– Reply to discussion (valuating Decentralized Operations)

Reply todiscussion (valuating Decentralized Operations)

Q – Please read the discussion Attached and prepare a Reply to this discussion 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:200words.

As the chief executive officer of Tiller Components, whose operation is spread across 35
locations, a decentralized pattern of decision making is very well applicable. It would bring the
corporation closer to the local and regional managers, hence an avenue of quicker response
times in terms of changing market conditions and operational difficulties (Vantrappen & Wirtz,
2017). Decentralization can also go a step ahead in increasing the managers accountability as
well as motivation since their performances would be determined by the units they managed.
Centralized vs. Decentralized Decision-Making
Decision-making power is located at the top under a centralized structure, and under such a
framework, delays and inefficiencies will probably occur, especially within a large organization
like Tiller Components. At the other extreme, decentralization disperses the power downward
through the levels of management. This would be particularly advantageous about
manufacturing products since the regional managers will be better positioned to apply their
knowledge of local market forces to make decisions faster.
Centralize and Decentralize Activities
Other activities that can perhaps remain centralized include strategic planning, financial control,
and major investment decisions. This allows financial management to be centrally controlled
and assures consistency and conformance with overall corporate goals and objectives. For
example, budgeting and capital expenditure can be centrally coordinated to maintain financial
integrity in all plants. On the other hand, operational decisions such as production scheduling,
local marketing, and employee management should be undertaken at a decentralized
level (Bragg, 2022). It is the managers located at the local level that have the know-how to
orient operations towards the prevailing regional needs of the customers and improve
productivity and customer satisfaction. In being autonomous, these managers would allow Tiller
Components to enjoy customized strategies leveraging from the local market conditions.
Impact of Decentralization on the Company
A decentralized structure may probably have significant impacts on Tiller Components. Giving
regional managers more power could lead to responsiveness and agility in the company.
Decisions can be much quicker without being bottled up by higher management seeking
approval. This may foster innovation as managers experiment with new strategies in regions
where they find most fit. Apart from that, this can also increase the spirit and the retention of
an employee. Ownership for outcomes by operating managers would stimulate investment in
their teams that would, in turn trigger performance improvement. This relates to the discussion
in the textbook regarding the principles on performance management and evaluation with
regard to how properly articulated measures bring value to the stakeholders (Managerial
Accounting, Chapter 10)
Analytical Tools on Performance Appraisal
In such regard, the tools can be utilized differently by Sherry Smith in facilitating the
performance of each division. Therefore, within this context, KPIs are imperative in ensuring
that measurement performance is achieved within decentralized units; these are presented in
the form of ROI and residual income. The ROI measures profitability of each division against its
investment in capital, and the information outlines operations efficiency.
On the other hand, residual income gives a better insight into value creation beyond only
profits. It considers cost of capital, hence assists in ensuring that the divisions do not only
generate profits but also have a positive contribution to the overall performance of the
company. These analyses will, therefore, aid Smith in judging which divisions are performing
well and which may be in need of support or even restructuring (Managerial Accounting,
Chapter 10). This would allow local managers to make responsible decisions that allow quicker
responsiveness and accountability.
In essence, the company will be improving its performances throughout its wide network by
centralizing strategic oversight while decentralizing the operation functions. The use of
analytical tools like ROI and residual income will help Smith in better performance
measurement while effectively making strategic decisions.
References:
Chapter 10 in Managerial Accounting
Bragg, S. (2022, April 29). Decentralized organizational structure.
AccountingTools. https://www.accountingtools.com/articles/decentralized-organizationalstructure (seminal)
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)
Reply to discussion (valuating Decentralized Operations)
Q – Please read the discussion Attached and prepare a Reply to this discussion 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.