ch.11 - Decentralization Performance Evaluation and the...

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Chapter Number Decentralization, Performance Evaluation, and the Balanced Scorecard ACIS 2116 Chapter 11
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A Decentralized Organization Decision making is spread throughout the organization. Managers at various levels make important decisions relating to their area of responsibility.
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Benefits of Decentralization Top management - can focus on long- range planning Lower-level managers: w Gain experience in decision-making w Increased job satisfaction w May have better information (closer to the problem) w Can make decisions more quickly
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Disadvantages of Decentralization Lower-level managers: w May not see “big picture” w May not act in best interest of the company as a whole w To start with, may not be adequately trained in decision-making Lack of coordination and communication Difficult to spread innovative ideas
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Responsibility Accounting To hold managers responsible for only those things they can control. Important in a decentralized organization.
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Cost, Revenue, Profit, and Investment Centers Responsibilit y Centers Cost Center Profit Center Invest ment Center Revenu e Center
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Cost Center Manager has control over costs, but not over revenues or investment funds. Examples: Manufacturing facilities. Service departments (purchasing, accounting, general administration, legal, and personnel.) Cost center managers evaluated based on how well costs are controlled.
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Revenue Center Manager has control over revenues generated but not over costs incurred. Examples: Sales department manager
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Profit Center Manager has control over both costs and revenues, but no control over investment funds. Obj10 Revenues Sales Interes t Other Costs Mfg. costs Commission s Salaries Other Examples: Store manager, Hotel manager
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Investment Center Manager has control over costs, revenues, and investments in property, plant and equipment. Like a separate business – can be called Strategic Business Unit (SBU) Corporate Headquarters Example: A division or group within a large company
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Responsibility Centers Cost Centers Investment Centers Clothi ng Product Manager Bottling Plant Mana ger Warehou se Mana ger Distributi on Mana ger Sauc es Product Manager Party Items Product Manager Operatio ns Vice President Finan ce Chief Financial Officer Le gal General Counsel Person nel Vice President Hokie Corporation Corporate Headquarters President and CEO
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Responsibility Centers Profit Centers Clothi ng Product Manager Bottling Plant Mana ger Warehou se Mana ger Distributi on Mana ger Sauc es Product Manager Party Items Product Manager Operatio ns Vice President Finan ce Chief FInancial Officer Le gal General Counsel Person nel Vice President Hokie Corporation Corporate Headquarters President and CEO
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Centers Clothi ng Product Manager Bottling Plant Mana ger Warehou se Mana ger Distributi on Mana ger Sauc es Product Manager Party Items Product Manager Operatio ns Vice President Finan ce Chief FInancial Officer Le gal General Counsel Person nel Vice President
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ch.11 - Decentralization Performance Evaluation and the...

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