Organisational structure and governance

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