ACCA FAB In Business - Study On Line And Pass ACCA And .
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March/June 2016 ExamsACCA F1 / FABContents1.The nature and structure of organisations32.Information and information technology173.An organisation’s environment254.Organisational culture315.An organisation’s stakeholders356.Corporate governance and ethical considerations377.Accountancy and the accountancy profession478.Internal control and the implications of fraud539.Management5710.Leadership6511.The nature of groups7312.Theories of motivation7713.How an individual can develop8514.The nature of communication8715.The recruitment and selection process9116.How people learn9717.Performance and appraisal interviews9918.Some legal obligations10319.Economics113Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums1
March/June 2016 ExamsACCA F1 / FABAccess FREE ACCA F1online resources on OpenTuition:F1 Lecturesa complete course for paper F1F1 Practice QuestionsTest yourself as you studyF1 RevisionQuick Revision after completing the courseF1 Revision Mock ExamPractice exam under time pressureF1 Forumsget help from other studentsAsk F1 TutorPost questions to a ACCA tutorvisit http://opentuition.com/acca/f1/Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums2
March/June 2016 ExamsACCA F1 / FABChapter 1The nature and structure oforganisations1. OrganisationsAn organisation can be defined as:“A social arrangement which pursues collective goals, which controls its ownperformance, and which has a boundary separating it from its environment.”๏This is, perhaps, a deceptively simple definition. Probably the most importantword is ‘social’. Organisations consist of people and we are all social animals. Wehave to get on with our colleagues; ideally we would like our boss, or at leastrespect our boss. We have to get on with customers; we have our own ambitions;we have our own motivations.๏Early management theory tended to neglect the social side of organisations andmanagement and had a rather cold, militaristic approach. Modern theories havechanged this considerably.๏Another important aspect of the definition is that of ‘collective goal’s. There has tobe an assumption that people within an organisation are ultimately aiming at thesame end results, if they are not, then chaos is likely to rule. One of the functionsof management is to arrange the business and the people in it so that everyone ispulling in the same direction, and the collective goals are ultimately established.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums3
March/June 2016 ExamsACCA F1 / FAB2. SystemsThe definition of an organisation included the terms ‘boundary’ and ‘environment’.These terms come from systems theory.The environment is what the organisation sits or lives in. For example a business lives inits national or country environment and perhaps in the international environment. Theboundary separates the environment from the organisational system. Input normallygoes into the organisation and output comes out of the organisation; some sort ofprocessing takes place within the ationAll organisations or systems can be divided into subsystems. For example, anorganisation will have a sales and marketing department, an accounting department, amanufacturing department and so on. Subsystems can then be further split down intoeven smaller subsystems. For example, the accounting department will consist of thereceivables ledger, the payables ledger, the cash book, the nominal ledger and so on.Some systems are known as ‘closed systems’: they take no input from the environmentand give no output to it. These are very theoretical and have no long life. It will bedifficult to see an organisation continuing to compete successfully if it paid no heed totechnological advances, or what its rivals were doing, or what its customers wanted.Open organisations on the other hand do receive input from the environment andproduce output which is sent to the environment. These are the only ones of anypractical importance.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums4
March/June 2016 ExamsACCA F1 / FAB3. Types of organisationYou need to be aware of the characteristics of several types of organisation.๏Commercial organisations are profit-seeking. They can be sole traders,partnerships, limited liability partnerships and limited companies. The mainadvantage of limited liability partnerships and limited companies is that if theorganisation hits hard times and has to go to liquidation, the owners of theorganisation are protected. Creditors and banks can pursue only the assets whichare in the company. Sole traders and partners, on the other hand, have unlimitedliability for all the business’s debts.๏The second type of organisation is a not-for-profit organisation. An example of anot-for-profit organisation could be a charity, such as a charitable hospital. Insteadof producing a profit and loss account, they tend to produce income andexpenditure accounts. Ultimately their income has to exceed their expenditure orthey will run out of money.๏Public sector organisations are owned by the state either at a national level or at alocal level. Examples could be the defence department, many health services andeducational systems. In some economies other industries or businesses are alsoowned by the state. For example, many national airlines are state-owned.๏Non-governmental organisations tend to be not-for-profit organisations but withan international brief. Many United Nations organisations will fall into thiscategory.๏Co-operatives are owned by the people who work in the organisation. Somefarmers, for example, set up co-operatives to market their products moreeffectively than they could on their own. Usually they seek some sort of profit, butthe ownership is shared widely amongst the people who are working in theorganisation.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums5
March/June 2016 ExamsACCA F1 / FAB4. Organisation structuresOrganisation structures can be described as:๏entrepreneurial,๏functional,๏divisional, or๏matrix.Entrepreneurial structures are very simple; basically it’s a boss and the workers. Theyare small, often family-owned, and are not large enough to be divided into separatedepartments.Once a business begins growing it will normally develop into a functional structure.This means that there are separate departments according to function – a sales andmarketing department, an accounting department, a payables department, receivablesdepartment, research and development department and so on. This can be a veryefficient structure as expertise is concentrated in each department and there could begreat economies of scale.MDFinanceManufacturingR&DSalesFunctional StructureThe main functions within in organisations are:๏Ordering and purchasing - provision of raw material and non-current assets๏Manufacturing or service provision๏Sales and marketing (finding customers, selling to them)๏Distribution๏Research and development (new products and services)๏Human resources๏Accounting including payment of suppliers and employees, invoicing customersand collecting payment, cash management, and financial statement preparation.๏Treasury management (to ensure there is enough capital and to reduce risks suchas foreign exchange movements)Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums6
March/June 2016 ExamsACCA F1 / FABNote that once organisations grow there is usually a separation between its owners (egshareholders), those who direct it (eg the board of directors) and those who manage it.If the business continues to grow it may find it worthwhile to divisionalise. This meanssplitting the company up, perhaps on the basis of product or geography. For exampleyou might have a North American division and a European division. You might have adivision which makes and sells paint and you might have a division which makes andsells pharmaceuticals. The rationale for splitting a company up into divisions is toachieve specialisation. If you are selling paint and pharmaceuticals it is likely that themanufacturing is very different, the markets and competition will be very different, aswill the regulation of the business. There is probably not much point in keeping it alltogether as one, and the business is better off being divided up into different divisionswhich can specialise.MDDivision AFinanceManufacturingDivision BSalesR&DFinanceManufacturingSalesR&DDivisional StructureA matrix organisation is more complex. A good way to think of a matrix organisation isto think of a project team. A project team for project A, for example, will have a projectleader or manager for project A. The members of the team report to that manager. Butthe members of the team also have functional responsibilities. For example, there willbe a project accountant and someone who looks after the quality control aspects of theproject perhaps someone who deals with the personnel involved in the departmentProject A Project B Project C Quality controldepartment R&DdepartmentMarketingdepartment Matrix StructureThese people, as well as reporting to the project manager, also have to report to theirfunctional heads. Therefore each person can have two bosses. Classical managementtheory suggested that this was unfair. But in fact depicting the organisation as a matrixdoesn’t cause there to be extra pressure on the people who work for the project. It isFree ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums7
March/June 2016 ExamsACCA F1 / FABperhaps simply a more honest representation of the pressures that the projectmembers are under.A boundaryless organisation can be virtual, hollow or modular:๏Virtual: create a company outside the organisation to respond to exceptional,often temporary market opportunities.๏Hollow: all non-core operations are outsourced eg accounting, human resources,legal services and manufacturing could be outsourced, leaving the company toconcentrate on its core competence eg design of new products.๏Modular: order parts from different internal and external providers and assembleinto a product.5. Mintzberg’s structureMintzberg divides organisations into five parts.The strategic apex is equivalent to top management or the Board of Directors.The middle line is the middle managers, sometimes called the scalar chain. This is thehierarchy as it passes down through the organisation.The operating core are the people near the bottom who for the most part do the dayto-day work.Support staff would include the accounting staff and IT staff.The technostructure. This is perhaps the hardest to understand and is the part of theorganisation responsible for devising and enforcing standards and procedures. It is thetechnostructure that would write the quality control manual, the employee handbook,the health and safety manual, the finance manual.As drawn initially:Strategic apexTecstru hnoctureMiddle linetporSup affstOperating coreFree ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums8
March/June 2016 ExamsACCA F1 / FABthe diagrams show what Mintzberg would have called the machine bureaucracy whichis basically a large mass manufacturing organisation.The size and importance of the five parts of the organisation change as we change theorganisation. In an entrepreneurial organisation there will be a strategic apex and theoperating core. You may remember that entrepreneurial organisation was a basically aboss and the workers with little middle line and the organisation was so small that therewas not much support staff and no need for technostructure.One of the most interesting adaptations of the basic structure is what Mintzberg calledprofessional organisation.Strategic apexohn urecTe uctrsttporpuS affstMiddle lineOperating coreHe was thinking of something like a large firm of accountants and lawyers. In theseorganisations, the middle line is much shorter, representing that there is really quite aclose relationship between the partners at the top of the organisation and the peopledoing the audit or legal work at the bottom. These people need to communicate andcooperate very closely. There are of course middle managers but the middle line isrelatively short.Support staff is still quite large. But what is surprising is that the technostructure is verysmall. This is perhaps surprising because auditors and lawyers have large files ofstandardised procedures, for example, audit programs to fill in, and you might thinkthat audits and legal work were highly regulated and standardised. But if you thinkabout it, every client an auditor goes to, or every client coming to see a lawyer, will haveslightly different problems. We are not in the mass production manufacturing industryanymore. We are dealing with tailoring solutions to clients. So the technostructure, suchas it is, represented by standard forms is somewhat superficial. Each client and eachservice has to be individually devised and delivered, so the power of thetechnostructure is relatively small.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums9
March/June 2016 ExamsACCA F1 / FAB6. LevelsOrganisations are often regarded as having three levels.StrategicTacticalOperationalThe top level is the strategic level. This is basically the very top managers and the boardof directors. They should be looking after the strategy of the organisation, andwhenever you hear the word “strategy,” you should be thinking of something like a fiveyear plan for the whole organisation. What will the organisation be doing in five years?In what countries will it be operating? Will it still be manufacturing or will it haveswitched to predominantly service provision?Right at the bottom of the organisation is the operational level. This is the level wherethe day-to-day activities are carried out. The time horizons are very short, often thingsare dealt within a day, and planning is often not much longer than a week or two. Thesepeople are predominantly dealing with or recording transactions which are eitherhappening or have already occurred: processing invoices, sending out orders, dealingwith customer queries, these are all at the operational level.In between there is the tactical level, think of the tactical level as being the level of amanager of a department. Typically this person will have a time horizon of about a yearbecause this person will often be concerned with meeting the year’s budget. Of coursethey have to deal from time-to-time with day-to-day activities, but their particularpriority will be to make sure that they organise their department to meet this year’sbudgets and expectations.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums10
March/June 2016 ExamsACCA F1 / FAB7. Tall/narrow, wide/flatOrganisations are often described as being tall-narrow or wide-flat.In the tall narrow organisation each manager or supervisor looks after relatively fewpeople.Here the diagram has been drawn so that each supervisor directly looks after twopeople. That will be described as having a span of control of two.In the wide flat organisation the span of control is much wider. In this diagram we’veshown a span of control of seven, meaning that each supervisor or manager has sevenpeople reporting directly to him or her.You will see in a tall narrow structure there are many layers and because each managerlooks after only a few people, there can be very close supervision. Indeed it might notbe supervision; it might be closer to re-performance or interference.The tall narrow structure is sometimes described as very bureaucratic, very formal, strictjob descriptions, great importance placed on exactly what one’s grade is, and the sort ofpay and benefits and conditions that would go with that grade. The wide flatorganisation is much more egalitarian; there is much less distance between top andbottom in the organisation and communication between top and bottom will be muchfaster. Because it is more egalitarian, there tends to be less emphasis on strict jobdescriptions and a greater emphasis on how can we get the job done, a greateremphasis on all being a part of a team, rather than being a part of a hierarchy.In the 1990s there tended to be deliberate moves from tall narrow to wide flat by manyorganisations. They called this ‘delayering’ or ‘flattening’ the shape of the organisation.There were two motives for doing this.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums11
March/June 2016 ExamsACCA F1 / FABFirst of all in the ‘90s there began to be very great cost pressure from Far Easternmanufacturers where manufacturing was relatively cheap. In response to this, Westernbusinesses had to be somewhat ruthless. They had to ask, “Is any value being added bythese people in the middle, or are they just managers, managing supervisors, managingassistant supervisors?” It was decided that often these people were not adding valueand that they could safely be removed from the organisation.Secondly in the 1990s, things began to move quickly. Technology changed very rapidly;there were huge changes in world markets, and operations based in China or India orMalaysia became very skilled and very adept at designing and launching newcompeting products. Western organisations to change and respond quickly and the tallnarrow organisation was very slow to change. Many layers had to agree to the change,and many people were protecting their own particular grade. Therefore to get fasterand more flexible responses to change, the wide flat organisation was often adopted.The term ‘scalar chain’ refers to the chin of command from the top of the companydown to the bottom.8. Centralisation/decentralisationThe shape of the organisation is independent of where power lies within theorganisation. You could have two organisations of exactly the same shape andstructure, yet in one a particular grade of employee could be given an expenditureauthority of only 100 Euros but in another, the same grade of person could be given anexpenditure authority of 10,000 Euros. Decentralisation or centralisation describes howfar down the organisation power is passed. Generally it is agreed t
Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums March/June 2016 Exams ACCA F1 / FAB 2 Access FREE ACCA F1 online resources on OpenTuition: F1 Lectures a complete course for paper F1 F1 Practice Questions Test yourself as you stu
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Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums March/June 2016 Exams ACCA F1 / FAB 2 Access FREE ACCA F1 online resources on OpenTuition: F1 Lectures a complete course for paper F1 F1 Practice Questions Test yourself as you study F1
ACCA F9 –Financial Management PROFESSIONAL (5 papers in total) Essentials ACCA P1 –Governance, Risk and Ethics ACCA P2 –Corporate Reporting ACCA P3 –Business Analysis Options (two to be completed) ACCA P4 –Advanced Financial Management ACCA P5 –Advanced Performance Management ACCA P6 –Advan
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Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community Accountant in Business (AB) ORGANISATIONS AND THEIR ENVIRONMENT 1. The nature and structure of organisations 3 2. An organisation
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