Session 2 - Organisational Structure and Governance Flashcards
Name 3 different organisational structures?
Functional
Divisional
Matrix
What is a functional structure?
Divides the business into teams with specialised functions or skills. Work can be carried out quickly and efficiently, creating a pool of expertise. Most common structure
What is a divisional structure?
Usually used for larger businesses, number of different teams each with a focus on an individual product or service or on a geographical area. Each division will have its own budget and will typically have one director at the top. Need to avoid unhealthy competition between divisions
What is a matrix structure?
Individuals will work across teams and projects. A team may consist of one individual from each of the following teams: Design, production, marketing and finance. Each of the staff will then return to their usual team after the project.
What 3 factors will determine a managers span of control?
Size of organisation
Type of work that the individuals do
Location of staff
What is a tall organisational structure?
The chain of command will have several different layers of management. Each manager will have a narrow span of control. Decision making often will take longer as info must pass between several layers of management.
What is a flat organisational structure?
Fewer levels of management, resulting in a wider span of control. Decisions are made quickly up and down the strcuture however there are fewer roles to progress into.
What is governance?
Provides a framework for managing. It identifies who can make decisions and who has the authority to act on behalf of the organisation.
What does good governance look like in a business?
Good governance will ensure an individual cannot go beyond their scope of authority. Enables the directors together with the management to run the business ethically and sustainably.
Name 3 different governances?
Corporate Governance
Financial Governance
Legal Governance
What is corporate governance?
Directors, appointed by the shareholders, must have systems in place to control the way the business operates and will include settting businesses strategic aims and objectives and providing effective leadership.
What is financial governance?
This focuses on how the business collects, manages and controls financial information. Might just be as simple as making sure suppliers are paid on time and money from customers are collected on time.
What is legal governance?
Business must ensure that it complies with the necessary legal legislation and regulation. This includes implementing levels of authroity responsible for ensuring the rules are complied with.
What is centralised control (top down approach)?
The decision making rests with higher tiers of management, such as owners in small businesses or directors in large businesses. Decisions will be imposed on staff to implement rather than contribute to the decision making process. The higher someone is in the business the more influence they have on direction where the business goes and they will be distanced from the actual activites of the business
What is decentralised control (bottom up approach)?
Authority for decision making is given to lower levels of management, these decisions will not be needed to check with management everytime.
Advantages and disadvanatges decentralised control?
Advantages:
Leads to a more collaborative atmosphere.
Senior management can focus on key decisions while leaving to the day-to-day decisions to team managers who can make them quickly.
Disadvantages:
Lower level management might not have the experience to make good decisions.
May lead to a disconnection between senior managers and staff leading to a loss of control
Name 3 different types of levels of management in an organisation?
Strategic or Corporate Level
Managerial level
Operational level
What occurs at a Strategic or Corporate level?
At the top of the organisation where strategic decisions are made, decisions tend to be long term.
What occurs at a managerial level?
Middle level of management. Decisions relate to how the team go about acheiving goals set from higher above.
Explain operational level?
Decisions made at this level are short term and relate to pratical day-to-day runnings of the business.
Name the key functions of a business?
Operations/productions
Sales and marketing
HR
IT
Distribution and logistics
What does the operation/production team do and how does the finance function relate?
Ensures the production is as efficient as possible. Ensuring a fair price is paid, finance function helps negotiating credit terms and agreeing good prices. Also helps ensure sufficient inventory is available.
What does the sales and marketing team do and how does the finance function relate?
Ensures customers are made aware of products and services, and needs of customers are met. Finance function will be involved by calculating prices to be charged. They will also set budgets for the marketing team.
What does the HR team do and how does the finance function relate?
Ensures all employment rules and regs are met and ensures a positive environment. Finance function will set budgets for recruiting new and high quality staff. Also approving cost for training and managing staff benefits and pay.
What does the IT team do and how does the finance function relate?
Ensures all IT systems are working and issues are dealt with promptly. Finance function will approve costs for new IT systems and will need to monitor costs for software which keeps data safe and secure.
What does the distribution and logistics team do and how does the finance function relate?
Ensures all raw materials and finished goods are moved effectively. Finance function will calculate lead times and will aslo advise on costs of holding inventory. They will aslo calculate costs of exporting and importing goods.
How is risk defined?
Possibility of something bad happening.
What is uncertainty?
Uncertainty refer to situations where the decision maker does not know the possible outcomes or probability that they will occur.
What does business risk mean?
A business’s vulnerability to factors that could decrease its profits or cause the business to fail
What is a strategic risk?
Risks that arise from fundamental decisions the directors of the business make about objectives or strategies.
What is a financial risk?
Financial risks come from a change in the financial conditions in which a business operates. Might be a change in interest rates resulting in an increase in repayments.
What is an operational risk?
A risk which arises from the way in which an organisation operates its business functions.
What is the definition of cyber risk?
any risk associated with financial loss, disruption or damage to the reputation of an organisation from failure, unauthorised or erroneous use of its information systems.
What is a reputational risk?
Risks which can be a threat to the name of the business which can be from actions of one or more of its employees or third parties.
What is the TARA method and what is it used for?
TARA is the framework to decided how individual risk can be managed.
Transfer
Avoid
Reduce
Accept
Using the TARA approach, how should a High impact Low likelihood risk be treated?
Transfer
Using the TARA approach, how should a Low impact Low likelihood risk be treated?
Accept
Using the TARA approach, how should a High impact High likelihood risk be treated?
Avoid
Using the TARA approach, how should a low impact high likelihood risk be treated?
Reduce
Name 2 advantages and 2 Disadvantages of functional structures?
Ad - Potential Economies of Scale, Career path for employees
Dis - Empire building, Decisions made slower
Name an example of a strategic risk?
A car manufacturer moving to another country
Name a financial risk?
Might be interest rates rising and a business being heavily impacted as they use loans frequently
