Question

In: Accounting

. What challenges do todays’ decentralized organizations pose to maintaining a corporate culture?

. What challenges do todays’ decentralized organizations pose to maintaining a corporate culture?

Solutions

Expert Solution

  • Decentralization increases the problems of coordination among the various units.
  • Decentralization increases the administrative expenses because highly-paid managers have to be appointed.
  • High Cost of Operation: Establishing of various departments and employment of specialists in each department will result in a higher cost of operation.
  • Lack of Uniformity: There shall not be uniformity in policies and actions, since each manager will form his own genius in designing them.
  • Reliance on the Manager: Decentralized organization has to place undue reliance on the efficiency of the divisional managers. If they do not have enough skill or competence to take appropriate decisions, the enterprise has to incur heavy losses due to their faulty decisions.
  • Self Centered Attitude: Each department will tend to be self centered ignoring the broader interests of other departments and that of the entire firm.
  • Decentralization makes the utilization of the services of exceptionally talented people. Because of weak financial resources, appointment of such persons may not be possible.
  • Decentralization puts increased pressure on divisional heads to realize profits at any cost. This may lead to inter-divisional rivalry leading to bitter fights. Each divisional head might be tempted to build his own empire at the cost of others. Problems of coordination and control may also arise when such ‘mini-companies’ or ‘little empires’ exist within an organisation.
  • Decentralization results in a duplication of staff effort. To be in­dependent, each division should have access to purchasing, personnel, marketing and other specialists. As a result each division is expected to carry a large group of staff specialists at enormous cost.
  • Often capable and competent individuals may not be avail­able to run the divisionalised organizations. Freedom of action may lead to diversity of decisions. Many a time the remote control from headquarters may prove to be ineffective as the enterprise grows. In addition, decentralization demands training programmes that may be time-consuming and highly expensive.
  • At times the lower level management is not able to handle the authority with dignity. They may use it for their personal purposes in contrast with the interests of the organization.
  • Decentralization may bring inconsistencies in the organization. For instance, uniform procedures may not be followed for the same type of work in various divisions. This makes the task of coordination and control difficult.
  • When a company is to make some urgent adjustments in its products or major policies, decentralization is a handicap.

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