7: Structure and Shape of the Finance Function

Question 1

Mintzberg’s organisational structure: 5 elements

Answer 1

5 elements to the business which is dominated/influenced by varying degrees of these 5 elements

operating core
strategic apex
middle line
technostructure
support staff

Question 2

Mintzberg’s organisational structures

Answer 2

simple structure
machine bureaucracy
professional bureaucracy
divisionalised structure
adhocracy
missionary

Question 3

simple structure (Mintzberg)

Answer 3

strategic apex is dominant

little to no middle line, not a lot of managerial control between owners and workers

Question 4

machine bureaucracy (Mintzberg)

Answer 4

technostructure is enlarged/dominant

manufacturer making highly standardised products

Question 5

professional bureaucracy (Mintzberg)

Answer 5

operating core is dominant

processes are skilled, complex and non-standardised
- think of an accountancy firm

Question 6

divisionalised structure (Mintzberg)

Answer 6

middle line is dominant

Question 7

adhocracy (Mintzberg)

Answer 7

support staff are dominant

high degree of innovation/group working - no need for control or a large tech structure
- think about virtual organisations

Question 8

missionary (Mintzberg)

Answer 8

little structure and formal control

shared mission/values/ethics/culture hold the organisation together

Question 9

traditional organisational culture

Answer 9

functional structures - grouped by specialism
geographic/divisional structures
matrix structure - cross-functional teams

Question 10

contemporary organisational structures

Answer 10

boundaryless organisations
shamrock organisation (Charles Handy)
flatter structures
horizontal structures
unglued/chunked structures
output-focused structures
jobless structures

Question 11

boundaryless organisations

Answer 11

virtual organisations - no physical remises

modular organisations - manufacturing processes broken down into modules and components

hollow organisations - activities split into core and non-core (which are outsourced)

Question 12

shamrock organisation (Charles Handy)

Answer 12

driven by the professional core

1. professional core
2. self-employed
3. contingent workforce (people in low level jobs with no career aspirations)
4. consumers (DIY - think IKEA, doing some of the work in terms of the overall value chain)

Question 13

scalar chain and span of control

Answer 13

wider span of control leads to shorter scalar chains and vice versa
- fewer links in the chain of command, delayering the organisation

Question 14

horizontal vs vertical integration

Answer 14

horizontal - developing competitor/complementary activities to form a new activity with a similar workforce/work pool

vertical - company expanding backwards or forwards

Question 15

alliance

Answer 15

where an organisation works with one or more external entities

Question 16

types of alliances

Answer 16

joint ventures - 2 organisations work together to set up a new entity

licences and franchises - licences to sell another organisation’s products or for redistribution, franchises where you get permission to perform someone else’s process on their behalf and you pay a fee

consortium - working together on a specific project

agents - having sales agents market/sell the product on the company’s behalf

strategic alliances - businesses formally agree to work together

Question 17

new structure of the finance function in the digital age

Answer 17

creation of a pentagon/diamond structure

central bulge as a result of the proliferation of higher-value services and a narrower base at the bottom as a result of automation

Question 18

different levels of the finance function

Answer 18

L1 - finance leadership

L2 - value partnering

L3 - insight generation

L4 - data extraction

Question 19

shared service centres (SSC)

Answer 19

example of a reconfiguration and way of internally outsourcing something

driven by globalisation and the idea of offshoring

Question 20

3 ways to think about competencies to outsource (Lonsdale and Cox)

Answer 20

1. core competencies - business should not outsource this
2. complementary competences - can be outsourced but only when they are not overly technically complex
3. residual competencies - can be outsourced at a basic arms-length transaction

Question 21

service level agreements (SLA)

Answer 21

lists of KPIs within contracts to ensure that things are done properly

Question 22

transaction costs

Answer 22

costs associated with doing something

big driver of whether companies want to outsource something

Question 23

transaction cost theory (Williamson)

Answer 23

an organisation should consider everything it does/every good it makes/every service it provides and ask itself whether it is cheaper to make it in-house or buy it in

Question 24

2 solutions in the transaction cost theory (Williamson)

Answer 24

hierarchy solution - you make it yourself

market solution - you buy something
- influenced by uncertainty, frequency, asset specificity

Question 25

different types of asset specificity

Answer 25

site specificity physical asset specificity human asset specificity brand name capital specificity dedicated asset specificity temporal specificity

Question 26

business process re-engineering (BPR)

Answer 26

involves an organisation transforming business processes, often redesigning them fro the group up

Question 27

4 themes of business process re-engineering (BPR)

Answer 27

process reorientation creative use of IT should be employed ambition challenge and break rules, think radically

Question 28

relocation/offshoring

Answer 28

relocating any part of the business and migrating it overseas, which is wrapped in with an outsourcing decision

Question 29

segregation of the finance function

Answer 29

base gets outsourced, strategic aspect on top remains in-house