COMM-2016EL Chapter Notes - Chapter 14: Profit Center, Transfer Pricing, Historical Cost
16 Dec 2017
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Lower-level managers have the best information concerning local conditions and therefore may be able to make better decisions than their superiors. Managers acquire decision-making ability and other management skills that help them move upward in the organization, assuring continuity of leadership. Managers enjoy higher status from being independent and thus are better motivated. Managers in decentralized organizations also tend to be duplicated services that might be less expensive if they were centralized (such as accounting, advertising, etc. ) Costs of accumulating and processing information frequency rise because responsibility accounting reports are needed for top management to learn about and evaluate decentralized units and their manager. Managers may waste time negotiating w/ other units about goods/services one unit provides to the other. Decentralization is most successful when an organization"s segments are relatively independent of one another. That is, the decisions of one manager will not affect the fortunes of another manager. Segment autonomy the delegation of decision-making power to segment managers.
