Organisation and Information Management Flashcards
Definition: organisation (by Pride - not preferred by Baisch)
a group of two or more people working together to achieve a common set of goals
Definition: organisation (by Jones - preferred by Baisch
a tool used by people to coordinate their actions to obtain something they desire or value – that is, to achieve their goals. People who value security create an organisation called a police force, an army, or a bank.
Why do we organise?
- Increase quality – by specialisation
- Reduce cost – by reducing transaction costs and by generating economies of scale
- Prevent fraud – by better control of power (compliance)
- Increase speed – by faster processes
- d
Explain the organisational principle of congruence
The following should be congruent:
- Task / job
- Responsibility
- Power/authority
Avoid:
- Suicide squad: high task/job, high responsibility, low power
- Land of milk and honey: high task/job, high power, low responsibility
- Jumping Jack Director: High power/authority, low task, low responsibility
- d
What defines a job/task
FOPMTL
- Function – what to do?
- Object – on what do we work?
- Person – who does it?
- Means, tools – with what?
- Time – when?
- Location – where?
What are the two kinds of competencies needed to fulfil a task?
Operational competence
Leaders competence
What is operational competence?
PAAD
- permission to do something
- being available (Verfügungskompetenz)
- to ask for
- to decide
What is leaders competence
Authority to:
- give directives
- set compliance rules
- monitor and check
- d
Define Responsibility
RACI Method:
Responsible – for the doing
Accountable – for getting the permission
Consulted – to be involved
Informed – to hand over information
Two concepts:
- Own up to your actions – I did it
- Take responsibility for the consequences
Definition: functional structure (organisational structure)
DBEER
A design that groups people together on the basis of their common expertise and experience or because they use the same resources.
E.g. CEO
Then: materials management, manufacturing, sales and marketing
Functional structure:
Where is this typical?
What are it’s characteristics
Where typical: small to medium sized business
Characteristics
- Based on scope of one’s duties. Focus on competence and performance
- One-line design – only 1 boss for everybody.
From where does the functional structure of an organisation derive?
Oldest organisational design in industry: derives from the split in technical or commercial focus of the founders of a company.
6 Advantages of a functional structure
TOSCRS PL
- CEO in touch with all operations (good information transparency)
- Simplifies control mechanisms
- Clear definition of responsibilities (due to 1-line structure)
- Specialists at senior and middle management levels (deliver high quality because they are experts in their field)
- High productivity in each single function (but overall customer to customer…not?)
- Deep learning for skills might form core competencies
Functional structure:
6 Disadvantages
Don’ scam
- Difficult to cope with diversity (especially product / market diversity)
- Senior managers overburdened with routine matters => bottle necks
- Senior managers neglect strategic issues (too far away from markets)
- Coordination between functions difficult (many interfaces in order fulfilment – slow cycle times)
- Failure to adapt (no market drive in most of the functions)
- Difficult to measure the contribution to company’s overall profitability
Divisional structure: what is this
Head office (central services to the side) Then: Division 1, 2, 3...(like companies within a company, e.g. Daimler trucks)
Divisional structure:
Where
Characteristics
History
Where: big, diversified companies
Characteristics:
- One-line design: 1 boss for everybody
- Focus on products and markets/customers
History: 2nd half of 20th century
Divisional structure:
Advantages
FCCSSD
- High flexibility (good for M and As): invest or de-invest in product groups = divisions.
- Better control by unit’s performance for each unit possible: like a company with margin/profit line: Profit Centres
- Better contribution to company strategy (through market contact, sees customer and competitor perspectives)
- Specialisation in products helps to develop core competencies
- Development of division managers: so able to manage whole company if promoted.
Divisional structure:
Disadvantages
ErEcsEcELs
- Expensive redundancy in resources that are installed in each division (HR, Mgmt team, purchasing…)
- Expensive central services to coordinate the divisional functions (e.g. finding synergies…)
- Expensive Bureaucratic cost and transaction cost
- Egoism of the divisions or the attempt of the central services to dominate the decisions may paralyse the organisation.
- Losing synergies in…purchasing, HR…
Matrix structure: what is it
Line 1: CEO
Line 2: Functional structures: VP Purchasing, VP Manufacturing, VP Sales and marketing
Other side of level 3, to the left of the line structure: Product managers, Divisions, Process managers, Project managers…
E.g. Daimler is multi-dimensional
Matrix structure: Focus
Object and performance
Matrix structure: Advantages
CEFICQIK
- Reduce functional barriers by communication between functions, stimulated by product managers
- Overcome egoism in divisions
- Make the (high-tech) organisation more flexible and able to respond quickly
- Improve cost and quality at the same time (functions for high quality, product managers for speed and cost)
- Integrate knowledge: the two lines and teams are more open to learning
Matrix structure: Disadvantages
Suc-Fruc
- The decisions become slow (discussion between 2 dimensions)
- Unclear job and task responsibilities (e.g. finding synergies…)
- High degree of conflicts, high transaction costs
- Cost and resource allocation becomes fuzzy
- Lack of rules and Standard Operating Procedures (SOP) leads to uncertainty
- Tendency to more centralisation to get more authority and control.
Agency theory history
1973, Ross ‘Theory of Agency’
Agency theory assumptions
- Individuals maximise their personal benefit
- Information asymmetry between principal and agent; agent generally knows more in their area of expertise (so inflate the costs, don’t pass on bad performance information…)
• Different interests
/ incentives / preferences: conflict in objectives; profit v maintain collegiate relationships, finish early…
• Assume people are naturally bad: malice, fraud, opportunistic behaviour.
Agency theory: main idea
An organisation is a network of contracts.
Examples of Agency theory relationships
Principal - Agent
Employer - Employee
Customer - Seller
Board - CEO
What are agency costs, and what is the goal?
Agency costs are:
- principal control costs (avoid fraud)
- warranty costs incurred by agent (to be selected)
- welfare costs (costs of negative effects)
Principle: Principal control costs and warranty costs should not be larger than the potential welfare costs that may have otherwise been incurred.
Describe agency theory issues before the contract is signed, and strategies to deal with them
Problem: Adverse Selection (risk of hidden information – agent knows their abilities and achievements best)
- Signaling (agent shows they have skills and will work hard) - e.g. Request degree certificates, assessment centre…
- Screening - e.g. Review CVs data carefully
- Self-selection (only the goods ones will accept it) - e.g. Request Recommendation
- Alignment of interest (consequences of fraud…) - e.g. Right to cancel contract due to…
