Words of wisdom from the FAE core examiner – strategic management and leadership

Jun 30, 2020

Paul Monahan, Lead FAE Educator, spoke with the FAE core examiner to reflect on a newly refreshed Topic Area 2 – strategic management and leadership.

Strategic management and leadership has been amalgamated from the previous business leadership topic area along with some elements of strategic finance and strategic management accounting. Paul (PM) wished to explore where the examiner (CE) felt candidates struggled in the topic area’s exam in the past.

Applying models to specific exam scenarios

CE: Candidates appear to fall into two groups: those who understand the model and can make a reasonable attempt at applying it to the facts of the case and those who apply the models very generically. We see evidence of the latter group frequently where large passages of text are transcribed. In last year’s FAE Core Comprehensive paper (August 2019), a candidate had transcribed a quote from the 2017 summer paper, along with the name of the case character from back then. It was disappointing because not only was it a poor transcription, it was not relevant to the indicator being examined.

PM: We tell candidates not to panic but instead assess the scenario presented to them. Indicators are directed in such a way that it is reasonable to deduce what model is being asked of the candidates. It is very likely that, based on past experience, the candidates will have seen the model used in either a technical lecture, an Integrated Case Day or one of the other cross marking or STEPS sessions.

CE: The company in the case can have a number of differing, competing issues ongoing simultaneously; and this is true of real-life scenarios. There should be plenty of breadcrumbs that allow candidates to form and shape their answers around the models and frameworks that they use.

PM: And the candidates should be encouraged to feel comfortable using their judgement in deciding what facts to use. Some may appear more urgent than others. The examiners reassure students there will be no ‘red herrings’ in the exam and no attempt made to send students down a ‘dead-end’. We also try to avoid this in teaching material.

CE: That is correct. Candidates see different priorities. However, it should be obvious that some things are more important or time pressing.  A useful way to look at it is to step back and take in what is going on overall in the case for the company and the industry. Where are they in terms of the business cycle, what macroeconomic context is the case set in? How are the issues presenting themselves in terms of what is strategic or longer-term, what is tactical or medium-term and what is operational or shorter-term?

PM: That clarity is useful, and I might add that the clue is in this topic area title – “strategic”. The strategic issues should be prevalent. Tactical and operational matters should be resolvable with time, resource or justifiable spend. It is important to recognise that most candidates have limited real-life business experience and are also under pressure in the exam. We encourage students to read relevant material so that they can see the ‘big picture’ trends affecting different industries.

Unrealistic recommendations

CE: Unrealistic recommendations are something we see regularly, and it can be across the range of answers.  In some instances, we see candidates who have correctly applied a model, have drawn on facts from the case and is scoring well along the way. Then when it comes to recommendations, candidates can lose focus, perhaps it is time pressure but sometimes the suggestions don’t fit the specific circumstances, or the cost of implementation would negate the benefit that was to be achieved in the first instance. Regrettably, this impacts on the professional mark awarded. In real-life, a client would not pay for unrealistic advice.

PM: It is very useful to officially reinforce this message to candidates. I think this often comes down to confidence and perhaps time management. Some candidates can be reticent about making recommendations and can sometimes hedge their bets, which is something that we advocate that they do not do. We stress, particularly in the cross-marking sessions, the importance of the marks available for conclusions. We also make the commercial point that clients will pay a limited amount for analysis, what they tend to want (and are prepared to pay for) is advice. We often draw the attention of candidates to the unequivocal advice from the examiner on page 39 of the 2018 Report of the FAE Committee, pointedly noting that an incorrect conclusion can never score worse than no conclusion.

CE: Candidates should look at this from another lens. A candidate does good work on explaining a framework or model, goes onto discussing its relevance, uses it to solve the problem presented by the case, identifies, and uses facts from the case to support discussion. So, logically, walking through the indicator and then arrives at recommendations…

PM: It would be sensible to presume that one or two obvious things should present themselves as a result of that process and, if candidates did that, then that would significantly improve their answer and their marks. If they have done the work above, it must be confidence and that is perhaps a combination of limited business experience and trepidation about putting down what they feel might be the wrong answer in an exam context.

CE: Agreed. And taking that final step can make all the difference in presenting a balanced, well thought out answer. It is clear that the candidates described above know their stuff so they should recommend what the analysis has pointed out. Perhaps candidates feel if they make an erroneous recommendation, they will jeopardise the marks. That is not really true. The candidate will stop scoring if they make a wild or completely unrelated recommendation.

The downfall of financial tools

PM: We tell candidates that they are expected to be comfortable at this stage with tools like investment appraisal, relevant costing, budgeting and cash flow forecasting, but these are only part of the indicator. Is it the analysis of the output from the calculation, and the amalgamation of this with the facts of the case, what is required to tell the next part of the story at FAE level?

CE: That is correct. Some candidates are very weak or not confident using these tools, so a solid understanding of the moving parts is a necessity. Some candidates fixate on getting the calculation correct, to the detriment of under-developing the subsequent analysis and discussion required by the indicator. My advice here is to be crystal clear about what is being asked. For example, in a recent paper, a budgeting indicator was required. This was a big piece of calculative work, so the indicator was phrased in such a way to leave candidates with no doubt that this was all that was required. However, where an indicator asks a candidate to review something, then this really is the jumping-off point for further or sub-asks.

PM: We warn against candidates overly focusing in on parts of the indicator that they are comfortable with and overdoing them. This clearly upsets the time allowance for the indicator. Again, we have drawn attention to the overall assessment of the performance of candidates in the FAE Committee Reports in 2018 and 2019, which note that some candidates are still not answering all parts of compound indicators. While there are many reasons for this, one is presumably an excessive focus on what candidates feel comfortable with. This is expensive in terms of marks lost. Cross marking sessions where candidates must attempt an indicator ‘cold’ against the clock and then mark another candidates attempt should graphically illustrate the marks lost if this is the route taken.

CE: Time management is vital and we understand that candidates love the calculations, however, candidates must pay attention to the conjunction words that we use such as ‘also,’ ‘in addition,’ ‘furthermore,’ ‘can you also’. These are all branch off into sub-asks, so it is a shame to see candidates miss out on the marks in these subsequent important parts of the indicator because so much time was spent upfront on the calculative element. 

PM: It is helpful to reinforce this point. Would you have a recent actual FAE example of candidates consistently missing the sub-asks in an indicator?

CE: The FAE Core January 2019 Paper called Newline Investments, Business Leadership indicator #8 was a very good example of this. There were a number of issues raised in the course of the paper and the relevant appendix however candidate answers were very unstructured. There were three or four moving parts to the indicator, however, we had to specifically comment on the fact that candidates did not spot all the indicator parts or candidates over-invested in other parts of the indicator resulting in an imbalanced and poor scoring indicator overall.