The Market-advantage Test: this test of fit with market strategy is fundamental, following Alfred Chandler’s classic principle that “structure follows strategy”. For example, if coordination between two steps in a production process is important to market advantage, then they should probably be placed in the same structural unit.
The Parenting Advantage Test: the structural design should fit the “parenting” role of the corporate centre). For example, if the corporate centre aims to add value as a synergy manager, then it should design a structure that places important integrative specialisms, such as marketing or research, at the centre.
The People Test: the structural design must fit the people available. It is dangerous to switch completely from a functional structure to a multidivisional structure if, as is likely, the organisation lacks managers with competence in running decentralized business units.
The Feasibility Test: this is a catch-all category, indicating that the structure must fit legal, stakeholder, trade union or similar constraints. For example, after scandals involving biased research, investment banks are now required by financial regulators to separate their research and analysis departments from their deal-making departments.
The Specialized Cultures Test: This test reflects the value of bringing together specialists so that they can develop their expertise in close collaboration with each other. A structure fails if it breaks up important specialist cultures.
The Difficult Links Test: this tests asks whether a proposed structure will set up links between parts of the organisations that are important but bound to be strained. For example extreme decentralization to profit-accountable business units is likely to strain relationships with a central research and development department. Unless compensating mechanisms are put in place, this kind of structure is likely to fail.
The Redundant Hierarchy Test: any structural design should be checked in case it has too many layers of management, causing undue blockages and expense. Delayering in response to redundant hierarchies has been an important structural trend in recent years.
The Accountability Test: this test stresses the importance of clear lines of accountability, ensuring the control and commitment of managers throughout the structure. Because of their accused of lacking dual lines of reporting, matrix structures are often accused of lacking clear accountability.
The Flexibility Test: In a fast-moving world, an important test is the extent to which a design will allow for change in the future. For instance, divisional domains should be specified broadly enough to allow divisional managers to follow new opportunities as they emerge. As Kathleen Eisenhardt puts it, structures should also have enough ‘modularity’ (i.e standardization) to allow easy “patching’ of one part of the organisation on to another part of the organisation., as market needs change.

Offshoring
Offshoring is the relocation of some part of an organisation’s activities to another country.
Developments in technology have made offshoring feasible in many situations, such as back office support for banking operations. Offshoring has grown significantly in recent years. South Africa is one popular offshoring country, many banks and other companies now have service centres based in South Africa.
i) Offshoring offers a number of advantages to the AGYASCO Banking Group.

•  Lower overall cost. Labour and other costs (eg premises) will be lower in South Africa than in
• Ghana.
• Able to afford a more qualified workforce. Call centre positions in South Africa are often filled by better qualified individuals than would be the case in Ghana.
• Investment by host government. Infrastructure (for example communication) in emerging economies has often been heavily invested in by the host governments, in order to attract inward investment.
• Economies of scale / centralised operations. The back office operations will now be able to concentrate its back office operation in South Africa, where it already employs 3,000 people.
• Economies of scale are likely to result. Long-term moves such as this also encourage strategic planning.
• Allows specialisation. Offshoring back office operations to South Africa will allow the AGYASCO Banking group to concentrate on the more complex side of its banking operations and grow its international business by allowing other staff to focus on specialised areas of operation. This is necessary in a global economy where competition is increasing.
  On the other side of the discussion, managing operations based in another country will involve a number of challenges for the AGYASCO Banking Group:
• Risks associated with currency exchange rates. As an experienced banking group, this should be manageable. Exchange rates will always be liable to fluctuate and this may erode some of the cost savings.
• Language barriers and cultural differences. This may not be such a significant hurdle to overcome for AGYASCO Group as they already have a large presence in South Africa. There may be some resistance by customers based in Ghana, due to perceived problems dealing with call centres based overseas.
• Technical challenges. Staff in South Africa will need to be properly trained to ensure that service levels in the offshored function do not suffer. Some functions may be retained at the call centres in Ghana, so that customer service and satisfaction levels remain high.
• Exercising control from a distance. Offshoring can lead to a loss of control, particularly over quality.
• Dealing with different time zones. This is a challenge that a multinational company should be able to meet reasonably comfortably, although employees may find themselves inconvenienced occasionally (for example the timing of telephone conference calls).

The 500 employees of The AGYASCO Group that aren’t redeployed following the offshoring will be dismissed through reason of redundancy. The Human Resources Division should have policies governing redundancy and ensure these are followed.
The HR Division’s role should include setting policies that cover areas such as:

• Selection for redundancy – the criteria for selection must be clear and must be communicated as clearly as possible
• Pre-redundancy consultation and clear communication of where and when redundancies are to occur to enable staff to plan their futures.
• Help with developing a CV and clear guidelines covering time off to attend interviews.
• Clear guidelines on redundancy payments, with clear communication of packages and negotiation where appropriate
• Assistance with re-development of skills, re-training to learn new skills for a new career, or re-location of redundant employees.
• Careers advice, counselling and post-redundancy support.
• Redundancy is likely to be an unpleasant experience. The HR Division must ensure affected staff are handled with care and sensitivity.
• HR should also play a part ensuring remaining employees remain motivated, and morale is as high as can be expected in the circumstances.                                                                                                                                                        (Any 4 points)

                                                                                                    MEMO
To: Chairman
From: Chief Operations Officer
Date:
Subject: Reasons for maintaining a centralised administration office
The following are reasons why the company should maintain its current centralised administration office structure:
i. Consistency – Maintaining the current centralised administration office would continue to ensure consistency throughout the organisation with regards to administrative tasks. This consistency is needful in ensuring a common organisational identity and culture. For example, the current centralised administration structure ensures that the same account codes are used no matter which part of the organisation submits an invoice. This way, everyone uses the same data and information.
ii. Security and control – The current centralised administration structure gives better security and control over operations and it is easier to enforce standards throughout the organisation.
iii. Economies of scale – The current centralised administrative structure offers the advantage of economies of scale and thus contributes to the reduction of overhead costs. For example, in purchasing computer equipment for the entire organisation, lower prices can be bargained for in addition to other benefits since a greater purchase volume positions our company to bargain for lower prices.
iv. Better understanding of operations – A centralised administration office puts Head Office in a better position to know and understand the operations of the other units within the regions. This facilitates a better strategic planning of the entire organisation.
v. Expert staff – Since administration staff are in a single location more expert staff are likely to be employed. This ensures that career paths are more clearly defined than in a decentralised system.
                                                                                                                                                                                                  Signed

Outsourcing involves an organisation contracting out certain internal business functions to a third party. In outsourcing, the external third party is located within the same country as the outsourcing entity. The outsourced function is usually considered be a non-critical activity within the value chain of the firm. A bank hiring out its security or cleaning services to external security or cleaning companies is a typical example of outsourcing.

Offshoring is a form of outsourcing. It, however, differs from traditional outsourcing to the extent that it involves an external entity – i.e. the third party – which is based in a different country that provides an organisation with a particular product or process which had previously been provided in-house. An example of Offshoring will be a financial institution operating in the United Kingdom but has a customer call centre operated in India.

Shared servicing is an alternative to outsourcing. In this structure, an organisation establishes shared service centres to consolidate the transaction-processing activities of many operations with the organisation. Shared service centres aim to achieve significant cost reductions whilst improving service levels through the use of standardized technology and processes. A typical example of shared servicing would be a very large University that centralizes its IT support function or its HR support function instead of decentralizing among the various colleges of the University.

i) It can affect the quality of a firm’s product or services offered since the use of third parties breaks the direct link between the firm and its customers.
ii) It can lead to bad publicity to the firm in the home market when consumers perceive moves to offshore operations as leading to domestic jobs losses.
iii) It could lead to loss of control since it increases the scope for third parties not to meet agreed service levels.