Organisations _ ACCA Qualification _ Students _ ACCA Global f1

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8/5/2015 Organisations|ACCAQualification|Students|ACCAGlobalhttp://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f1/technicalarticles/organisations.html 1/4Home > Students > Examresources > Fundamentalslevel > F1AccountantinBusiness > TechnicalarticlesORGANISATIONSMyACCASearchRELATED LINKSStudentAccountanthubpageThesyllabusforPaperF1,AccountantinBusinessincludesthetheoryoforganisationsandrelatedtopics.Candidatesmustbefamiliarwiththedifferentorganisationalstructuresthatcanbeadopted,aswellasrelatedconceptssuchasdepartmentalisation,divisionalisation,centralisationanddecentralisation,spanofcontrol,scalarchainandtallandflatorganisations.Inadditiontothesetopics,candidatesshouldalsostudysomeofthemorecontemporaryorganisationalmodels.Theseincludeboundarylessorganisationsandsharedservicesorganisations,bothofwhichareexaminableforthefirsttimein2014.Thisarticleprovidesanoverviewofsomeoftheseconcepts.PURPOSESOFORGANISATIONSAnorganisationisagroupofpeoplewithacommonpurpose.Thepurposeisdefinedbytheentityforwhichtheywork.Insmallerbusinesses,suchaspartnershipsandsmallcompanies,itiscommonforthosewhoworkfortheorganisationtohavecreatedit,ortohavehadsomepartincreatingit.Bycontrast,largerorganisationshavetoemployorinvolvemorepeople,themajorityofwhichwillhavelittleornoconnectionwiththefoundersorowners.THEDEVELOPMENTOFORGANISATIONSOrganisationshavebeenaroundforthousandsofyears.ThemightyarmiesofGreeceandRomewereorganisations,andthePhoenicianmerchantswhopliedtheirtradeacrosstheoceanscouldnothaverunsuccessfulbusinesseswithoutsomeorganisationalstructure.Whenevertwoormorepeoplecometogethertopursuethesameoutcomes,wehaveanorganisation.Organisationsexistbecausesynergycanbeachievedbycombininghumanresources.Together,thoseinanorganisationcanproducemorethanthesumtotaloutputofindividualsworkingalone.Theindustrialrevolutionoftheeighteenthandnineteenthcenturiesbroughtaneedformoresystematicandformalconsiderationofhoworganisationsshouldbeconfigured.AdamSmithusedtheexampleofthedivisionoflabourinapinfactorytodescribethebenefitsofspecialisation:Onemandrawsoutthewire,anotherstraightsit,athirdcutsit,afourthpointsit,afifthgrindsitatthetopforreceivingthehead:tomaketheheadrequirestwoorthreedistinctoperations:toputitonisaparticularbusiness,towhitenthepinsisanother...andtheimportantbusinessofmakingapinis,inthismanner,dividedintoabouteighteendistinctoperations,whichinsomemanufactoriesareallperformedbydistincthands,thoughinothersthesamemanwillsometimeperformtwoorthreeofthem.(TheWealthofNations,1776)Generally,businessesstartassmallentities,andmanyremainso.Everycountryintheworldhasthousandsofsoletraders,manyofwhichworkaloneandareabletomaketheirlivingwithoutinvolvingothers.However,iftheactivitiesofthebusinessgrow,iteventuallybecomesnecessarytoutilisethelabourofothers.Infamilyconcerns,thetradermayinvolveaspouse,childrenorsiblings,andthismaynotevenrequirethecreationofanycontractualrelationships.Yetitdoesrequiresomedegreeoforganisation.Whocarriesoutwhichtasks?Doeseverybodydothesameworkordoeseachindividualspecialise?Towhatextentshouldeveryonebeabletocarryoutthetasksusuallyreservedforothers?Howdoweensurethatallworkisdone,butthereisnowastefulduplicationofeffort?Thesequestionscanbeaddressedinarelativelyinformalmannerinasmallbusinesswhereallcontrolisinthehandsofasingleperson.However,theverysamequestionshavetobeaskedinthelargestandmostcomplexbusinesses,andforthesetheanswersarelessstraightforward.THEENTREPRENEURIALSTRUCTURETheentrepreneurialstructureisadoptedbysmallerbusinesses.Itissimple,informalandveryfluid,inthatTheglobalbodyforprofessionalaccountants Aboutus Contactus Workforus Technicalactivities Help&support Global8/5/2015 Organisations|ACCAQualification|Students|ACCAGlobalhttp://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f1/technicalarticles/organisations.html 2/4itmaychangeonadaytodaybasis.Thisstructureisadoptedbysoletraderswhoemployothers,somesmallpartnershipsandsomesmallcompanies.Thosewhoownandcontrolthebusinesstakedecisionsontheworktobedone,howitwillbedoneandbywhom.Itisquitecommonforemployeestobeexpectedtomultitaskandnottoexpectrigidjobdescriptions.Specialisationmaybepossible,suchasafamilymemberdealingwithbookkeeping,butthatindividualmayalsoberequiredtocarryoutadditionaltasks,perhapsifthereisnobookkeepingworktobedoneatcertaintimes.Theentrepreneurialstructureisperfectformanysmallbusinesses,butistooinformalandcanevenbechaoticoncethelevelofbusinessactivityreachesacertainlevel.Eventually,theentrepreneurhastoconsiderformalisingtherolesthatemployeesplay,andcreatingjobswithdefineddutiesandresponsibilities.THEFUNCTIONALSTRUCTUREThefunctionalstructureisthemostcommonorganisationalmodel.Itisusuallydepictedasatriangle,withthechiefexecutiveofficeratthetopandreportinglinesofothersflowingvertically.Thefunctionalstructureisformallydepictedasanorganisationchart.Figure1showsatypicalorganisationchart.Thedutiesofindividualsareallocatedaccordingtothefunctionstheyperform.Forexample,asmallcompanymayhaveaproductionmanager,financemanager,salesmanagerandITmanagerreportingtothechiefexecutiveofficer.Eachofthefunctionalmanagersisresponsibleforadepartment.Manylargercompanieshavegeneralmanagersorassistantgeneralmanagersresponsibleforgroupsoffunctions.Forexample,theGeneralManager(Marketing)mayberesponsibleforadvertising,publicrelations,merchandisinganddirectsales,andtheremaybeadepartmentalmanagerresponsibleforeachoftheseactivities.Foreachfunction,employeesaregroupedtogethertoperformsimilarorcomplementarytasks.Justastheorganisationasawholecanberepresentedonanorganisationchart,sotoocaneachdepartment.Figure2showshowafinancedepartmentmightbeorganised.Thefunctionalstructurehasseveraladvantages:itfacilitatesspecialisation,bybringingtogetherthosewiththeknowledgeandskillsnecessarytocarryouteachfunction,andthereforeshouldcreateeconomiesofscaleitenablestheorganisationtooperatethroughclearlinesofauthorityandwelldefinedresponsibilities,withallemployeesknowingtowhomtheyreportandforwhomtheyareresponsibleitpreventsduplicationofeffort,therebyreducinginefficienciesitaccommodatesspecialists.Thedisadvantagesofthefunctionalstructureare:itcanbeinflexible,particularlyinaperiodofrapidchange,andineconomicsystemswhereitisdifficultorcostlytorecruitordismissemployeesitencouragesdemarcationlinestobecreated,whichmaymakeemployeesreluctanttocarryouttasksthattheyconsidernottobetheirresponsibilityasorganisationsbecomelarger,theremaybecoordinationproblemsasthenumberoffunctionsincreasesasinformationtendstoflowthroughformalorganisationallines,largerorganisationsmayencountercommunicationproblemssomearguethatthefunctionalmodelistooinwardlooking,focusingonprocessesinsteadofconsideringdeliverablesdefinedbycustomerneeds.Thefunctionalstructureiscommontomanyorganisations,butdifferentconceptscanbedeployedwithinit.Forexample:theorganisationcanbetallorflat:tallorganisationshavemanylevels(alongscalarchain),whileflatorganisationshavefewerlevelstheorganisationmayhavemanyemployeesreportingtoeachmanager,fewemployeesreportingtoeachmanager,oracombinationofthese:thissocalledspanofcontrolwilldependonmanyfactors,includingthenatureofthework,varietyoftasksperformed,capabilitiesofemployeesandriskfactorssomeorganisationsconcentrateauthorityatthetopofthemanagementhierarchy,withkeydecisionstakenbyseniorexecutives,whileothersempowersubordinates,withgreaterdiscretionpermittedfurtherdownthemanagementchain:thisrelatestotheconceptofcentralisationanddecentralisation.FunctionalorganisationbyproductThefunctionalmodelcanbeadaptedfororganisationsthatofferarangeofproducts.Justasmanagersresponsiblefordifferentproductscanreporttotheproductmanager,itisalsopossibleforeachproductmanagertohavehisorherownfunctionalstructure.Inthisway,severalfunctionsareduplicatedacrosstheorganisation,asthemanagerresponsibleforeachproductmayhavetheirownproduction,sales,marketing,financeandadministrationdepartments.ThisisshowninFigure3.Thisorganisationstructureissometimesappropriateifthedesign,productionandmarketingofeachproductisuniqueorsignificantlydifferenttothoseforotherproducts.Thisstructurecanalsobesuitableifproductsaredistinctivebrands.Forexample,somemanufacturersofdetergentsofferbothquality(orpremium)productsanddiscountproducts.Althoughtheycompetewithoneanothertosomeextent,theproductsareusuallytargetedatdifferentmarketsegments.FunctionalorganisationbygeographicalregionManyorganisationsoperateacrossdifferentregions,oracrossinternationalfrontiers,sotheymay8/5/2015 Organisations|ACCAQualification|Students|ACCAGlobalhttp://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f1/technicalarticles/organisations.html 3/4considerittobeappropriatetomaintainseparatefunctionalstructuresineachlocation.Thisapproachisnotappropriatetoallgeographicallydispersedbusinesses,butissuitablefororganisationswhosegeographicallocationshavedistinctivebutcontrastingcharacteristics.Forexample,companieswithapresenceintheUK,IrelandandGermanywouldbeabletoidentifymajordifferencesinthedemographicprofiles,personalandfamilyvaluesandtastesinthethreelocations,whilecompaniesoperatinginBelgium,LuxembourgandtheNetherlandswouldidentifydifferencesthatarelesscrucialincommercialterms.Functionalorganisationbygeographicallocationisespeciallyimportantforlargecompaniesthatoperateacrossseveralcontinents.MATRIXSTRUCTUREThematrixstructureevolvedincompaniesthatsoughttoovercomesomeoftherigiditiesofthefunctionalorganisationstructure.ItwasfirstdeployedintheaerospaceindustryintheUSAinthe1950s.Themostcommonapplicationofthematrixstructureisthecreationofanextralayerofresponsibilitiesacrossthetraditionalfunctionalstructure.Aswellhasoccupyingapositionintheorganisationalpyramid,whichdefineslinerelationships,employeeshaveresponsibilitiestoprojectmanagers.Inthisway,theemployeemayhavetwoorevenmoremanagers.Forexample,anindividualworkinginthefinancedepartmentmayreporttotheheadoffinancebutmayalsohavesomedutiesinrelationtoIT/ISormarketingprojects.Themanagersresponsiblefortheseprojectswillbeabletocalluponstaffacrossorganisationalboundariesonaformalbasis.Figure4showsthematrixorganisation.Matrixorganisationscanbetakenfurtherinenvironmentsthatarelessdependentonrigidchainsofcommandandlinesofcommunication.Forexample,insomeprofessionalfirmsandconsultancies,apositioninafunctionalorganisationchartisonlyimportantforthepurposeofestablishingaccountabilitiesunderemploymentlaw.Asoneindividualworkinginsuchanorganisationputit,whenaskedWhoisyourmanager?,thereplywasItdependswhatdayitis.Thereareseveraladvantagesofadoptingamatrixstructure:byinvolvingindividualsformallyinteamsallocatedtospecificprojects,theorganisationcancapitaliseontheknowledge,skillsandexperiencetheycanoffercommunicationlinesareshortenedinthatprojectmanagerscandealwithstaffassignedtothembureaucracyshouldbereducedemployeesjobsareenriched,andthismayimprovemotivationmoreambitiousindividualscanexploitopportunitiesmadeavailabletothemandmorereadilypursueadvancementcooperationbetweendepartmentscanbeincreased,andthedisadvantagesofworkbeingdemarcatedbysiloscanbereducedthematrixapproachmaymakeemployeesmoreresponsivetochangeandmorewillingtowelcomechange.Thedisadvantagesincludethefollowing:thematrixstructuresacrificesthenotionthateveryemployeeshouldberesponsibletoonemanager,andthiscanresultinconflictingdemandsontheemployee,intermsofwhatworkshouldbedone,howtimeshouldbeapportionedandhowworkshouldbecarriedoutthedifferentmanagerstowhomtheindividualreportsmayhaveverydifferentstyles,whichmaycreateconflict,orevenconfusionastothebestorcorrectapproachthematrixstructurecreatesadditionaltimemanagementpressures,whichmayhaveaneffectoncostsifthematrixisnotdesignedorimplementedsystematically,itcancreateorganisationalinefficiencies,suchasslowerdecisiontaking.BOUNDARYLESSORGANISATIONSTraditionally,organisationsbringpeopletogetherinoneormorephysicallocationsinordertoprocessinputsandcreateoutputs,allwithinaformallydefinedstructure.Advancesininformationcommunicationstechnologyhaveresultedinnewapproachesthathaveredefinedwhere,whenandhowpeoplework.Themostobviousevidenceofthisisthereductioninrelianceonthe9.00amto5.00pmworkingday,theemergenceofflexibleworkingarrangementsandincreasesinworksharingandhomeworking.Organisationshavealsoadoptednewwaysofconfiguringrelationships.VirtualorganisationAvirtualorganisationisonewhichoperatesprimarilythroughelectroniccommunications,takingadvantageoftheefficienciesmadepossiblebyinformationtechnology.Itremovesmanyofthefeaturesoftheworkingenvironmentthatwereoncetakenforgranted,suchasbringingmanagersandstafftogetheratadefinedlocation.Peopleworktogetherremotely,withlittleornodependenceonphysicalpremises.Instead,communicationstakeplacethroughmediasuchasemails,econferencing,extranetandintranet.Thisvirtualaspectoftheoperationsometimesextendstolinkswithsuppliers(upstream),andcustomers(downstream).Byextendingthevirtualconcepttocustomerrelationships,thedependenceonretailpremisesandcustomerfacingstaffiseliminated.Amazonisoftencitedasthefirstmajorvirtualbusinessinthisrespect.Thevirtualorganisationmodelcanbeadoptedwhollyorinjustcertainpartsofthebusiness.Forexample,onemajorinsurancecompanymaintainsalargeheadofficewhichservesasabaseforfunctionaldepartments,butmanyofthestaffworkingforcertaindepartmentsworkfromhomeandrarelyifeverneedtovisittheoffice.8/5/2015 Organisations|ACCAQualification|Students|ACCAGlobalhttp://www.accaglobal.com/gb/en/student/examsupportresources/fundamentalsexamsstudyresources/f1/technicalarticles/organisations.html 4/4Lastupdated:20Apr2015Someserviceorganisationscanadoptthevirtualapproachinitsentirety,withatokenphysicalpresenceataregisteredofficetosatisfystatutoryregistrationrequirements.Theadvantagesofvirtualorganisationsare:Costscanbegreatlyreduced,asthereislessdependenceonpremises.Thiscanresultinsignificantreductionsinoverheads,suchaselectricity,water,mortgageorrent,andservicestaff.Theadoptionofebusinesssolutionscancreateefficiencies,suchasautomatedreorderingandseamlesstransactionprocessing.Infact,whilethevirtualorganisationisarelativelynewbusinessconcept,manyofthetechnologiesdeployedhavebeenavailableformanyyears.Forexample,electronicdatainterchange(EDI)wasfirstdevelopedinthe1960s.Jobswiththeorganisationmaybemoreattractive,astheneedfordailycommutingisremoved.Thiscanbeparticularlyappealingtothosewithfamilycommitmentsatcertaintimesofday,andthosewhowouldbedeterredfromworkingduetothecostoftransportandcarparking.Thevirtualorganisationhasamodernimagewhichmayappealtoseveralstakeholdergroups,includingcustomers,suppliersanddistributors.Increasingly,thisapproachtobusinessalignswiththeexpectationsofsuchgroups.Thedisadvantagesofvirtualorganisationsare:Thereisheavyrelianceoninformationtechnology,soifthingsgowrongthiscanhaveacatastrophiceffect.Problemscanarisefromlackofconnectivity,hardwareandsoftwarefailures,malwareandsecuritybreaches.ThosewholackbasicITskills,orareunpreparedtouseinformationtechnologyequipment,havenoprospectofdoingbusinesswithvirtualorganisationsorworkingforthem.Insomecultures,thereremainsapreferenceforthepersonaltouch,sovirtualorganisationsmayfinditdifficulttoachieveafoothold.Someofthosewhoworkforvirtualorganisationsfeelisolatedasdirecthumaninteractiononafacetofacebasisisminimal.Feelingpersonallyconnectedtoaworkgroupcanbemotivational,andthiseffectislostwhenmembersofteamsdonotmeetonaregularbasis.HolloworganisationAholloworganisationisonewhichreliesheavilyonoutsourcing,enablingittomaintainlowstaffinglevelswhilecapitalisingonthecompetencesofpartnerorganisations.Themostcommonapplicationofthismodeliswhereanorganisationidentifiesthosecompetencesthatarecoreandmustberetained.Thesearethenkeptinhouse,whileallnoncoreoperationsarecontractedout.Theholloworganisationmustforgestrongstrategiclinkswithtrustedpartners.AnexampleofthisorganisationalformisNike,asportsgoodsmanufacturer,whichsubcontractsproductionactivitieswhilstmaintainingtotalcontroloverdesignandqualityspecifications.ModularorganisationAmodularorganisationextendsthehollowconceptbybreakingdownproductionprocessesintomodules.Productionisoutsourced,buteachexternalorganisationisresponsibleforonlyoneelementoftheprocess.Forexample,inproducingtheDreamlineraircraft,Boeingentersintocontractswithmanysuppliers,eachofwhichisresponsibleforonecomponentorassembly.Theoutputsofthesesupplierscanthenbeintegrated.Themodularorganisationisamoreefficient,contemporaryversionofthemodelpreviouslyusedbymanycarmanufacturers,whooftenownedthesubsidiarieswhichproducedcomponentsthatmakeupthefinalproduct.Themodularorganisationremovestheneedforcomplexownershipstructuresthroughholdingcompaniesandsubsidiaries,andalsocreatesforcedefficiencies,asthoseresponsibleforeachmodulehavetocompetewithorganisationsinthesamemarketplacefortheirservices.SHAREDSERVICESORGANISATIONSThesharedservicesorganisationisamediumthroughwhichdefinedservicescanbeprovidedacrosstheorganisationbyadedicatedunit.Thisdiffersfromoutsourcing,inthatthesharedservicesproviderisactuallyapartoftheorganisation.Sharedservicesorganisationsreducethelevelofduplicationoftasks.Forexample,insteadofeachpartoftheorganisationemployinghumanresourcesorinformationtechnologyspecialists,theseservicescanbeprovidedcentrally,throughasingleteam.Inthisway,theycanreducecostssignificantlyandalsostandardisethepoliciesandprocessesacrossthebusiness.Managementandoperationalsupportcanbedeliveredthroughfacilitiessuchashotlinesorhelpdesks.Anexampleofaveryeffectiveuseofthesharedservicesconceptistheprovisionofprofessionaltrainingcoursesandsupportacrosslargeconsultancyfirmsoperatingonaregionalormultinationalbasis.Whiletheuseofsharedservicesorganisationsisincreasing,themodelisnotsuitableforall.Forexample,ifthebusinessunitsareverydiverse,acentralisedmodelmaynotbeappropriate.Ithasalsobeensuggestedthatpotentialcostreductionsshouldnotbeoverestimated,asmanyorganisationswillstillrelyonlocalprovisiontomeettheidiosyncraticneedsofeachbusinessfunctionorlocality.WrittenbyamemberofthePaperF1/FABexaminingteam

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