ACCA AB

  1. Organisation
    Social arrangement which pursues collective goals, controls its own performance, and has a boundary from the environment.
  2. Organisation - Social Arrangement
    Idea that org is made up of people that like to be informed, motivated, team work, etc.
  3. Organisation - Collective Goals
    Profit for commercial organisation, alleviate hunger from charity, etc.
  4. Organisation - Controls own performance
    Org controls / monitors performance (i.e. sales / profit) vs goals and adjusts when / where necessary
  5. Environment (SYSTEMS THEORY) - Diagram
    Image Upload 1
  6. Environment (Systems Theory)
    • * Inputs (raw materials, energy, etc.)
    • * Org (boundary from environment)
    • * Outputs (finished product)

    ** Broken into sub systems (IT / Purchasing) - need to understand who is responsible for what (i.e. buying new raw materials)
  7. Open System vs Closed System
    Closed system has no interaction w/ environment, no inputs / outputs
  8. Types of Organisations (5)
    • 1. Commercial (sole traders, partnerships, etc.)
    • 2. Not for Profit
    • 3. Public Sector (army, nationalised companies)
    • 4. NGOs
    • 5. Cooperatives
  9. Limited Partnerships / Companies
    Creditors cannot go after personal property of shareholders / partners (only property of the corporation)
  10. Org Structures (5)
    • 1. Entrepreneurial
    • 2. Functional
    • 3. Divisional
    • 4. Matrix
    • 5. Boundaryless / Virtual / Hollow / Modular
  11. Org Structure - Entrepreunurial
    Young, new business, small

    Basically the boss and the workers
  12. Org Structure - Functional
    Separate departments according to function (sales & marketing, R&D, accounting, etc.) - very efficient as expertise is concentrated and there can be great economies of scale. 

    Image Upload 2
  13. Org Structure - Divisional
    Very large companies. Similar to functional org, but company split into multiple divisions which each have all of the functions (i.e. USA division vs EUR division, each with an accounting, sales, R&D, etc. departments). Allows for specialisation across regions, unrelated product lines, etc.
  14. Org Structure - Matrix
    • Employee reports to both project mgr & functional head (i.e. project A, Quality Control functional head) - cooperation between managers is essential to ensure employees aren't being treated unfairly in the dual reporting structure. 
    • Image Upload 3
  15. Org Structure - Boundaryless (3 types)
    • 1. Virtual - company created outside organisation to respond to exceptional, often temporary market opportunities.
    • 2. Hollow - All non-core operations outsourced (accounting, HR, legal, manufactoring) - company focuses only on core competency (i.e. Apple and design)
    • 3. Modular - order parts from different providers and assemble them into a product.
  16. Mitzberg's Structures - diagram and pieces
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  17. Mitzburg's Structures - Strategic Apex
    Part of org focused on long term strategy (executive team / board)
  18. Mitzburg's Structures - Middle Line
    Middle Management
  19. Mitzburg's Structures -  Operating Core
    the workers
  20. Mitzburg's Structures - Support Staff
    Accounting, HR, legal - admin staff
  21. Mitzburg's Structures - Technostructure
    Part of organisation responsible for devising and enforcing standards and procedures. Write QC manuals, employee handbook, finance manual, etc.
  22. Mitzburg Diagram - Different structures
    • Importance/Size of each component will vary depending on the organisation
    • Law firm will have a very short middle line as partners (strategic apex) want to work closely with those doing the cases (operating core) - they don't want information filtered through a bunch of layers of middle management - hence why partners often join meetings with clients, and a small technostructure as every case is unique
    • Manufactoring company will have huge technostructure to ensure all products are made consistently/safely.
  23. Machine bureaucracy
    Mass manufactoring
  24. Professional bureaucracy
    law firm / auditors / etc.
  25. Organisation Levels (Anthony Hierarchy)
    • Strategic - top managers / board - long term view (5 yrs)
    • Tactical - manager of department - 1 yr view (i.e. making the budget)
    • Operational - day to day work
  26. Shape of Organisation (2)
    • 1. Tall / Narrow
    • 2. Wide / Flat
  27. Tall / Narrow Organisation
    • Moving towards wide / flat
    • Short span of control
    • Poor vertical communication because it has to be filtered through multiple levels to reach top
    • High supervision / duplication of effort
    • Change mgmt difficult as each layer doesn't want to give up their perks  or change
  28. Wide / Flat Organisation
    • High span of control (SOC)
    • Allows for shifting teams / collaboration
    • Communication quick / filtered through fewer levels
  29. De-layering
    Moving from tall/narrow to wide/flat
  30. Formal vs Informal organisation
    • Formal - includes mission statement, procedures, org charts, etc.
    • Informal - norms, alliances, shortcuts, personal ambitions - THIS IS THE VAST MAJORITY OF WHAT GOES ON and may or may not be known to management (iceberg)
  31. Recent trends in business (5)
    • 1. Downsizing
    • 2. Delayering
    • 3. Outsourcing
    • 4. Offshoring
    • 5. Shared Services
  32. PESTEL (macro forces)
    • Political
    • Economic
    • Social
    • Technological
    • Ecological
    • Legal
  33. PESTEL (macro forces) - Political
    i.e. who wins the election, political unrest, war
  34. PESTEL (macro forces) - Economic
    interest rates, tax rates, FX rates, economic outlook (i.e. recession vs growth view)
  35. PESTEL (macro forces) - Social
    Population trends (birth rates, labor force), societal trends (green trend, veganism)
  36. PESTEL (macro forces) - Technological
    effect of internet, AI, improvement of batteries, etc.
  37. PESTEL (macro forces) - Ecological/Environmental
    Green issues, carbon waste, recycling, etc.
  38. PESTEL (macro forces) - Legal
    rules/regulations, consumer protection, MIFIID, etc.
  39. Competitive Forces - PORTERS (5)
    Competitive Environment (B2B, Sector, Industry)

    • Competition/Rivalry
    • New Entrants
    • Customers
    • Suppliers
    • Substitutes
  40. Porters 5 forces - Competition/Rivalry
    How competitive is industry (i.e. monopoly/oligopoly vs many competitors)
  41. Porters 5 forces - New entrants
    barriers to entry are key
  42. Porters 5 forces - Customers
    Degree of influence/pressure from customers (i.e. few/large customers can exert pressure/leverage on price, timelines, etc.) - think Wal-Mart
  43. Porters 5 forces - Suppliers
    Degree of influence/pressure from suppliers (i.e. suppliers of a particularly important component, complex raw material, etc. can exert enormous pressure - i.e. rare earths)
  44. Porters 5 forces - Substitutes
    Provides customer with same result but in very different means (landline phone vs mobile phone vs skype - all provide ability to talk to people but in very different ways)
  45. Porter's Value Chain - Diagram (explain pieces)
    Image Upload 5
  46. Porters Value Chain - Profit/Margin
    • People pay the margin due to the added value that your org provides
    • You must understand why people pay for your product and maintain that value add - key consideration for management
  47. Firm Infrastructure (porter's value chain)
    head office / admin / org structure
  48. Porter's Value Chain (Support activities) - 4
    • Firm Infrastructure
    • Tech Development
    • HR Mgmt
    • Procurement
  49. Porter's Value Chain (Primary Activities) - 5
    • Inbound Logistics (actual receipt of goods)
    • Operations
    • Outbound logistics
    • Marketing/Sales
    • Service
  50. SWOT
    Image Upload 6
  51. Stakeholders (3 Types)
    • Internal - within organization (employees, mgmt, board)
    • External - local people, governments, competitors
    • Connected - contractual relationship with org (shareholders, suppliers, lenders, customers)
  52. Conflict between stakeholders
    Stakeholders may want different things (i.e. employees want higher wages, shareholders want higher dividends) - mgmt must manage these conflicts
  53. Mendelow's Matrix - Diagram
    Image Upload 7
  54. Mendelow's Matrix - Minimal Effort
    • Low Power, Low Interest
    • Unskilled workers, low ambition employees, etc.
  55. Mendelow's Matrix - Keep Informed
    • High interest, low power
    • Local people - need informed if new railway planned - easier to inform people and get early buy-in versus created an angry populace
  56. Mendelow's Matrix - Keep satisfied
    • High power, low interest
    • Nurses - can exert power (i.e. nurse strike would be devastating for hospital), but often more interested in helping people. Make sure you keep these people satisfied.
  57. Mendelow's Matrix - Key Player
    • High power, high interest
    • i.e. airline cabin staff - big time unions, big time high power strikes (during summer) to get pay rises
  58. Mendelow's Matrix - Power
    How much you can influence organisation
  59. Mendelow's Matrix - Interest
    Passive vs active in trying to influence organisation
  60. Culture Web (6 + middle)
    • Symbols & Titles
    • Power Relations
    • Org Structure
    • Control Systems
    • Rituals & Routines
    • Myths & Stories
    • Middle = Organisational Assumptions (Paradigm)
  61. Culture Web - Symbols & Titles
    VP titles, reserve car spaces, mgmt only cafes, etc.
  62. Culture Web - Power Relations
    Does your boss tell you exactly what to do and how to do it or does he ask for your opinion / give you responsibility + autonomy?
  63. Culture Web - Org Structure
    Tall/Narrow vs Wide/Flat (i.e. beaurocratic, small span of control, high supervision vs more trust, more delegation)
  64. Culture Web - Control Systems
    Time tracking systems, T&E tracking, approvals, etc. - controls that are too petty can reduce efficiency and even create a poor working environment (i.e. does every penny need justified)
  65. Culture Web - Rituals / Routines
    Birthday cakes, jeans on Fridays, staff social events, etc.
  66. Culture Web -  Myths / Stories
    Normally selected and promoted as examples of how employees should behave - i.e. remember the time the accounts team stayed all weekend to deliver the great report to the client..we should all strive to do that.
  67. Culture Web - Organisational Assumptions (Paradigm) - middle
    What people inside the organisation really think the org is for - i.e. NHS started as way to give everyone access to goo dmedical care with no regard for the cost - that was their 'mission'
  68. Culture
    'The way we do things around here'
  69. Culture Web - Diagram
  70. Handy's Types of Cultures (4)
    • Power
    • Role
    • Task
    • Person
  71. Handy's Types of Cultures - Power
    • Centered around ' the big boss' - usually the owner - They have full control.
    • ** Bad for corporate governance - lots of risk
    • ** Usually smaller, entrepreunurial organisations
  72. Handy's Types of Cultures - Role
    Functional Org Structure - titles define culture (i.e. chief accountant, head of purchasing)

    This type is moving towards Task culture as people in role based cultures will work very hard to preserve their role and position. It can also lead to a silo mentality.
  73. Handy's Types of Cultures - Task
    "Get the job done" - flexible, nimble - work to achieve the goal
  74. Handy's Types of Cultures - Person
    Focused on the person above all else. I.e. a very talented, single minded surgeon is who the focus is on, not all the admin stuff of running a company
  75. Schein's Levels of Culture (3)
    • Artifacts
    • Expoused Values
    • Basic Underlying Assumptions
  76. Scheins Levels of Culture - Artifacts
    Visual - things you can see - how people dress, open office vs closed, Mr. vs using first names
  77. Scheins Levels of Culture - Espoused Values
    strategy, goals, philosphies or the org. i.e. 'we put a premium on high quality'
  78. Scheins Levels of Culture - Basic Underlying Assumptions
    What is the org really about - profit seeking vs charitable etc.
  79. Hofsted Model - National Cultures - Influence on People (4)
    • Power distance
    • Uncertainty avoidance
    • Individualism/Collectivism
    • Masculinity
  80. Hofsted - Power Distance
    Interactions = giving orders vs seeking advice/opinions
  81. Hofsted - Uncertainty Avoidance
    USA = willing to gamble/fail vs Asia where failing is seen as unacceptable/shameful so risks may not be taken as much
  82. Hofsted - Individualism / Collectivism
    Single vs group acceptance - i.e. willing to go at it yourself regardless of group's opinion versus seeking full acceptance/backing of the group
  83. Hofsted - Masculinity
    Tight targets, critical vs masculine, ruthless to win = masculine

    Help those in need, teamwork, etc = feminine
  84. Corporate Governance
    How companies are directed & controller.

    Need arises due to seperation (and conflict) between ownership (shareholders / principals) and control (executivs / agents)
  85. Agency Problem / Stewardship - Diagram
  86. Agency Problem / Stewardship
    Directors (agents) should act in best interest of principals (shareholders/owners), but they have a vested interest in themselves (comp, etc.) and short term vs long term goals
  87. Principles of Corporate Governance (OECD)
    Faciliate effective entrepruenurial (growth seeking) & prudent (prudent risks) management
  88. Principles of Corporate Governance (OECD) - 5
    • Leadership
    • Division of Responsibilities
    • Composition, Supervision, Evaluation
    • Audit, Risk, Internal Control
    • Remuneration
  89. Principles of Corporate Governance (OECD) - Leadership
    Caliber of directos, meeting frequency, etc. - i.e. directors should be hired just like any employee, based on skill/qualifications, not because they are a friend of a friend
  90. Principles of Corporate Governance (OECD) - Division of Responsibilities
    Ensure no directors have too much power - in UK/EU, CEO position is separate from chairman of the board
  91. Principles of Corporate Governance (OECD) - Composition, Succession, Evaluation
    • Composition = split between exec and non-exec directors (50/50 goal)
    • NED comp should NOT be linked to profit so they can be unbiased
  92. Principles of Corporate Governance (OECD) - Audit/Risk/Internal Control
    • Audit - Independent, sufficient powers - examine statements, processes
    • Risk - Monitor, handle risk effectively
    • IC - Authorise costs, track time, management accounting
  93. Principles of Corporate Governance (OECD) - Remuneration
    Fair comp for directors
  94. UK Corporate Governance Code - Division of Responsibilities
    • Split CEO/Chairman
    • Chairman max 9 year appointment
    • NEDs must be appointed - they should have active role on the board
  95. NEDs must form part of committies (3)
    • Nomination Committee - finding new directors, unbiased, appropriate hires
    • Remuneration Committee - 100% NED, decides on directors comp
    • Audit Committee - liason between auditors and company
  96. UK Corporate Governance COde
    • Principles based code - broad rules laid out - company decides how to comply in their own way - flexibile.
    • Listed companies expected to comply and watched by stock exchange. NOT CODIFIED IN LAW. If they don't comply, they could be delisted from Stock exchange
  97. USA governance = compliance based
    Very detailed procedures with exactly how company should behave. Inflexible, but better records (SOX, US GAAP, etc.)
  98. Corporate Social Responsibility
    Should we take into account interests of stakeholders beyond shareholders/profit (i.e. customers, community, environment, government, etc.)jQuery112409144137711822227_1578751877054
  99. Arguments against social responsibility
    • Profit is in itself good for society (jobs, income, etc.)
    • Shareholders can make donations themselves (why should directors choose who to give money to)
    • Do directors have the authority to make non-essential payments?
    • Who decides the beneficiaries of company money?
  100. Ethics - Importance (6)
    • Risk Reduction
    • Cost Reduction (lower borrowing costs)
    • Lower Returns required (safer bet for shareholders)
    • More collaboration (companies willing to work with you)
    • Better employees (recruiting is easier)
    • More sales (goodwill)
  101. Public Interest
    Relates to all stakeholders - net benefits derived for all society in relation to your actions / decisions / policies
  102. Promote Ethical Behavior + Corporate Code of Ethics
    • Emphasis on values
    • Support from the top is key
    • Guidance to employees
    • Good PR

    =

    • Openness
    • trust
    • honesty
    • respect
    • empowerment
    • accountability
  103. Ethical Conflicts - Steps (6)
    • COnsider facts
    • Consider ethical principles involved
    • Consider related fundamental principles
    • Consider internal procedures
    • Consider alternative courses of action
    • Consider consequences of each course of action
  104. IF ethical conflict unresolved (3)
    • Raise issue internally (board, audit committee)
    • Raise issue externally (legal advisors, professional help)
    • Cease association w/ issue causing problem
  105. Grease Money
    Paying money to expedite what should be happening already
  106. Deontological Approach
    Behaviour should be based on series of rules, not consequences
  107. Sources of Law (3)
    • European Community Law
    • Legislation/Statute
    • Case Law
  108. European Community Law (2)
    • Regulations - directly applicable to all member states
    • Directives - directives to member states to alter their national laws to comply
  109. Legislation/Statute
    Domestic parliament laws
  110. Case Law
    Common law / precedent - rely on acceted decisions of the past - gradually being replaced by legislation
  111. Data Protection Act (UK) / GDPR (EU) - 6
    • Data shall be processed fairly and lawfully
    • Data shall be obtained for specific and lawful purposes only
    • Data should be adequate, relevant, and not excessive
    • Data should be accurate and kept up to date
    • Data should not be held for longer than necessary
    • Data should be held and processed securely
  112. Rights of Data Subject (personal data only - does not apply to company data) - 7
    • Right to be informed
    • Right to access data
    • Right to rectification
    • Right to restrict processing
    • Right to portability - convenient receipt of data
    • Right to object
    • Rights related to automatic decision making - i.e. righ tto not be prejeduced by auto algorithms
  113. Risk to Data (6)
    • Human Error (fat finger)
    • Technical Error (poor testing, server outage)
    • Catastrophic Events (fire, flood, terrorist incident)
    • Malicious Damage
    • Industrial Espionage (hacking, etc.)
    • Dishonesty (Fraud)
  114. Is a sole trader considered an organisation?
    No, organisations have collective goals, sole trader would not have collective goals
  115. Company notes
    Sole traders do not enjoy limited liability as they are not separate (legally) from their owners. Only public companies can issue shaes to the public and partnerships cannot be owned by one person!
  116. Partnership
    Owned and run by two or more people that are legally indistinguishable from the organisation itself
  117. Marketing
    Mgmt process that defines, identifies, anticipates, and supplies CUSTOMER NEEDS efficiently and profitably
  118. Matrix Structure Disadvantages
    Time-consuming meetings, significant overlap of authority between managers, slow decision making processes
  119. Organisation - Social Arrangement
    Someone working alone cannot be classed as an organisation
  120. Organisations enable people to:
    • Share skills & knowledge - enable people to perform tasks that they would not be able to achieve on their own
    • Specialise
    • Pool Resources - money or time
    • Synergy - organisations can achieve more than the individuals could on their own
  121. Three common forms a COMMERCIAL COMPANY can take
    • Sole Traders
    • Partnerships
    • Limited Liability Companies
  122. Sole Traders
    Owned and run by one person (made up of more than one person). Owner is legally the same as the business
  123. Partnerships
    Organisation owned and run by two or more individuals - do not have separate legal identify from company
  124. Limited liability companies (2)
    • Company that has a separate legal identity to its owners (shareholders)
    • Private Limited Companies
    • Public Limited Companies
  125. Private Limited Companies
    • Ltd after name
    • smaller businesses owned by a few shareholders
    • Shares cannot be offered to general public
  126. Public Limited Companies
    • plc after name
    • shares can be offered to general public
  127. Co-operatives
    • Orgs that are owned democratically by their members
    • Each member gets a single vote on key decisions
    • Organised to meet needs of member-owners who share profits
  128. Organisation Structure
    Concerned with the way in which work is divided up and allocated
  129. Entrepreneurial Structure - Advantages/Disadvantages
    Advantages - fast decision making, responsive to market, goal congruence, good control, close bond to workforce

    Disadvantages - lack of career structure, dependent on owner's capabilities, cannot cope with diversification/growth
  130. Functional/Departmental Structure - Advantages/Disadvantages
    Advantages - Economics of scale, standardisation, specialists feel comfortable, career opportunities (up ladder of department)

    Disadvantages - empire building, slow, conflicts between functions, cannot cope with diversification (need divisional structure)
  131. Empire Building
    Managers make decisions that increase their own power or are in the interests of only their department/function
  132. Strategic Business Unit (SBU)
    Each division is a separately identifiable profit center and can be identified separate from overall business
  133. Divisional Structure - Advantages / Disadvantages
    Advantages - enables growth/further diversification, clear responsibilities, training of GMs, top mgmt free to concentrate on strategy

    Disadvantages - potential loss of control, lack of goal congruence, duplication, specialists may feel isolated, allocation of shared services can be a problem
  134. Product vs Geographic diversification
    Product preferred for complex products that require a high cost of capital equipment (i.e. car industry)
  135. Matrix Organisation - Advantages/Disadvantages
    Advantages - best of functional and divisional, flexibility, customer orientation, teamwork encouraged

    Disadvantages - dual command/conflict, time-consuming meetings, higher admin costs
  136. Boundaryless Organisations (3)
    Orgs that have an unstructured design that is not constrained by having a chain of command or formal departments with the focus instead on FLEXIBILITY

    • Hollow
    • Virtual
    • Modular
  137. Hollow Organisation
    Split functions into core (strategically important) and non-core. Non-core is outsourced.
  138. Virtual Organisation
    Organisation outsources many functions and exists as a network of contracts with few functions in house (internet retailers fall into this category as they bring together manufactorers, web developer, 3rd party distribution, etc)
  139. Modular Organisation
    Boundarlyess manufacturing - process broken into modules - each component is outsourced to external supplier and company puts the things together (mobile phone company)
  140. Technostructure
    • Analysts who plan and control the work of others
    • They have technical input into the design of operations and standardize across the company
  141. Mitzberg Ideology
    org's beliefs and values (culture) - can be discerned based on norms / behavior in the workplace
  142. Mitzberg's types of structures (6)
    • Simple
    • Machine Bureaucracy
    • Professional Bureaucracy
    • Divisionalised
    • Adhocracy
    • Missionary
  143. Mitzberg's - Simple Structure
    • Strategic apex dominates
    • Entrepreneurial structure
  144. Mitzberg's - Machine Bureaucracy
    • techostructure dominates
    • work becomes very formalised
    • large number of rules/procedures
    • Standardisation is critical
  145. Mitzberg's - Professional Bureaucracy
    • operating core dominates
    • Highly skilled organisations (medical/legal/accounting)
  146. Mitzberg's - Divisionalised
    • Middle line dominates
    • divisional structure
    • Heads of each division (middle mgrs) have great deal of control
    • Strategic Apex focuses only on big-picture strategy
  147. Mitzberg's - Adhocracy
    • Support staff/operating core dominates
    • focus on innovation
    • high-tech/pharmaceuticals
  148. Mitzberg's - Missionary
    • Ideology dominates
    • mission and beliefs of org are dominant
    • Behaviors/norms become standardized
  149. Scalar Chain
    line of authority which can be traced up or down org chart
  150. Span of control influenced by (3)
    • Nature of work - simple work = wider span
    • Type of personnel - more skilled = wider span
    • Location of personnel - more local = wider span
  151. Flat vs Tall org structure
    Flat organisations tend to have fewer chances for employees to be promoted and have weaker control vs tall
  152. Shared Services - Advantages (3)
    • Improved quality of service
    • Improved consistency of service
    • Cost savings (less duplication / more efficiency)
  153. Centralised Structure
    upper levels retain authority to make decisions
  154. Decentralised structure
    authority passed down to units and people at lower levels

    Advantages - sr mgmt free to look at strategy, better local decisions, better motivation due to career opportunities, quicker responses/flexibility

    Disadvantages - loss of control, lack of goal congruence, training costs, duplication of roles, extra costs to funnel information
  155. Marketing
    management process that identifies, anticipates, an suppliers CUSTOMER NEEDS efficiently and profitably
  156. Marketing Key emphasis on Customer Needs (4)
    • Market Research - Identifying/Anticipating needs
    • Product Design/Dev - Supplying customer needs
    • Distribution - Efficiency
    • Profitability - pricing and promotion
  157. Marketing Orientation vs Product Orientation
    Marketing - attention & culture focused on customer - meeting customer needs better than competition = key to success

    Product - Success achieved through producing goods/services of optimum quality
  158. Potential issues with Product Orientation (2)
    • Costs escalate to create perfect product - can turn customers off
    • Product may have features customers don't need or want.
Author
themalones2011
ID
350240
Card Set
ACCA AB
Description
ACCA AB ALL
Updated