very big job. Our success
rate has been reasonably good in this area.’
Spencer explained some of the problems associated with tendering for work:
‘We may occasionally put out a low price if we want to get a foot in the door or think we can
get ancillary work, but it is rare. Otherwise, putting in a low price on a tender can work against
you. Firstly, because our prices are relatively fixed, we know how long the job will take and
how many and what sort of staff it will require. Secondly, because we tend to know what other
firms will charge, and usually we all charge roughly the same rate. After all, it is the same job,
requiring the same resources and time, and we all pay roughly the same rates. Also, the price
of an audit is not a big cost to the client. An organisation with a turnover of £20 millions may
pay £10 000 for its auditing. It scarcely matters whether it is £9000 or £11 000. For some
organisations, however, the price is important, in particular government services.
‘What I think does matter in attracting work is how the clients feel they will get on with the
auditors, who they have to work with for some time. It’s like choosing a doctor: the auditors
will be inside your organisation and can mess things up for you. Decisions are usually made
on whether they feel good about you or not.
‘The main thing that makes our firm different from all the others is that we try to sell our staff
rather than our skills. I reckon the thing that clinches a deal is the individual that the clients
meet at this end. The clients can’t easily assess skills at the first meeting but they can assess if
they like what they see. They like to see someone who gives the appearance of being bright,
cheerful, competent and willing. Usually the first point of contact is a partner. It is important
then that we know how to sell ourselves. We have training for senior staff on client
management which includes how to make formal presentations, how to address people and
write to people. Client relationships are very important to us. Besides working hard getting
clients, we work hard on keeping them. I believe it’s the best way to keep a thriving practice.
We have a programme of visiting all our major clients so we keep in close touch with many
organisations. Sometimes our contacts within the organisations come and go, so we try to deal
with several people. If one of us deals with the old guard, we will bring someone in who can
deal with the new guard as well. We need to be alert to management changes.
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‘An important part of managing our relationship with the clients is making sure our staff in the
field do a good job, so we spend a lot of time on student recruitment in order to try to get hold
of the best people possible. We don’t necessarily pay more than other firms, indeed pay scales
are comparable, but we do try to get better people by selecting better.’
As a senior partner, Spencer is keen to make sure that client relationships are managed well.
Though there is no systematic method of monitoring client relation- ships, Spencer keeps his
ear to the ground.
An audit is the act of checking the client’s records to make sure that they are accurate and fairly
represent the situation. It involves examination of an organisation’s financial statements and
the performance of detailed tests and procedures on the accounting and other records to form
the basis of a professional opinion (audit report) on the fairness of the financial statements. The
audit report provides the statements with credibility and enables third parties, such as banks
and other creditors, to rely on the statements with confidence. Auditing has become
increasingly sophisticated with the development of many techniques, including flow charting,
statistical sampling and analytical review techniques. Although many techniques have become
standardised, there is still a major need for professional judgement, which is required because
clients operate in many different industries, each with characteristics that create special audit
issues and problems. In addition, clients use a wide variety of accounting systems and vary
significantly in the competence of their accounting staffs.
Professional judgement is also required because audits must frequently be carried out under
considerable pressure. Deadlines for completion are imposed by regulation or client reporting
requirements. Audit staff are, therefore, commonly required to make trade-offs between
completing audits within the required time and ensuring that the procedures performed are
appropriate, sufficient and properly executed. Spencer added:
‘We are quite hard pressed at times, but we don’t turn work away. Also, clients some- times
change their plans but we always do our best to accommodate them. We have never yet failed
to staff a job. If it comes to it we can always borrow staff from London or other offices or use
overtime if the work builds up. Sometimes we can delay part of the work – there is always a
bit of slack.’
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The pressure is further increased by the seasonality of the workload. Audits are performed at a
client’s year-end. Many of PBR’s clients have a 31st December year- end which means that
January, February and March are very busy months. Most of the other clients have a March
year-end so the heavy workload is actually spread over about six months. One junior
‘We are quite frantic at times but we always meet our deadlines’.
The length of time needed to complete an audit varies and depends largely upon the size
(turnover) and complexity of the organisation. The audit for an organisation with a turnover of
around £2000 may only take one person one day. A large job for an organisation with a turnover
of £200 million may take 3000 hours.
A central London-based Professional Standards Committee is responsible for con- trolling the
professional performance of the individual offices. The Committee sends out inspection teams
to each office on a regular basis, every couple of years, to monitor their performance on a
selection of their audits. The team report on any shortcomings or difficulties encountered. The
Committee then advises the office as to how it should deal with them. The teams are made up
of partners from other branches. They select a number of audit files at random and review them
for compliance with the firm’s accounting procedures.
Audit teams
Each PBR office creates an internal audit team for each audit assignment. Typically a client
will see an Audit Senior and two or three assistants, usually ‘students’, working in the field.
The students are graduates who are doing their three years training, during which time they
take their professional exams. There is an Audit Manager to whom the Senior reports. The
Audit Manager would normally be permanently assigned to a set of clients. It is his or her job
to arrange the audit assignment, assign staff, visit and review the audit team and keep in contact
with the client throughout the audit. A partner oversees the operation, keeps in regular touch
with the client and reviews the work of the Audit Manager.
Audit Managers plan the staffing of the team in conjunction with the Administrator who runs
the Planning Board. This is a large chart showing all the staff below manager level, with the
dates of known jobs and all the staff allocated to them. When an Audit Manager is planning an
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audit, they will go to the Administrator to book the number and grades of staff that they require
for the weeks they will be required. There is usually never quite enough slack in the system for
the Audit Managers to have exactly what they want when they need it. This is resolved in
cooperation with the other managers and by minor adjustment to the job schedule.
Staff assessment
One student explained:
‘We are formally assessed twice a year by one of the partners. It is really quite useful and it is
very fair. We have to fill in our comments as well and we then discuss all the points. It’s a very
good learning document. It gives you feedback on how you are improving and in what areas
you need to improve. All the managers are assessed in the same way.’
Spencer added.
‘We also keep our ears to the ground and listen to the gossip; we are a small com- munity, so
we know what is going on.’
Each branch of PBR has a considerable degree of autonomy. All performance targets are set
by the local partner in discussion with Head Office. Spencer Dobson explained:
‘I don’t have any specific targets set by Head Office. Any targets that are set, I set, and I will
be measured against them. Most branches are well established and if they want to expand they
have to look for new clients and new markets – they have to achieve some- thing new from a
current base. The bright people in the business will work out how to do it and then do it. They
see it as a challenge for themselves and they will be acknowledged as bright people.’
In general, performance criteria are set at local level. They are, however, examined by Head
Office and discussions may follow, but as Spencer said,
‘If they don’t know where we can get any more business then there is no point in demanding
that we increase it.’
There are five main performance criteria: manpower utilisation, collections, variance, profit
and pricing.
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Manpower utilisation
Everyone (including partners) in the organisation, with the exception of the administrative
staff, fills in time sheets. These documents show how many hours each person has spent on
which job and how many hours have been spent on things that cannot be charged to any job.
Spencer added:
‘These sheets are not used as a stick to beat people with but so that we know what we have to
charge each client for. We do check them to make sure that any non-chargeable time on the
sheet is our fault and not the auditors’ fault. If a junior only fills in three days’ work, there may
be nothing wrong with this if we were only able to provide him/her with three days’ work that
week. Utilisation is a management problem, not a problem for the individual.’
Spencer explained,
‘In the office we check our rates of billing and collections. If we have done the work then we
hope to collect money for it. Like all organisations, we have to monitor our cash flow.’
Spencer explained:
‘Variance is the difference between the actual cost of a job and what we charge the client for
it. This checks that our original estimate of time, number and grade of staff required is
accurately reflected in the cost of the job. It also ensures that we don’t stoke time on to a job.
For example, if you agree a fee of £5000 with a client you could allocate time on the job to say
£15 000 and still only charge £5000. The variance would be £10 000 and would obviously not
be a good thing. These figures are checked locally by the partners and then centrally.’
Profit is influenced by several factors including the combined variances of all the jobs. It is
important to monitor profit as all the partners share in the profits of the firm, so a partner’s
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share is expected to be covered by the profits from his/her office. Also, if any office wants
another partner, it must demonstrate that there is enough potential profit to cover another share.
Spencer explained how the firm sets charging rates:
‘Pricing and budgeting are basically the same process. We work out how many people we are
going to have and how much we are going to charge for them on an hourly basis. This is based
on the hours we expect them to work, the expected utilisation of each, last year’s charges and
this year’s pay increases. We have a computer program in London that provides us with a new
set of charging rates based on all of these. When they appear, we check them against what we
think is possible in our local market and, if necessary, amend them and rerun it. Head Office
may come back and say that the proposed rates are not high enough. Then we will debate them
as Head Office will not necessarily know about any new competition in our area or if a big job
has recently been lost.’
Generally, PBR quote for the job based on the hours and grades of staff required, but it is
equally possible to quote per hour. The budgeting process starts each April with ideas about
salary increases due in July. The process must be complete by July when the rates have to be
entered into the central computer.
1. How is PBR’s operational performance monitored and controlled? [10]
2. What seem to be the weaknesses in PBR’s systems? [10]
3. Identify the improvement priorities for PBR using the importance–performance
matrix. [10]
4. What steps would you recommend PBR to take? [10]
Good Luck

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