Chapter 3 - Structure and shape of finance function Flashcards
What are Mitzberg’s 6 building blocks?
- Operating core
- Strategic apex
- Middle line
- Technostructure
- Support staff
- Ideology
What is the operating core?
Basic work of organisation
What is the strategic apex?
Higher levels of management responsible for formulating strategy and long-term plans
What is the middle line?
Link between strategic apex and operating core, include mid to low level management
What is the technostructure?
Responsible for designing procedures and standards
What are support staff?
Provide services to organisation which support operations/production
What is ideology?
Organisations’ values and beliefs (culture)
What are the 6 co-ordination mechanisms?
- Mutual adjustment
- Direct supervision
- Standardisation of work processes
- Standardisation of outputs
- Standardisation of skills and knowledge
- Standardisation of norms
What is mutual adjustment?
Co-ordination through informal contact
What is direct supervision?
Co-ordination through a formal hierachy
What is Standardisation of work processes?
Literally what it says
What is Standardisation of outputs?
Product and service specifications
What is Standardisation of skills and knowledge?
Identifies training needs and the necessary skills base to do the work
What is Standardisation of norms?
Cultural norms and expectations
What is an entrepreneurial structure?
- Built around owner and management
- Totally centralised
- Typically small companies
What are the advantages of an entrepreneurial structure?
- Fast decision making
- Responsive to market
- Good control
- Close bond to workforce
What are the disadvantages of an entrepreneurial structure?
- Lack of career structure
- Dependent on owner/managers
- Cannot cope with diversification/growth
What is a functional structure?
- Employees grouped into departments
- Organisation outgrown entrepreneurial structure
- Appropriate for small company with few products
What are the advantages of the functional structure?
- Economies of scale
- Standardisation/efficiency
- Specialists
- Career opportunities
What are the disadvantages of the functional structure?
- Empire building
- Slow to adapt to market changes
- Conflicts between functions
- Cannot cope with diversification
What is the divisional structure?
- Split into several divisions by product or location
- Headed by general managers
What are the advantages of the divisional structure?
- Enables product/geographical growth
- Clear responsibilities
- Training of general managers
- Easily adapted for further diversiaifcation
- Top management can concentrate on strategic matters
What are the disadvantages of the divisional structure?
- Duplication
- Lack of goal congruence
- Potential loss of control
- Allocation of central costs
- Specialists isolated
What is the matrix structure?
- Combines benefits of functional and divisional
- Appropriate for multi-product and multi-functional organisations
What are the advantages of the matrix structure?
- Benefits of functional and divisional
- Flexibility to focus on customers
- Encourages teamwork
What are the disadvantages of the matrix structure?
- Dual command
- Dilution of functional authority
- Time consuming meetings
What factors affect the amount of centralisation?
- Management style
- Ability of management/employees
- Geographical spread
- Size of organisation
What are the advantages of decentralisation?
- Senior management free to concentrate on strategy
- Better local decisions
- Better motivation
- Better flexibility
What are the disadvantages of decentralisation?
- Loss of control by senior management
- Dysfunctional decisions
- Poor decisions by inexperienced managers
- Training costs
- Duplication of roles
- Extra costs
What is the scalar chain?
Line of authority which can be traced up/down chain of command
What factors influence the span of control?
- Nature of work
- Type of personnel
- Location of personnel
What is a tall organisation?
- Many levels of management
- Long scalar chain
- Narrow span of control
- More bureaucratic
- Longer decision making process
What is a flat organisation?
- Few levels of management
- Short scalar chain
- Wide span of control
- Weaker control
- Lack of employee progression
What is a hierarchical triangle (traditional shape)?
Contains broad base of finance workers reporting upwards to a series of narrower management levels
What is a segregated triangle?
- Development over last 20 years
- Could be carried out by a shared service centre
- Bottom represents this
What is the diamond shape?
- Today’s digital age
- Traditional triangle eroded due to automation
- Central bulge due to shared service centres
- Flat top shows move to collaborative finance leadership
What are the 4 levels of the diamond shape (top to bottom)?
- Senior finance team
- Strategic business partnering
- Digital centers of excellence
- Smart finance factories
What is the role of strategic business partners?
Work with internal/external stakeholders to influence and shape how value is created and preserved
What is the role of the digital centers of excellence?
Specialists generate further insight about value creation and preservation
What is the role of smart finance factories?
Assemble and extract data to provide info and insight
What are the non-core services that are often outsourced?
- Facilities management
- HR management
- Cleaning
- Catering
- Legal
What are the 3 main types of transaction costs?
- Search and info
- Bargaining
- Policing and enforcement
What are the advantages of outsourcing the finance function’s activities?
- Cost reduction
- Radical transformation
- Access to superior capabilities
- Business partnering
What are the disadvantages of outsourcing the finance function’s activities?
- Loss of control
- Managing outsourced services
- Disruption
- Risk of IP theft and data breaches
- Erosion of internal knowledge and skills
