Week 11 - 12 chapter notes

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University of Toronto Scarborough
Financial Accounting
Liang Chen

Chapter 15 Performance Evaluation and Compensation Notes Decision-Making Authority and Responsibility N one approach to measuring, monitoring, and motivating employee performance is to give specific decision-making authority to employees and then hold them responsible for and reward them for the results of their decisions N shareholders give managers authority to decide how corporations resources are used N then, shareholders hold the managers responsible for creating shareholder value Centralized and Decentralized Organizations N when decision-making is centralized, the right to make or authorize decisions lies within top levels of management N when decision-making is decentralized, the rights and responsibilities for decision-making permeate all levels of the organization General versus Specific Knowledge N general knowledge information that is easy to transfer from one person to another within an organization N decisions based on general knowledge are likely to be centralized, made primarily by the CEO and other top managers N transferring general knowledge needed for decision-making to organizations headquarters is relatively easy and not very costly N specific knowledge detailed info about particular processes, customers, or products; info that is costly to transfer within firm Choosing a Centralized versus Decentralized Organizational Structure Centralized Organizations Decentralized Organizations Advantages Disadvantages Advantages Disadvantages N less monitoring of N more monitoring of N timely decision-making; N decisions may meet decisions employee effort because appropriate for dynamic objectives of decision N decisions are intended to they may be less processes and unstable makers subunit but not benefit overall firm motivated economic conditions meet organizational goals N if decision makers have N decision makers may not N decisions are made by N decisions may not be complete info, timely and have complete info, people who have most coordinated among efficient decisions are resulting in poorer-quality knowledge and expertise subunits, resulting in less made decisions N upper management has effective decision-making N good for stable operations N when knowledge from time to focus on for full organization and economic conditions subunits is required, the organizational strategies N decision makers may not decision-making process N decision-making authority understand or agree with slows down combined with reward organizational strategies N
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