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Principles of Accounting. Analyzing and Recording Transactions. Adjustments and Financial Statements. Completion of the Accounting Cycle. Accounting for a Merchandising Company. Subsidiary Ledgers and Special Journals. Operating Assets. Subject: Examinations, questions, etc. Subject: Accounting -- Problems, exercises, etc.
- The Economics of Macro Issues, 5th Edition (Pearson Series in Economics).
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In centralized companies, many important decisions are made at higher levels of the hierarchy, whereas in decentralized companies, decisions are made and problems are solved at lower levels by employees who are closer to the problem in question. As an employee, where would you feel more comfortable and productive?
Decentralized companies give more authority to lower-level employees, resulting in a sense of empowerment. Decisions can be made more quickly, and employees often believe that decentralized companies provide greater levels of procedural fairness to employees. Job candidates are more likely to be attracted to decentralized organizations. Because centralized organizations assign decision-making responsibility to higher-level managers, they place greater demands on the judgment capabilities of CEOs and other high-level managers.
Many companies find that the centralization of operations leads to inefficiencies in decision making. For example, in the s, the industrial equipment manufacturer Caterpillar suffered the consequences of centralized decision making. At the time, all pricing decisions were made in the corporate headquarters in Peoria, Illinois.
CliffsQuickReview Accounting Principles I
This meant that when a sales representative working in Africa wanted to give a discount on a product, they needed to check with headquarters. Headquarters did not always have accurate or timely information about the subsidiary markets to make an effective decision. As a result, Caterpillar was at a disadvantage against competitors such as the Japanese firm Komatsu.
Changing their decision-making approach to a more decentralized style has helped Caterpillar compete at the global level. However, centralization also has its advantages. Some employees are more comfortable in an organization where their manager confidently gives instructions and makes decisions.
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In fact, organizations can suffer from extreme decentralization. For example, some analysts believe that the Federal Bureau of Investigation FBI experiences some problems because all its structure and systems are based on the assumption that crime needs to be investigated after it happens. Over time, this assumption led to a situation where, instead of following an overarching strategy, each FBI unit is completely decentralized and field agents determine how investigations should be pursued.
It has been argued that due to the change in the nature of crimes, the FBI needs to gather accurate intelligence before a crime is committed; this requires more centralized decision making and strategy development Brazil, Hitting the right balance between decentralization and centralization is a challenge for many organizations. For example, for a company of that size, centralizing purchasing operations led to big cost savings because the company could negotiate important discounts from suppliers.
At the same time, many analysts think that the centralization went too far, leading to the loss of the service-oriented culture at the stores. Nardelli was ousted after seven years Charan, ; Marquez, Formalized structures are those in which there are many written rules and regulations.
These structures control employee behavior using written rules, so that employees have little autonomy to decide on a case-by-case basis.
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An advantage of formalization is that it makes employee behavior more predictable. Whenever a problem at work arises, employees know to turn to a handbook or a procedure guideline. Therefore, employees respond to problems in a similar way across the organization; this leads to consistency of behavior. While formalization reduces ambiguity and provides direction to employees, it is not without disadvantages.
A high degree of formalization may actually lead to reduced innovativeness because employees are used to behaving in a certain manner. In fact, strategic decision making in such organizations often occurs only when there is a crisis. The service industry is particularly susceptible to problems associated with high levels of formalization. For example, while a handful of airlines such as Southwest do a good job of empowering their employees to handle complaints, in many airlines, lower-level employees have limited power to resolve a customer problem and are constrained by stringent rules that outline a limited number of acceptable responses.
Keeping the size of the organization constant, tall structures have several layers of management between frontline employees and the top level, while flat structures consist of only a few layers. In tall structures, the number of employees reporting to each manager tends to be smaller, resulting in greater opportunities for managers to supervise and monitor employee activities. In contrast, flat structures involve a larger number of employees reporting to each manager.
In such a structure, managers will be relatively unable to provide close supervision, leading to greater levels of freedom of action for each employee.
Principles of Management
At the same time, there may be some challenges associated with flat structures. Research shows that when managers supervise a large number of employees, which is more likely to happen in flat structures, employees experience greater levels of role ambiguity—the confusion that results from being unsure of what is expected of a worker on the job Chonko, This is especially a disadvantage for employees who need closer guidance from their managers.
Moreover, in a flat structure, advancement opportunities will be more limited because there are fewer management layers.
Because tall structures are typical of large and well-established companies, it is possible that when working in such organizations employees feel a greater sense of job security. Companies such as IKEA, the Swedish furniture manufacturer and retailer, are successfully using flat structures within stores to build an employee attitude of job involvement and ownership.
Organizational structures differ in terms of departmentalization, which is broadly categorized as either functional or divisional. Organizations using functional structures group jobs based on similarity in functions. Such structures may have departments such as marketing, manufacturing, finance, accounting, human resources, and information technology.
In these structures, each person serves a specialized role and handles large volumes of transactions. For example, in a functional structure, an employee in the marketing department may serve as an event planner, planning promotional events for all the products of the company. In organizations using divisional structures , departments represent the unique products, services, customers, or geographic locations the company is serving.
Thus each unique product or service the company is producing will have its own department. Within each department, functions such as marketing, manufacturing, and other roles are replicated. In these structures, employees act like generalists as opposed to specialists. Instead of performing specialized tasks, employees will be in charge of performing many different tasks in the service of the product.
For example, a marketing employee in a company with a divisional structure may be in charge of planning promotions, coordinating relations with advertising agencies, and planning and conducting marketing research, all for the particular product line handled by his or her division. In reality, many organizations are structured according to a mixture of functional and divisional forms. For example, if the company has multiple product lines, departmentalizing by product may increase innovativeness and reduce response times.
Each of these departments may have dedicated marketing, manufacturing, and customer service employees serving the specific product; yet, the company may also find that centralizing some operations and retaining the functional structure makes sense and is more cost effective for roles such as human resources management and information technology. The same organization may also create geographic departments if it is serving different countries.
Each type of departmentalization has its advantages. Functional structures tend to be effective when an organization does not have a large number of products and services requiring special attention. Wewelcome your feedback!
Managers fulfill many roles and have many different responsibili-ties at each level of management within an organization. In this chapter,you not only discover those roles and functions, but you also find out thetruth about several common misconceptions about management. Groups of individuals constantlyjoin forces to accomplish common goals. Sometimes the goals of theseorganizations are for profit, such as franchise restaurant chains or clothingretailers. Other times, the goals are more altruistic, such as nonprofitchurches or public schools.