MA: Org. behaviour + divisionalisation

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  • Created by: charlie
  • Created on: 29-05-17 10:28
Organisational behaviour (e.g. financial crisis 2008)
how org. run/ org. responsibility (motivation, commitment + governance)/ how managers behave + react to others decisions
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Contingency theory definition (no best way) (reference)
at org. level cultural, leadership + power issues/ each org. is unique + values/ beliefs have been developed by individual actors through communication + negotiation (Fisher + Ury)
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(5) Contingent factors (influence strategic/ tactical/ operational levels)
INTERNAL: (1) competitive strategy (products) (2) knowledge (skills) EXTERNAL: (3) complexity of environment (4) industry variables (location) (5) technology available
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Contingency factor definition
future situation/ event thats possible but can't be predicted with absolute certainty (if/when does arise need to be resolved for business to move forward/ operate)
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2 ways org. can be structured
(1) FUNCTIONALLY: all activities of similar type (prod, sales + dist.) under control of department head/ DIVISIONALLY: split into divisions in accordance with output/ geographical location
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Divisionalise org. features (3)
(1) DM: responsible for all functions in division (incl FM's) (2) usually only partly (admin/ procure central for scale economies) (3) decentralisation of decision making (degree of autonomy to DM depends on contingent factors)
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Divisionalisation control hierarchy (3)
(1) ACTION (observing cause + effect relationship to prevent problems) (2) PERSONAL, CULTURAL + SOCIAL (type of culture of org.) (3) RESULTS (MA budgeting control + planning system)
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Divisionalisation (4) advantages
(1) improved decision quality + speed (closer to operations) (2) motivation to DM (autonomy + resp.) (3) free's top management to focus on bigger issues (4) career progression for future senior managers (like running own company)
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Divisionalisation (3) disadvantages (e.g. NIKE vertical)
(1) Lack of goal congruence + dysfunctional behaviour (decisions to benefit division) (2) greater costs (lack of scale economies) (3) loss of top management control (can only set targets)
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Most effective divisionalisation when...
(1) Dissimilar activités (2) Independent divisions (3) careful regulation (managers held responsible for own variances)
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Responsibility accounting definition (QUANTITATIVE)
used to describe decentralisation of authority (individual manager of unit)/ performance of decentralised units measures in terms of ACCOUNTING results (FINANCIAL)
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Responsibility centre: (1) Cost centre (WEAKEST form)
MANAGER CONTROLS: controllable costs (controllability principle) USING: variance analysis/ efficiency measures (quality + timing)
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Responsibility centre: (2) Revenue centre
MANAGER CONTROLS: revenue USING: revenue/ share (outputs)
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Responsibility centre: (3) Profit centre
MANAGER CONTROLS: all controllable costs + sales price (incl TP) USING: profit
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Responsibility centre: (4) Contn centre
MANAGER CONTROLS: marginal controllable costs + sales price (incl TP) USING: contribution
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Responsibility centre: (5) Investment centre (STRONGEST form)
MANAGER CONTROLS: all controllable cost, sales price (incl TP), output volumes, investments in NCA + working capital USING: ROI/ RI/ other financial ratios
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Divisionalisation into profit centres (3) rules (reference)
(Shillinglaw) (1) Local profit shouldn't inc at expense of company profit (accounting G. CONGRUENCE) (2) Local profit is independent from other areas of company (limited constraints) (3) Local profit reflects all controllable costs (C.PRINCIPLE)
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Divisionalisation problems if ignore Shillinglaw (1-3)
(1) Competition for same work by 2 centres ('price war' viscous cycle) (2) loss of company customer (2 p.centres, same customer, diff. products but 1 shuts due to low profits) (3) reduce revenue to reduce central costs (even when still demand)
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Divisionalisation problems if ignore Shillinglaw (4-5)
(4) service centres may become inefficient (allocated costs stimulates communication between cost + revenue) (5) damaged motivation + unfairness for DM if profit centre valued as cost centre
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Controllability principle definition
managers performance should be judged only against those revenues + costs that they can control/ judged only on costs that top management want paid attention to/ BEFORE (specify uncontrollable) AFTER (relative + subj. variance analysis/ flex budget)
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controllable cost: advantages
avoids issues arising from allocating central/ service costs to profit centres
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Issuing uncontrollable costs: advantages
'partially' controllable (competition/ prices/ supply) labelled 'controllable' to motivate goal congruence/ communication of DM/ reminder costs need recovering (pricing policy)/ encourage pressure between centres ('value for money' communications)
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Annual performance: profit statement layout (what is assesses)
Sales/ less: VC/ =short run contn margin (decision making/ b/e analysis)/ less:C.FC/= C.contn (management)/ less:NC.avoidable/=Div. contn (division)/ less:NC.unavoidable/ =Div. net profit before tax (external comparison)
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Annual performance: short run contn margin (how to get/uses)
less VC: vary with output (direct lab./ direct mat./ var OH)/ USES: decision making/ b/e analysis
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Annual performance: controllable contn/ profit
less controllable FC: manager can control (advertising/ specific marketing)/ USES: assessing management
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Annual performance: divisional contn/ profit
less uncontrollable avoidable costs: manager can't control but can be avoided by not producing good/ service (VC) or closing service (depreciation/ HO financial + legal staff)/ USES: assessing/ closing divisions
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Annual performance: divisional net profit before taxes
less uncontrollable unavoidable costs: manager can't control and can't be avoided at least in ST (FC) (rent/ corp. expenses general/ admin) USES: external business comparison
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Other cards in this set

Card 2

Front

Contingency theory definition (no best way) (reference)

Back

at org. level cultural, leadership + power issues/ each org. is unique + values/ beliefs have been developed by individual actors through communication + negotiation (Fisher + Ury)

Card 3

Front

(5) Contingent factors (influence strategic/ tactical/ operational levels)

Back

Preview of the front of card 3

Card 4

Front

Contingency factor definition

Back

Preview of the front of card 4

Card 5

Front

2 ways org. can be structured

Back

Preview of the front of card 5
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