7. Structre Flashcards
What was the traditional role of the finance function?
To generate information
What are the five components of an organisation according to to Henry Mintzberg
Strategic Apex
Technostructure
Support Staff
Middle Line
Operating Core
What is the strategic apex
Drives the direction of the business through control over decision-making
What is the technostructure
Analysts and technicians and skilled professionals that can
Drives efficiency through rules and procedures
What is the operating core
Performs the routine activities of the organisation in a proficient and standardised manner
What is the middle line
Performs the management function of control over resources, processes and business areas
What is meant by the support staff
Provides expertise and service to the organisation
What are the potential configurations of Mintzberg’s five components
- Simple structure
- Machine Bearaucracy
- Professional bureaucracy
- Divisionalised/Conglomerate
- Adhocracy
- Missionary
What is the simple structure
- Strategic Apex is dominant
- Direct supervision- exercises coordination and control
- Effective in small, simple, dynamic organisation
- Flexibility
- Entrepreneurial structure
What is meant by machine bearaucracy
- Technostructure is dominant
- Standardisation of work processes exercise coordination and control
- Heavily unionised business
- Complex stable environment focused of improving performance
- Functional structure
What is meant by professional bearaucracy
Operating core is dominant
- Processes are too complex to be standardised
- Individual trainng and expertise is most valuable
- Complex and stable environment
- Standardisation of skills/knowledge: coordination and control
What is divisionalised or conglomerate configuration
- Middle line is dominant
- Large organisation or too complex to be managed by one unit and is split into divisions
- Static and diverse environment
- Standardisation of outputs: coordination and control
- Divisional structure
What is meant by the adhocracy configuration
-Support staff and dominant as they provide continuity
- Operating core is also important
- Dynamic and innovative environment
- Complex project based works with few formal controls
- Mutual adjustment: coordination and control
- Matrix structure
What is meant by the missionary configuration
- Little structure or formal control
- Held together by shared values and strong culture
- Standardisation of norms: coordination and control
- Effective in start-ups or campaigning groups
What is the direct supervision method of coordination and control
A formal hierarchy where manager supervises the work of subordinates
What is standardisation of work process method of coordination and control
Work tasks are established and set out in rules and operating procesdures
What is standardisation of skills and knowledge as a method of coordination and control
Focus is on identifying training needs to do their job
What is the standardisation of outputs as a method of coordination and control
Specifications are set for the service or product being made
What is the mutual adjustment method of coordination and control
Informal contact between employees and mangers to coordinate work
What is the standardisation of norms method to coordination and control
The organisation’s culture provides expectations for all employees
What are traditional organisational structures
- Functional structure
-Geographic or divisional structure - Matrix structure
What is a functional structure
Group employees by specialism or skill sets such as finance
What is meant by the geographical/divisional structure
The organisation is arranged according to geographical area
What is the matrix structure of an organisation
The organisation uses cross-functional teams
- eg. for project-based services
- mainly linked to adhocracy configuration
What are contemporary organisational structures
- Boundaryless organisations:
- Shamrock organisation
What is meant by boundaryless organisations
Minimise or eliminate formality to focus on speed and flexibility
What are the types of boundaryless organisations
- Virtual: organisation only exists electronically without any premises
- Modular: The manufacturing process is broken down into units or production is outsourced
- Hollow: Split their activities into core and non-core. Core activities are tragically important and kept in-house whilst non-core is outsourced
What is a shamrock organisation
- Driven by pressure to reduce personnel costs, flexible firm
- Four parts:
Professional core: main workers who define the organisation’s competence
Self-employed core: support professionals and are hired on contract
Contingent core: Low-level routine jobs
Consumers: some organisations enlist customers help
What are other types of new organisations
- Flatter structures- fewer layers
- Horizontal structures - multifunctional project teams
- Chunked structures or unglued structures: smaller and flexible units within the overall structure
- Output focused structure: focus on the result rather than the process
- Jobless structure: changing pool of freelancers
What is the scalar chain and span of control
- As organisations become bigger- different organisational structures may be suitable
Scalar chain: levels in the organisations
Span: control of the number of employees managed
What is meant by delayering
Reduction of the number of management levels from the bottom to the top
- Organisations are increasing average span of control to reduce middle management
What is horizontal integration
Developing competitor or complementary activities
What is verticle integration
The company expands backwards or forwards within its existing value network and becomes its supplier or distributor
What is an alliance
When an organisation works with external entities
What are the types of alliances
Joint Ventures
Licences
Franchises
Consortia
Agents
Strategic alliance
Join venture
two organisations set up a new shared organisation
Liscence
granting permission to another company to manufacture or sell product
Franchising
The franchisee manufactures or distributes the product while the franchiser retains control of the brand and marketing
Consortia
short-term legal entities aim to deliver a specific product
Agents
Use of agents as distribution channel
Strategic alliance
Sharing of resources and activities to pursue strategy
Contractual agreements - similar to joint ventures although no separate company is formed
What was the traditional structure of the finance function
Hierarchical or triangular shape
What is the segregated structure of the finance function
Some parts of the finance function were moved to the shared service centres
The bottom half of the triangle - routine, lower level accounting operations migrated to shared service centres- centralised
What is the digital age pentagon/diamond structure of the finance function?
- Flat top: collaborative financial leadership
- Strategic business partnering to create and preserve value
- Central bulge: digital centres of excellence
- Managing processes and applying accounting rules to assemble and extract data
Describe the Level 1 finance leadership level
Type of system: Governance
Outcome: oversight
Gartner model: Predictive, Descriptive and Cognitive
Technology: AI, prediction tools, Business intelligence systems
Role of accounting: enabling value creation, allocation of resources
Level 2 - Value partnering
Types of system: Engagement
Outcome: foresight
Gartner model: Diagnostic, predictive, prescriptive
Technology: AI, Visualisation, final stages of BI
Role of accounting: Shaping how value is created and enabling
Focus: quality decision-making and judgement
Level 3 Insight generation
Types of system: interpretation
Outcome: insight
Gartner model: diagnostic
Tech: AI, Natural language processing, middle stages of BI
Role of accounting: narrating, begins to shape how organisations create and preserve value
Focus: Compliance
Level 4 Data extraction
Type of system: recording
Outcome: Hindsight
Gartner model: descriptive
Technology: Robotic process automation, early stages of BI
Role of accounting: gathering information
Focus: quality and integrity of data
What are shared service centres
Centralising operations that previously existed in more than on part of the organisation
‘internal outsourcing’
What are the benefits of shared service centres
Cost savings
Standardisation of processes
Selection and delivery of best practice
Improved control and quality
Consolidation of information system
What are the risks of shared service centres
- HR Issues - redundancy and impact on morale
- Insufficient funds to establish
- Consolidating systems will be costly, complex and time consuming
- Language, cultural and reporting barriers
What are the requirements to establish a successful SSC
Commitment to continuous improvement
Clear scope and delegation of responsibility
A clear vision of the role of SSC in the organisation
Buy-in to change
Strong customer-focused culture
Senior management commitment
What is outsourcing
Involves an organisation sub-contracting business activities to an external provider
What are the three types of competence in regard to outsourcing identified by Lonsdale and cox
- Core competencies: fundamental to firm’s competitive advantage so should not be outsourced
- Complementary competencies: can be outsourced but technical complexity so should only be given to trusted source
- Residual competency: outsourced at arms length
What are advantages of outsourcing
- Reduces costs
- Enables structural changes
- Access to expertise and resources
- Enable finance tea to concentrate on becoming business partners
What are the disadvantages of outsourcing
- Investment is needed to manage relationships with outsourcing companies
- Disruption to business and resistance to change
- Loss of control over function
-Increase risk due to loss or data breaches - loss of internal knowledge and expertise
What are service level agreements
SLAs - legally binding contracts made between customers and outsource partners that agree on the type of service provided
- Description of service
- targets, expectations, cancellation procedures
What are transaction costs
Incurred by an organisation as a consequence of having business activities performed by third parties
What are non standard prducts which have high transaction costs
- Search and information costs: determining which products are needed and selecting suppliers at appropriate cost and quality
- Bargaining costs: negotiating deal with the supplier
- Policing and enforcement costs: monitoring whether supplier adheres to expectation
What is the transaction cost theory
Williamson: organisation has choice of whether to produce goods itself or through third party:
- Hierarchy solution: do it itself
- Market solution: enter a contract and buy asset outside the organisation
What are the factors that determine whether hierarchy or market solution to be picked
Uncertainty: It is difficult to arrange contracts
Frequency: more likely to be outsourced if it’s infrequent
Asset specificity: when assets are specific it is preferred to be done in-house due to the high transaction cost
What are the six main types of asset specificity
- Site specificity: immobile
- Physical asset specificity: customised for a specific purpose
-Human asset specificity: workers acquire knowledge of a specific role which has higher value in the role than outside of it
- Brand name capital specificity: brand name associated with specific activity
- Dedicated asset specificity: Assets acquired solely for work undertaken for a specific customer
- Temporal specificity: activities require perishable goods
What is business process re-engineering
Organisations transforming business processes and re-design them from the ground up
‘radical re-design’
What are the four themes of BPR
Process reorientation: focus on resources, tasks and constraints
Creative use of IT
Ambition
Challenge and break rules
What is offshoring
Relocation- involves migrating some parts of an organisation’s activities to another country
