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Conair is a company that produces quality hairdryers for the premium market. Although it started off as a small and centralized manufacturing company, it had since then grown larger, establishing production facilities in several cities, which enabled the company to claim market share in different countries. As it stands, the company is centralized, with a board of directors making decisions for all branches.
However, this type of organization is not efficient when the production centers are spread out, as decision-making takes place far from the actual facility, which hinders the speed and accuracy of choices. Decentralization is a viable opportunity for Conair. The purpose of this paper is to analyze the prospect of decentralization, changes in responsibility centers and their functions, the drain presented by cost centers, and the role of business analytics in a decentralized organization.
Responsibility Centers and Their Functions
As it stands, Conair has four responsibility centers, which are as follows (Drury, 2013):
- Revenue centers. These centers are responsible for generating revenue flows. Since Conair produces hair dryers for a larger market, it has no need to field and maintain specialized shops. Therefore, the revenue centers constitute the retail centers that buy the company’s products and sell them in interest.
- Cost centers. These centers incur certain costs and facilitate operations necessary for the company’s proper functioning. These include accounting departments, operational departments, and all support services. In Conair, these services are centralized, while each branch has primary supportive departments at their point of dislocation.
- Profit centers. They are responsible for creating products to be sold. These include the supply and assembly lines.
- Investment centers. Conair does not have any active investment centers in the form of differentiated product lines or affiliated organizations and enterprises. However, it will be possible to attract investments should the company decide to expand its existing line of products.
Cost Centers and Internal Chargebacks
As it stands, the company has main cost centers at the HQ and additional cost centers at each of the enterprises. The latter serves to double the primary facilities and produce intermediate reports necessary for the functioning of branch production facilities. Expenses for these costs centers are as follows (Tolbert & Hall, 2015):
|Central accounting department||100000 $|
|Branch accounting departments||25000$|
|Central marketing department||75000$|
|The central business analytics department||50000$|
|Central HR department||30000$|
|Branch HR departments||15000$|
It is possible to remove some of the centralized cost facilities and instead expand those located in the production centers. Such a measure would provide better detail of information, increase decision-making speed, and improve the overall flexibility of management. Applying Internal chargebacks could be done by delegating and outsourcing some of the operations, such as business analytics and supportive services. The adjusted results are as follows (Tolbert & Hall, 2015):
|Branch accounting departments||75000$|
|Branch marketing departments||100000$|
|Delegated analytics department||N/A-20000$ when needed|
|Branch HR departments||25000$|
|Delegated supportive Services||N/A-25000$ when needed|
The Role of Business Analytics in a Decentralized Organization
In a decentralized business organization, it is pointless to have a central business analytical department, nor is it very feasible to hold one readily available in each sector unless those sectors are large enough to serve as independent companies on their own. It is recommended for Conair to purchase the services of independent business analytic teams when it is required, as it would save money and help adjust the company strategy in a particular market. Business analytics can not only improve the quality of labor but also reduce costs, make marketing campaigns more efficient, and cater to the peculiarities of the location (Nagle & Muller, 2018).
Conair’s current centralized structure is not as efficient as it could be. Switching over to a more decentralized management framework would help reduce costs associated with redundant cost-centers and give local managers a greater degree of freedom in decision-making. Some of the functions currently held by centralized departments could be delegated to outside firms.
Drury, C. (2013). Management and cost accounting (4th ed.). Berlin, Germany: Springer.
Nagle, T. T., & Muller, G. (2018). The strategy and tactics of pricing: A guide to growing more profitability. New York, NY: Routledge.
Tolbert, P. S., & Hall, R. H. (2015). Organizations: Structures, Processes, and Outcomes (10th ed.). New York, NY: Routledge.