bsci study unit 1

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Questions and Answers

What is the primary contemporary role of the finance function?

Creating insight and adding value (correct)

Managing financial operations

Generating financial reports

Conducting investment appraisals

According to Mintzberg, which of the following is NOT one of the five components of organizational structure?

Techno structure

Support Staff

Financial core (correct)

Strategic Apex

Which organizational structure uses cross-functional teams to achieve its objectives?

Geographical structure

Matrix structure (correct)

Traditional functional structure

Bureaucratic structure

Which aspect distinguishes boundaryless organizations from traditional ones?

Focus on speed and flexibility Signup and view all the answers

What does the finance function primarily support in contemporary organizations?

Decision-making effectiveness Signup and view all the answers

In the digital era, how has the finance function evolved beyond simply generating information?

By transforming information into actionable insights Signup and view all the answers

Which type of organizational structure is characterized by minimizing formal hierarchies?

Boundaryless structure Signup and view all the answers

What has the traditional role of the finance function been primarily focused on?

Generating information through reports Signup and view all the answers

What defines a shamrock organization?

It consists of essential executives and workers supported by outside contractors. Signup and view all the answers

Which structure is characterized by fewer management layers for faster responses?

Flatter structures. Signup and view all the answers

What is the primary characteristic of jobless structures?

They rely on a changing pool of freelance workers. Signup and view all the answers

In a strategic alliance, organizations primarily aim to achieve what?

Share resources and activities to pursue common strategies. Signup and view all the answers

Which of the following best describes a joint venture?

A new shared organization established by two or more firms. Signup and view all the answers

Which structure prioritizes results over processes?

Output-focused structures. Signup and view all the answers

What type of alliance is focused on short-term projects?

Consortia. Signup and view all the answers

How has automation impacted the finance function's structure?

It has created a central bulge of higher value services. Signup and view all the answers

What is one of the benefits of Shared Services Centers (SSC)?

Improved control and quality Signup and view all the answers

What is a disadvantage of outsourcing?

Loss of control over the function being outsourced Signup and view all the answers

Which aspect is a risk associated with Shared Services Centers?

Organisational resources may be insufficient Signup and view all the answers

How do Service Level Agreements (SLAs) function?

They define the expected level of service between customer and provider Signup and view all the answers

Why might an organization find consolidating systems costly and time-consuming?

Because of potential language and cultural misunderstandings Signup and view all the answers

What is one advantage of outsourcing for a finance team?

Focus on becoming business partners Signup and view all the answers

What common issue might arise during the transition to outsourcing?

Resistance to change from employees Signup and view all the answers

What is a potential risk of outsourcing regarding organizational knowledge?

Loss of internal knowledge and expertise Signup and view all the answers

What does the flat top of the finance function hierarchy indicate?

Collaborative financial leadership activities Signup and view all the answers

Why is the shape of the finance function changing?

Due to the growing importance of business partnering Signup and view all the answers

What is a characteristic of shared service centres (SSCs)?

They centralize operations from multiple parts of the organization Signup and view all the answers

What role does the CFO typically play in relation to the CEO?

A co-pilot in business partnering Signup and view all the answers

What is the primary goal of the evolving role of the finance function?

To influence and shape organizational value creation Signup and view all the answers

What does the term 'internal outsourcing' refer to in the context of SSCs?

Centralizing operations within the organization Signup and view all the answers

Which of the following is NOT a reason for the changes in the finance function?

The growing need for detailed financial analysis Signup and view all the answers

What is a primary advantage of reconfigurations in shared services?

They enable centralization for improved efficiency Signup and view all the answers

Study Notes

The Changing Shape of the Finance Function

The historical role of the finance function was to generate information through financial reports, management accounts, investment appraisals, and risk/control reports.
Modern finance departments are creating insight and value through analysis and effective communication of information to decision-makers.
They also provide support and report on the effectiveness of decisions.

Mintzberg's Organisational Structure

Organizations can be analyzed through five components:
- Strategic Apex: Top management team.
- Techno Structure: Analyzes and designs work processes.
- Operating Core: People who perform the organization's primary work.
- Middle Line: Manages the operating core.
- Support Staff: Provides administrative support.

Traditional Organisational Structure

Functional Structure: Groups employees by specialization (e.g., finance, marketing).
Geographical and Divisional Structure: Organizes based on location or product/service lines.
Matrix Structures: Utilizes cross-functional teams.

Contemporary Organisational Structure

Boundaryless Organizations: Minimise formal structures for faster, more flexible operations.
Shamrock Organizations: Core executives/workers are supported by external contractors and part-time workers. This offers flexibility but increases overhead costs.

Other Organisational Structures

Flatter Structures: Fewer layers of management for quicker responses.
Horizontal Structures: Uses multi-functional teams and multi-skilling for greater flexibility.
Chunked and Unglued Structures: Smaller, more flexible units within a larger structure.
Output-Focused Structures: Focus on results rather than processes.
Jobless Structures: Uses a pool of freelance workers.

Alliances

Joint Ventures: Two or more companies create a new entity while retaining independence.
Licenses and Franchises: Granting permission to manufacture or sell a patented product (in return for a fee).
Consortia: Short-term legal entities for specific projects.
Agents: Used as a distribution channel.
Strategic Alliances: Sharing resources and activities between organizations for pursuing strategies.

Automation's Impact on the Finance Function

Automation has drastically changed the shape of the finance function:
- The base of the triangle represents tasks previously performed by many staff, but now mostly automated.
- The bulge in the middle represents higher-value services handled by centers of excellence or shared service centers (SSCs).
- The top of the triangle signifies collaborative financial leadership.

The Changing Mandate of Finance

Finance functions are increasingly focused on management rather than accounting.
The finance function provides an end-to-end view of the organization.
CFOs work alongside CEOs as business partners to shape and preserve value.

Organisational Development and the Finance Function

Shared Service Centers (SSCs): Centralize operational tasks for cost savings, standardization, and improved control.
Outsourcing: Subcontracting business activities to external providers.
Business Process Re-engineering: Significant restructuring for efficiency and effectiveness.
Segregation of the Finance Function: Separating financial activities to improve efficiency, clarity, and control.
Business Partnering: Close collaboration between finance and other departments to achieve strategic goals.

Shared Service Centers (SSCs)

Benefits*:
Cost savings (Lower headcount, lower premises costs).
Standardized processes.
Improved control and quality.
Consolidation of information.
Risks*:
Insufficient organizational resources.
HR issues (redundancy costs, morale).
Consolidating systems can be costly and complex.
Language, cultural, and reporting issues may arise.

Outsourcing

Advantages*:
Reduced costs through economies of scale.
Structural changes through transformation or business re-engineering.
Access to expertise and resources.
Enables focus on business partnering.
Disadvantages*:
Investment required to manage the relationship.
Initial disruption and resistance to change.
Loss of control over outsourced functions.
Increased risk of loss due to data breaches.
Loss of internal knowledge and expertise.

Service Level Agreements

Legally binding contracts between customers and outsourcing partners defining agreed levels of service.

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