Chapter 3 - Structure and shape of finance function

Question 1

What are Mitzberg’s 6 building blocks?

Answer 1

• Operating core
• Strategic apex
• Middle line
• Technostructure
• Support staff
• Ideology

Question 2

What is the operating core?

Answer 2

Basic work of organisation

Question 3

What is the strategic apex?

Answer 3

Higher levels of management responsible for formulating strategy and long-term plans

Question 4

What is the middle line?

Answer 4

Link between strategic apex and operating core, include mid to low level management

Question 5

What is the technostructure?

Answer 5

Responsible for designing procedures and standards

Question 6

What are support staff?

Answer 6

Provide services to organisation which support operations/production

Question 7

What is ideology?

Answer 7

Organisations’ values and beliefs (culture)

Question 8

What are the 6 co-ordination mechanisms?

Answer 8

• Mutual adjustment
• Direct supervision
• Standardisation of work processes
• Standardisation of outputs
• Standardisation of skills and knowledge
• Standardisation of norms

Question 9

What is mutual adjustment?

Answer 9

Co-ordination through informal contact

Question 10

What is direct supervision?

Answer 10

Co-ordination through a formal hierachy

Question 11

What is Standardisation of work processes?

Answer 11

Literally what it says

Question 12

What is Standardisation of outputs?

Answer 12

Product and service specifications

Question 13

What is Standardisation of skills and knowledge?

Answer 13

Identifies training needs and the necessary skills base to do the work

Question 14

What is Standardisation of norms?

Answer 14

Cultural norms and expectations

Question 15

What is an entrepreneurial structure?

Answer 15

• Built around owner and management
• Totally centralised
• Typically small companies

Question 16

What are the advantages of an entrepreneurial structure?

Answer 16

• Fast decision making
• Responsive to market
• Good control
• Close bond to workforce

Question 17

What are the disadvantages of an entrepreneurial structure?

Answer 17

• Lack of career structure
• Dependent on owner/managers
• Cannot cope with diversification/growth

Question 18

What is a functional structure?

Answer 18

• Employees grouped into departments
• Organisation outgrown entrepreneurial structure
• Appropriate for small company with few products

Question 19

What are the advantages of the functional structure?

Answer 19

• Economies of scale
• Standardisation/efficiency
• Specialists
• Career opportunities

Question 20

What are the disadvantages of the functional structure?

Answer 20

• Empire building
• Slow to adapt to market changes
• Conflicts between functions
• Cannot cope with diversification

Question 21

What is the divisional structure?

Answer 21

• Split into several divisions by product or location
• Headed by general managers

Question 22

What are the advantages of the divisional structure?

Answer 22

• Enables product/geographical growth
• Clear responsibilities
• Training of general managers
• Easily adapted for further diversiaifcation
• Top management can concentrate on strategic matters

Question 23

What are the disadvantages of the divisional structure?

Answer 23

• Duplication
• Lack of goal congruence
• Potential loss of control
• Allocation of central costs
• Specialists isolated

Question 24

What is the matrix structure?

Answer 24

• Combines benefits of functional and divisional
• Appropriate for multi-product and multi-functional organisations

Question 25

What are the advantages of the matrix structure?

Answer 25

- Benefits of functional and divisional - Flexibility to focus on customers - Encourages teamwork

Question 26

What are the disadvantages of the matrix structure?

Answer 26

- Dual command - Dilution of functional authority - Time consuming meetings

Question 27

What factors affect the amount of centralisation?

Answer 27

- Management style - Ability of management/employees - Geographical spread - Size of organisation

Question 28

What are the advantages of decentralisation?

Answer 28

- Senior management free to concentrate on strategy - Better local decisions - Better motivation - Better flexibility

Question 29

What are the disadvantages of decentralisation?

Answer 29

- Loss of control by senior management - Dysfunctional decisions - Poor decisions by inexperienced managers - Training costs - Duplication of roles - Extra costs

Question 30

What is the scalar chain?

Answer 30

Line of authority which can be traced up/down chain of command

Question 31

What factors influence the span of control?

Answer 31

- Nature of work - Type of personnel - Location of personnel

Question 32

What is a tall organisation?

Answer 32

- Many levels of management - Long scalar chain - Narrow span of control - More bureaucratic - Longer decision making process

Question 33

What is a flat organisation?

Answer 33

- Few levels of management - Short scalar chain - Wide span of control - Weaker control - Lack of employee progression

Question 34

What is a hierarchical triangle (traditional shape)?

Answer 34

Contains broad base of finance workers reporting upwards to a series of narrower management levels

Question 35

What is a segregated triangle?

Answer 35

- Development over last 20 years - Could be carried out by a shared service centre - Bottom represents this

Question 36

What is the diamond shape?

Answer 36

- Today's digital age - Traditional triangle eroded due to automation - Central bulge due to shared service centres - Flat top shows move to collaborative finance leadership

Question 37

What are the 4 levels of the diamond shape (top to bottom)?

Answer 37

- Senior finance team - Strategic business partnering - Digital centers of excellence - Smart finance factories

Question 38

What is the role of strategic business partners?

Answer 38

Work with internal/external stakeholders to influence and shape how value is created and preserved

Question 39

What is the role of the digital centers of excellence?

Answer 39

Specialists generate further insight about value creation and preservation

Question 40

What is the role of smart finance factories?

Answer 40

Assemble and extract data to provide info and insight

Question 41

What are the non-core services that are often outsourced?

Answer 41

- Facilities management - HR management - Cleaning - Catering - Legal

Question 42

What are the 3 main types of transaction costs?

Answer 42

- Search and info - Bargaining - Policing and enforcement

Question 43

What are the advantages of outsourcing the finance function's activities?

Answer 43

- Cost reduction - Radical transformation - Access to superior capabilities - Business partnering

Question 44

What are the disadvantages of outsourcing the finance function's activities?

Answer 44

- Loss of control - Managing outsourced services - Disruption - Risk of IP theft and data breaches - Erosion of internal knowledge and skills