Explain why an organization may choose to decentralize authority. What are some possible downsides to this approach?
What will be an ideal response?
Decentralizing authority gives lower-level managers and nonmanagerial employees the right to make important decisions about how to use organizational resources. It allows an organization and its employees to behave in a flexible way even as the organization grows and becomes taller. This is why managers are so interested in empowering employees, creating self-managed work teams, establishing cross-functional teams, and even moving to a product team structure. These design innovations help keep the organizational architecture flexible and responsive to complex task and general environments, complex technologies, and complex strategies. However, if divisions, functions, or teams are given too much decision-making authority, they may begin to pursue their own goals at the expense of organizational goals. Too much decentralization can cause lack of communication among functions or divisions; this prevents the synergies of cooperation from ever materializing, and organizational performance suffers.
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Red Sunset Co. manufactures mobile phones and wants to add a new model to its current line of products. The firm has estimated that the new phone’s selling price will be $80 and that variable costs would represent 65% of the sale price. Fixed operating costs are estimated to be $15M and the firm’s marginal tax rate is expected to remain at 35%. The firm also has forecasted that interest expenses associated with the new chip will reach $5M. The firm has 5M of common shares outstanding and forecasts a total preferred dividend payment of $200,000 for the next year. If Red Sunset Co. expects to sell 1M units of the new phone, then:
a) Create an income statement with the previous information. b) Calculate the operating break-even point in both units and dollars. c) How many units would Red Sunset Co. need to sell in order to achieve earnings, before interest and taxes of $2M? d) Calculate the degree of operating, financial, and combined leverage. e) Use the Goal Seek tool to determine the number of units that would allow Red Sunset Co. to break even in terms of its net income and the selling price to break even in terms of earnings before taxes. Also, determine with the same tool how much preferred dividends the firm would need to pay to keep a degree of financial leverage of 2.
Royer Corporation engaged in this transaction: Purchased inventory with cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows
a. Does not represent a cash flow b. Investing activities section c. Operating activities section d. Financing activities section
A(n) ________ specializes in low- to medium-volume production using job or batch processes
Fill in the blanks with correct word
The ________ addresses the roles of the community, region, nation, and world in a business.
A. business analysis B. environmental analysis C. industry analysis D. proof of market