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functional structures
created via separate departments or functions.
employees are grouped by specialism and departmental targets will be set
formal communication systems are set up to ensure information is shared.
Divisional structure
appropriate where the organisations activities are geographically dispersed. This is also useful where a company makes different classes of products or services.
Matrix structure
useful with cross functional working and project based work.
Span of control
the number of subordinates that a manager can manage
scalar chain
the number of links between the board and the most junior employees
tall organisations
long scalar chain (lots of layers of management)
clearly defined hierarchy (each area of management has its own responsibility
narrow span of control (each manager has few subordinates)
flat organisations
short scalar chain (fewer layers)
wide span of control
corporate governance
system by which companies are directed and controlled. considers how directs can be held accountable to shareholders for their actions.
how do all companies benefit from effective governance?
risk reduction
reduces fraud and the chance of financial difficulties
improved performance
improves with increased accountabilitu
better company perception
as a result of strong control and therefore encourage investment
key aspects of the code
splitting the role of CEO and Chair
majority of the board must be independent from non - executive directors
not allowing the executive directors to set their own pay
centralised organisations
retain much of the power and decision making at head office
decentralised organisations
delegate more business decisions to divisional heads
advantages of centralised organisations
faster decisions
holistic view of the company
more control and standardisation
disadvantages of centralised organisations
loss of local view in decision making
lack of autonomy
advantages of decentralised organisations
managers may be more motivated
localised focus in decision making
disadvantages of decentralised organisations
can be costly - need to employ more skilled decision makers
can lead to strategic drift - loss of standardisation and goal congruence
what are the levels where work happens within the scalar chain?
strategic level
managerial level
operational level
strategic level
performed by the board
they set strategy and monitor performance with reference to how the business is performing against the context of the marketplace as a whole
managerial level
takes the strategy and attempts to implement into actions
manages operations and feeding back to the strategic level on the performance of the business
operational level
where the work is done / completed
products made / services delivered .
managerial level will oversee this
risk
the condition in which there exists a quantifiable dispersion in the possible outcomes from any activity.
possibility that the actual results will turn out differently from those expected
in what two ways can risks be viewed
the downside and upside
downside
something could go wrong and the effect is damaging
upside
things work out better than expected
uncertainty
inability to predict the outcome from an activity due to a lack of information about the input / output relationship or about the environment within which the activity takes place.
strategic risks
affecting or created by the organisations strategy or objectives. tend to be long term risks that the organisation is exposed to and usually influenced by external factors.
competitor actions, changes in govt policy
operational risks
affect an organisations ability to execute its strategic plan. disrupt the daily functioning of an organisation.
usually an internal factor
machine downtime, strike, industrial accidents, failure to comply with industry specific regulations, systems being hacked or ransomware being installed
risk transfer
shift the risk to another entity
take out insurance
risk avoidance
stop performing the process that exposes you to risk
risk reduction
implement controls
risk acceptance
accept that this risk is part and parcel of doing business
role of the finance function
it acts as a shared service function by helping other functions within the organisation. They do this by providing information and analysis to support performance evaluation and decision making.
how does the finance function support others
operations or production
sales and marketing
Human Resources
IT
distribution and logistics
how finance function supports operations and production
cost schedules
analyse contribution or profitability of different products or service lines
how finance function supports sales and marketing
working out the cost benefit of sales and promotions or marketing schemes
how finance function supports Human Resources
evaluate efficiency, economy and effectiveness of HR strategies
how finance function supports IT
evaluate investments in new tech and systems
how finance function supports distribution and logistics
evaluating the efficiency of outbound logistics, analysing a decision to outsource this function
stakeholder
person or group who have a stake in an organisation
how may stakeholders be influential for an organisation to be able to deliver their strategy
banks may be required to lend money
TU organise resistance to new working patterns
customers may not like new products or services
govt may legislate in a manner that is unhelpful
what are the 2 classifications of stakeholders
primary and secondary
primary stakeholder
directly affected by decision
owners managers and staff
secondary stakeholder
indirectly affected by decisions who can exert some influence over the company
how can stakeholders be further classified
internal, connected and external
internal stakeholders
-corporate management
-employees
connected stakeholders
-shareholders
-debt holders (bank)
-intermediate (business) and final (consumer) customers
-suppliers
external stakeholders
-intermediate community / society at large
-competitors
-special interest groups
-govt
