Reply to discussion – Module 10: Evaluating Decentralized Operations

Reply to discussion – Module 10: Evaluating Decentralized Operations

Q – Please read the 2 discussions Attached and prepare a Reply for each of these discussions post with comments that further and advance the discussion topic.

The reply needs to be substantial and constructive in nature. it should add to the content of the post and evaluate/analyze that post Discussion

Please provide the references you used.

Ensure zero plagiarism.

Word limit: 200 words for each reply.

Student1
Decentralized vs Centralized Operations
Being the CEO of Tiller Components, that provides some strategic decisions you need to
make while running operations of 35 plants across the US. Moving from centralization to
decentralization in the management structure can drive improvements in efficiency and
responsiveness.
In centralized structure, decisions are taken by the top levels of management. This creates
consistency and control, but can also slow action to address local problems. On the flip side, in a
decentralized organization, lower-ranking managers are given the power to make decisions that
can lead to faster, more local decisions, and more independence for managers. More job
satisfaction, a better organization that responds in a more agile manner.
Centralized activities include strategic acumen where core long-term objectives and overall
corporate strategies should be created at the top to ensure a cohesive direction. Also, corporate
level control over budgeting, financial reporting, and allocation helps create consistency and
control. In addition, centralizing R&D coordination can lead to reduced redundant work and
foster innovation.
Decentralized Activities include operational decisions in which Day-to-day operations
including production scheduling and quality control can be handled by the local units for quick
response to local imperatives. Moreover, regional managers may customize strategies and
address local customer needs and competitive settings. Adding to that, local implementation
helps align with regional labor markets and cultural nuances where recruitment and employee
relations are concerned.
Let us examine the implication for local and regional managers. Decentralization gives local
and regional managers more power and authority. This results in better decision-making since
managers will be closer to the actual realities of their departments. But it will also necessitate,
thoughtful training and clarity on guidelines that will ensure decision making is in line with the
overall vision of the company. As for the impact for the overall company, the decentralized
structure will improve organizational agility and Tiller Components will react better to market
changes and regional needs. It could also help them innovate and engage employees. It does,
however, require a very robust underpinning to review and communicate performance to keep
the organization singing from the same hymn sheet.
Next, we look at the tools that are needed for performance tracking across different
divisions/segments. The balanced scorecard provides a multi-perspective assessment of
performance by examining success through financial, customer, internal processes and learning
& growth lenses to deliver a broader perspective on how each division is excelling. Using ROI
(Return on Investment) as a tool by calculating the quantity of profit produced in relation to the
assets employed to produce the profit, we can compute the ROI which makes comparison
across divisions easier. Residual income (RI) helps assess excess net income earned above the
minimum required return on assets, offering incentives to managers whose decisions may have
a negative impact on the total profitability of the company.
With these analytical tools embedded, Smith will be able to see how each division is
performing against the benchmarks he’s established, you’ll know where there are problems,
and you’ll have data on what decision you’re going to make to make the best decision to be the
best company possible (Warren & Tayler, 2020).
Reference
Warren, C. S., & Tayler, W. B. (2020). Managerial accounting (15th ed.). Cengage Learning.
Sudent2
Module 10
As CEO of Tiller Components, implementing a balanced approach between centralized and
decentralized decision-making would be crucial for managing the company’s 35 plants
effectively. Considering the company’s dimension and geographical dispersion, a hybrid model
would facilitate both strategic oversight and operational latitude.
I would control strategic aspects that cut across the whole organization for the activities that
would be centralized. There fall corporate finance, capital investment decisions, research and
development policies, and the entire policies of the organization. The centralization of these
functions ensures that both the strategic direction of the company remains intact and that the
quality control procedures across the various plants are standardized. Also, the extensive
supplier contracts and the company’s essential clients should remain controlled from the center
to maximize the company’s potential and maintain the relational aspects of the business.
On the other hand, I would leave it to the local and regional managers to make operational
decisions. This one-day essential production control, who to employ and train in the region,
how to dispose of and where to keep goods, and how to service regionally. The plant managers
would, therefore, be free to make changes to improve the processes depending on the market
conditions. Also, regional managers would be able to make decisions regarding non-critical parts
supplied by local suppliers as well as problems within the facility. Such a decentralization would
ensure faster movement in addressing local concerns and the fitting of the respective regional
markets (Vantrappen, H., & Wirtz, F. 2017).
Embracing this hybrid decision-making schema- being centralized and decentralized all at once
will have significant consequences for Tiller Components. In the first place, it would make the
authority and accountability structures more cohesive, making localized managers more
inclined to make decisions that fall within their purview. Such changes would likely positively
affect the levels of motivation and job satisfaction of employees operating at the regional level.
Secondly, the management of the company would enjoy quicker operational decision-making
since it would not be necessary for the local managers to ask for permission for all their
decisions. Additionally, this structural configuration would free Sherry Smith from the day-today details of management and turn her attention to longer-term strategic projects.
To continuously manage and improve the performance of various structures, several tools of
this type would be necessary. For instance, a Return on Investment (ROI) analysis would make it
possible to evaluate the relative effectiveness of each plant in the employment of assets
assigned to it and in making profits. Tips on using residual income measures suggest why one
might measure performance at the divisional level, considering divisions often make more than
simply creating profits over a targeted return. Performance dashboards focused on specific
indicators of production, including efficiency, quality, and customer satisfaction, would allow for
further assessment of the dynamics of the company’s operations.
Moreover, the introduction of responsibility accounting systems will be an effective way of also
measuring the performance of each department relevant to the specific performance targets
and budgets. This would mean categorizing each plant as a cost center, profit center, and
investment center according to the autonomy that the local administration is subjected to.
Periodic timely financial statements, for instance, those using vertical and horizontal analysis,
will indicate any performance anomalies and the regional performance within the period in
question.
The compensation scheme for the local management should incorporate incentives targeted
towards the specific divisions as well as those aimed towards the corporation as a whole to
enhance the achievement of local management strategy to the corporate one. This could also
mean cause imbalances that mushroomed two decades ago or the use of scorecards that
encompass finance, operations, customers, and learning and growth aspects. Periodical
adjustments in working conditions and satisfaction of the personnel would eliminate
communication barriers between the headquarters and regional branches (Bragg, 2022).
This rational model of the management of the unit, suited with better analytical mechanisms
and defining standards of performance, will enable Tiller Components to maintain its
competitive superiority in the market amidst better and more efficient management of
dispersed units. The challenge lies in achieving a proper equilibrium between central authority
and empowerment of the local management so that both the strategic intent of the corporation
and its operational effectiveness are maximized.
Reference
Chapter 10 PowerPoint slides in Managerial Accounting
Vantrappen, H., & Wirtz, F. (2017, December 26). When to Decentralize Decision Making, and
When Not To. Harvard Business Review. https://hbr.org/2017/12/when-to-decentralizedecision-making-and-when-not-to (seminal)
Bragg, S. (2022, April 29). Decentralized organizational structure. AccountingTools.
https://www.accountingtools.com/articles/decentralized-organizational-structure (seminal)