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In: Accounting

Decentralized businesses can have three responsibility centers that must be evaluated differently because of their functions....

Decentralized businesses can have three responsibility centers that must be evaluated differently because of their functions.

  • Describe the three responsibility centers and give an example of each from your work.
  • Give an explanation about how each is evaluated.
  • Tell us why you would prefer to work in a centralized or decentralized organization.
  • Discuss which type of responsibility center you would prefer to manage and why.

Solutions

Expert Solution

Decentralization is the division of an entire company into smaller, more manageable units. These units achieve some form of autonomy as these are managed by people from their own departments. In a decentralized organization, the lower level managers are given the authority to make operating decisions. The day-to-day operations of these units are left to lower level managers. Such a system frees top management from dealing with minor details. This allows them to focus on important management functions like strategic planning, dealing with major customers and suppliers, making investment and financial decisions, etc.

An advantage of decentralization is better decision-making. This presupposes that lower level managers possess more knowledge and experience as to how their departments operate. They are more acquainted with the common problems faced by their departments. Hence, they make better, more timely decisions. Further, this sense of autonomy empowers lower level managers and motivates them to contribute more to the organization's overall goals.

A potential problem associated with decentralization is management losing control over the company's operations. Lower level managers who are given power may mismanage or abuse their authority.

ekkarill92 answered 2 years ago
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