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E1. Managing Finance in a Digital World > 3. The Structure and Shape of the Finance Function > Flashcards

3. The Structure and Shape of the Finance Function Flashcards

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1
Q

What is meant by “organisational structure”?

A

Organisational structure is formed by the grouping of people into departments or sections and the allocation or responsibility and authority

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2
Q

Draw Mintzberg’s effective organisation diagram

A

page 46

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3
Q

In Mintzberg’s effective organisation diagram what is the “operating core”?

A

This is the basic work of the organisation

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4
Q

In Mintzberg’s effective organisation diagram what is the “strategic apex”?

A

This is the higher level of management responsible for formulating the strategy and long-term plans

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5
Q

In Mintzberg’s effective organisation diagram what is the “middle line”?

A

These is the lower and middle management layer linking the operating core and strategic apex

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6
Q

In Mintzberg’s effective organisation diagram what is the “technostructure”?

A

Those responsible for designing procedures and processes. Accountants, computer specialists, engineers

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7
Q

In Mintzberg’s effective organisation diagram what is the “support staff”?

A

These provide services which support operations. Sales and marketing, HR, etc

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8
Q

In Mintzberg’s effective organisation diagram what is the “ideology”?

A

The organisations values and beliefs. It’s culture.

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9
Q

What are the 6 co-ordinating mechanisms of Mintzberg’s effective organisation model?

A

Mutual adjustment (infomal co-operation)
Direct supervision (Formal hierarchy)
Standardisation of work processes (SOP’s)
Standardisation of outputs (Product/service specifications)
Standardisation of skills/knowledge (Training skills base)
Standardisation of norms (Cultural norms and expectations)

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10
Q

What are the 5 structural configurations in Mintzberg’s effective organisation model?

A

Simple structure (Block=Strategic apex, Mechanism=Direct supervision)

Machine bureaucracy (Block=Techno structure, Mechanism=Standardisation of work)

Professional bureaucracy (Block=Operating core, Mechanism=Standardisation of skills)

Divisionalised (Block=Middle line, Mechanism=Standardisation of outputs)

Adhocracy/Innovative (Block=Operating core, Mechanism=Mutual adjustment)

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11
Q

What is the entrepreneurial structure?

A

Built around the owner-manager
Centralised
All key decisions taken by the leader

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12
Q

What are the advantages of the entrepreneurial structure?

A

Fast decision making
Good control
More responsive to market
Close bond to workforce

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13
Q

What are the disadvantages of the entrepreneurial structure?

A

Success depends on capabilities of one person
Lack of career structure
Can’t cope with growth

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14
Q

What is the functional structure?

A

Group employees together who undertake similar tasks into departments.

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15
Q

What are the advantages of the functional structure?

A

Economies of scale
Chain of command
Standardisation
Specialists more comfortable
Career opportunities

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16
Q

What are the disadvantages of the functional structure?

A

Empire building and conflicts between functions
Slow to adapt to market changes
Cannot cope with rapid growth

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17
Q

What is the divisional structure?

A

Organisation split into several autonomous divisions which each look after a separate product or location

Headed by general managers

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18
Q

What are the advantages of a divisional structure?

A

Enables product growth
Clear responsibility
Training of general managers (wider view)
Decision making (speed and quality)
Frees up top management

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19
Q

What are the disadvantages of a divisional structure?

A

Duplication of business functions
Lack of goal congruence
Potential loss of control
Allocation of central costs problematic
Specialists may feel isolated

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20
Q

What is the matrix structure?

A

Combines benefits of divisional and functional

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21
Q

What are the advantages of a matrix structure?

A

Advantages of both functional and divisional structures
Flexibility
Encourages teamwork

22
Q

What are the disadvantages of a matrix structure?

A

Dual command
Dilution of functional and divisional authority
Lack of individual accountability
Time-consuming meetings

23
Q

What is a centralised struture?

A

Where the upper levels of management retain the authority to make decisions

24
Q

What is a de-centralised structure?

A

Authority to make decisions is passed down to units and people at lower levels

25
Q

What are the advantages of decentralisation?

A
  • Senior management free to concentrate on strategy
  • Better local decisions due to local expertise
  • Better motivation due to increased empowerment of staff
  • Quicker responses
26
Q

What are the disadvantages of decentralisation?

A
  • Loss of control by senior management
  • Lack of standardisation
  • Dysfunctional decisions
  • Lack of goal congruence
  • Training costs
  • Duplication of roles
  • Extra costs
27
Q

What is the scalar chain?

A

The scalar chain is the line of authority which can be traced up or down the chain of commmand.

Number of levels of management in an organisation

28
Q

What is the span of control?

A

This is how many people report to one superior

29
Q

What is meant by a tall organisation?

A

One with many layers of management and a narrow span of control

30
Q

What is meant by a flat organisation?

A

One with few levels of management and a wide span of control

31
Q

What qualifies the finance function to meet the changing needs of the business?

A
  • End to end view of the organisation
  • Trusted and credible
  • Existing framework for performance management
  • Brings objectivity to decision making
32
Q

What are the 3 shapes in the evolution of the finance department?

A

Hierarchical
Segregated
Digital age

33
Q

What are the 4 levels in the diamond shape?

A

Senior finance team
Strategic business partnering
Digital centres of excellence
Smart finance factories

34
Q

Explain level 1 of the diamond shape

A

Senior finance team

Lead the finance team to achieve the desired organisational impact

35
Q

Explain level 2 of the diamond shape

A

Strategic business partnering

Work with internal and external stakeholders to influence and shape how the organisation creates and preserves value

36
Q

Explain level 3 of the diamond shape

A

Digital centres of excellence

Specialists generate further insight about value creation and preservation in areas of specialism

37
Q

Explain level 4 of the diamond shape

A

Smart finance factories

Assemble and extract data to provide information and preliminary insight

38
Q

Why has the lower level of the traditional triangular shape of the finance function shrunk?

A

Lower level assembly and processing tasks have been eroded by technology

39
Q

Why is there a ‘central bulge’ in the modern finance function?

A

Higher value services still performed by finance professionals as part of multi-disciplinary teams

40
Q

What does the ‘flat top’represent?

A

This shows a move to a collaborative approach in leadership of the company with the CFO working alongside the CEO to lead the company.

41
Q

Draw the diamond shape diagram

A

Page 67

42
Q

What are the three main reasons driving change in the finance function?

A
  • Changing mandate
  • Technology
  • Finance function capability
43
Q

How will the finance function continue to evolve?

A
  • Need more support and management skills
  • More emphasis on specialist knowledge leading to a more multi-disciplinary team
44
Q

What is the definition of outsourcing?

A

Outsourcing means contracting out aspects of the work of the organisation previously done in-house, to specialist providers

45
Q

What is a shared service centre?

A

This is where an organisation chooses to centralise activities currently performed by separate teams in multiple locations into one site

46
Q

What is meant by an organisation’s ‘core competencies’?

A

These are the activities that an organisation can perform that give a competitive advantage and are very difficult for a competitor to emulate.

47
Q

What are the main advantages of outsourcing?

A
  • Cost advantages
  • Economies of scale
  • Reduced capital expenditure
  • Reduced headcount
  • R+D savings
  • Quality advantages
  • Supplier may have superior skills and expertise
  • Solve skills shortage issues
  • Other
  • Management can focus on core business activities
  • Buyer power can acquire favourable terms with supplier
  • Can switch suppliers
48
Q

What are the main disadvantages of outsourcing?

A
  • Supplier wants to make a profit, this suggest could be cheaper to do the work in-house
  • Future price increases
  • Loss of core competence
  • Transaction costs (effort of monitoring and setting up the arrangement)
  • Finality (hard to bring back in-house once outsourced)
  • Risk of loss of confidential information
  • Risk of supplier failing
  • Difficulty agreeing/enforcing contract terms
  • Damage to staff morale
49
Q

What is a service level agreement?

A

A negotiated agreement between the supplier and the customer and is a legal agreement regarding the level of service to be provided

50
Q

What are ‘transaction costs’ in the context of outsourcing?

A

These are the indirect costs of outsourcing.
- Search and information costs (working out which supplier is cheapest)
- Bargaining costs (the costs of agreeing an acceptable SLA)
- Policing and enforcement costs (costs of making sure the other party sticks to the agreement)

51
Q

What two factors have driven the change to a ‘segregated triangle’ structure?

A
  • Globalisation
  • Improved technology

E1. Managing Finance in a Digital World (6 decks)

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