Business structures

Question 1

Choice of structure -Functional structure

Answer 1

Choice of structure must be in line with strategy and environment

Functional environment
1. Traditional structure - finance, sales, IT, HR E.T.C

Performance mgt issues
benefits
1. lower overall cost base as no duplication jobs
2. good for control - depts must follow budget and rules
3. depts are specialists so quality of work is good

Problems
1. Dependency of function - if procurement purchases cheap
products, they get a favourable variance but production dept will
have adverse variance due to the low grade products.
2. Each dept will have their own KPI
3. Most will have only costs so will treated as cost centre and have
narrow down approach. focus will be on keeping cost low rather
spending more on quality

Question 2

Virtual or Network structures

Answer 2

This is a more modern approach
Businesses outsource as much as possible even more core processes like production
small MGT team directing outsourced functions

Performance mgt issues
benefits
1. very flexible approach
2. can switch suppliers if a better options appears -this may be costly
3. possible to operate an emerging strategy
4. low fixed cost so low operational gearing

Problems
1. Brand management can be more demanding to do
2. corporate culture mgt is challenging
3. control over critical processes can difficult, SLA can make it but
easier

Question 3

Joint Venture

Answer 3

Two or more partners set up a project that is shared
can be a new investment vehicle where J.V partners are shareholders

Performance mgt issues
Benefits
1. Shared Risk
2. shared resource commitments
3. shared skill set

Problems
1. Lack of agreement in objectives - mgt philosophy or exit strategy
2. Trust issues
3. Determination of equality of input and effort

Question 4

Service Businesses - characteristics

Answer 4

characteristics of services
These certain characteristics determine many performance management methodologies

1. Intangibility - no physical product, can be difficult to measure
   service. There is no standard service which makes performance
   control difficult.
2. Heterogeneity - services are provided and consumed by people ,
   this gives an inherent variability to delivery and demand prefaces,
   there is no standard possible in this situation
3. Simultaneity - services are produced and consumed at the same
   time, post production or delivery checks cannot be carried out
   before consumption. This makes every error visible to the
   consumer and so inherently risky and damaging
4. Perishability - stock holding is not possible, use it or lose it .
   Unused resource is expensive and resource utilisation is critical

Question 5

Service Businesses - Performance mgt consequences derived from
characteristics

Answer 5

Control - How do you control staff when they must respond to
demands of the customer

Targets - how can you set targets when output if intangible

Budget - How can you budget in such an environment

how to manage performance
1. Pre delivery
- Establish a set of guidelines
- insist on proper qualifications for therapist
- perform dummy sessions

2. Delivery
   - CCTV and Sitins of third party observation
   - Require consultant confirmation for complex procedures
3. Post delivery
   - Request feedback from patient
   - Insist on treatment note from therapist
   - set up discussion forums for therapists to discuss complex
   problems

Question 6

Business Process Re-engineering

Answer 6

Examiner is concerned with impact of BPR on performance or KPI’s or PM’s

what would be impact on performance - financial & non financial

what would be impact on KPIS/PMS ?

Requirements
1. Change in culture
2. Greater use of technology
3. New KPI’s
4. Leadership
5. Employee training
6. Realigned reward system