Q – Please read the discussion below and prepare a Reply to this discussion post withcomments that further and advance the discussion topic.
Please provide the references you used.
Ensure zero plagiarism.
Word limit: 200 words
Discussion
Centralized and Decentralized Decision-Making Approaches
One critical decision for Tiller Components’ CEO is whether to use centralized or decentralized
decision-making processes. The suitability of each strategy is determined by the organization’s
specific circumstances and objectives. I will discuss the implications of centralized and decentralized
decision-making, as well as how analytical tools might help Sherry Smith manage and evaluate
performance.
Decentralized Decision-Making:
Decentralized decision-making entails the transfer of decision-making power to management at
the local or regional level. Decentralization is crucial for the management of day-to-day operations,
inventories, customer relations, and product creation to cater to regional demands. The shift to
decentralized decision making by Tiller components will have many benefits. According to Warren
and Tayler (2020), decentralized decision making enables teams or departments to exercise decisionmaking authority, hence fostering multidirectional communication. Moreover, the empowerment of
regional managers to make decisions that are more relevant to their respective regions will contribute
to innovation and creativity. The implementation of decentralized decision-making can enhance
accountability by holding regional managers responsible for the success of their respective regions.
The successful execution of strategies can result in increased levels of creativity, faster decisionmaking, and enhanced levels of responsibility. Nevertheless, poor management of the decentralized
decision-making may result in poor performance and conflicts in the process of making decisions.
Therefore, Smith should establish clear policies and procedures pertaining to decision-making, as well
as establish effective communication channels to promote coordination among various regions.
Centralized Decision-Making:
Centralized decision-making entails the concentration of authority and decision-making power
among the uppermost levels of the organizational hierarchy. Smith should consider the centralization
of specific responsibilities to provide operational uniformity and oversight. These functions include
financial management, marketing, strategic planning, human resources management. The
implementation of a centralized strategic plan is crucial to effectively coordinate business objectives
across several regions (Warren & Tayler, 2020). Centralization of financial management is crucial for
ensuring efficient and successful administration of resources. Also, it is crucial to centralize human
resources management to maintain uniformity of business policies and procedures across different
geographical locations. Centralization of marketing is essential to provide consistent and successful
presentation of the company’s brand across all geographical locations. Nevertheless, it could also
lead to decreased response times and limited adaptability in accommodating regional or marketspecific fluctuations. The decision-making process in the company is limited to the top management,
thereby excluding employees from contributing to this process. Consequently, the lack of active
participation in the decision-making process leads to diminished performance, and decreased
motivation.
Analytical tools for evaluating company performance:
Analysis tools like as Return on Investment (ROI) and residual revenue can provide Smith with
enhanced insights into the performance of each division and sector. The return on investment (ROI)
metric assesses the profitability of an investment by evaluating the ratio between the return on
investment and the cost of investment. Residual income is a metric that quantifies the surplus return
generated by an investment, taking into account the deduction of the capital cost (Bergeron et al.,
2019). These techniques can help Smith to identify companies and segment that exhibit high
performance, as well as those that display low performance. Nevertheless, these methods may not
fully capture the comprehensive assessment of the business’s entire performance. Alternative
measures such as liquidity and profitability ratios can also be employed to evaluate the performance
of individual business units. Liquidity measures assess the capacity of a firm to fulfill its immediate
financial obligations, whereas profitability measures evaluate the company’s profitability in relation to
its sales, assets, and capital. These metrics offer a more holistic representation of the company’s
financial performance and aid Smith in making well-informed decisions.
References
Bergeron, C., Gueyie, J. P., & Sedzro, K. (2019). Earnings multifactor process, residual income
valuation, and long-run risk. Journal of Theoretical Accounting Research, 15(1), 23-43.
Warren, C. S., & Tayler, W. B. (2020). Managerial accounting. Cengage Learning, Inc..
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