Scenario Summary
Sherry Smith, CEO of Tiller Components, founded the company and led it to industry leadership in automobile parts. With plants in over 35 locations, she now struggles to manage operations as effectively as before.
The Concepts, Principles, and Theories from the Textbook Applicable to the Case
In the book Managerial Accounting, the authors consider specific operations and activities that form the managerial control of the company. For example, these points are divided into improving, directing, controlling, planning, and decision-making (Warren & Tayler, 2018). Particular attention should be paid to the fact that they have specific influences on each other. Such impacts as results, feedback, plans, and actions form the concept of a company’s functioning in terms of decentralization or centralization. Therefore, while determining what actions should be implemented via these two concepts, one should consider the actions described in the book.
Balancing Centralized and Decentralized Activities
Centralization
The operations that will be conducted centrally are the decision-making process, directing, financial control, and marketing strategy. The effectiveness of each of them will be much more significant when operating centrally. For instance, decision-making allows the company to have understandable goals and long-term strategies. Consequently, every area will realize its role and what points it should contribute.
Directing also depends on the vitality of a clearly outlined strategy. Financial control will be helpful in the centralized system due to the understanding of spending and making an entire plan for such needs as improvements, marketing, and actions needed for the company’s functioning. Finally, the centralized marketing strategy will allow the organization to contribute innovative approaches to attract new customers while assessing the specifications of every area.
Decentralization
On the other hand, decentralization is an efficient and essential process that contributes to many advantages within the company. First, taking into account the considerable number of areas that need to work effectively will allow one to diversify complex tasks in accordance with managers’ knowledge and skills. In other words, every area has its peculiarities, and the managers that operate within each of them can understand the needs and possible improvements much better compared to centralized management. The company will be able to achieve goals quickly with less spending. According to Calcaterra and Kaal (2021), “network effects occur when increasing numbers of participants or users in a given network improve the value of network access for the entirety of the users” (p. 8).
The next action regarding decentralization is customer service. In this case, managers of each area are aware of the specifications of local residents and clients. Moreover, in terms of automobile manufacturing, the company will be able to acquire local components and deal with policies effectively. It will positively affect local and regional managers by increasing their capabilities and influence.
Impact of Decision-Making Shifts on the Company
As a result of the above-stated actions, the overall influence on the company will assume better working experience in each area due to the greater capabilities that they would obtain. In addition, due to the shifts in the decision-making method, all workers will have a clear image of the company’s goals and how they can contribute to their achievement. It will increase their inspiration and reduce cases of burnout. The analytical tools, such as comparative analysis, will assist Smith in understanding each area’s functioning and constructing appropriate improvements by realizing the concerns of each area.
References
Calcaterra, C., & Kaal, W. (2021). Decentralization: Technology’s impact on organizational and societal structure. De Gruyter.
Warren, C., & Tayler, W. (2018). Managerial accounting (15 ed.). Cengage.
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