GNB 15e 11 Instructor
Performance Measurement in
Decentralized Organizations
Chapter 11
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 201 by McGrawHill Education. All rights reserved.
11-2
Decentralization in Organizations
Benefits of
Decentralization
Top
Top management management freed freed to to concentrate concentrate on on strategy. strategy. Lower-level decisions Lower-level decisions often often based based on on better better information. information. Lower
Lower level level managers managers can can respond respond quickly quickly to to customers. customers. Lower-level
Lower-level managers managers gain gain experience experience in in decision-making.
Decision-making
decision-making.
Decision-making
authority authority leads leads to to job job satisfaction. satisfaction. 11-3
Decentralization in Organizations
May
May be be aa lack lack of of coordination coordination among among autonomous autonomous managers. managers. Lower-level
Lower-level manager’s manager’s objectives objectives may may not not be be those those of of the the organization. organization. Lower-level
Lower-level managers managers may may make make decisions decisions without without seeing seeing the the “big
“big picture.” picture.” Disadvantages of
Decentralization
May
May be be difficult difficult to to spread spread innovative innovative ideas ideas in in the the organization. organization. 11-4
Responsibility Accounting
Cost
Cost
Center
Center
Cost, profit, and investment centers are all known as responsibility centers.
Profit
Profit
Center
Center
Responsibility
Responsibility
Center
Center
Investment
Investment
Center
Center
11-5
Cost Center
A segment whose manager has control over costs, but not over revenues or investment funds. 11-6
Profit Center
A segment whose manager has control over both costs and revenues, but no control over investment funds.
Revenues
Decentralized Organizations
Chapter 11
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 201 by McGrawHill Education. All rights reserved.
11-2
Decentralization in Organizations
Benefits of
Decentralization
Top
Top management management freed freed to to concentrate concentrate on on strategy. strategy. Lower-level decisions Lower-level decisions often often based based on on better better information. information. Lower
Lower level level managers managers can can respond respond quickly quickly to to customers. customers. Lower-level
Lower-level managers managers gain gain experience experience in in decision-making.
Decision-making
decision-making.
Decision-making
authority authority leads leads to to job job satisfaction. satisfaction. 11-3
Decentralization in Organizations
May
May be be aa lack lack of of coordination coordination among among autonomous autonomous managers. managers. Lower-level
Lower-level manager’s manager’s objectives objectives may may not not be be those those of of the the organization. organization. Lower-level
Lower-level managers managers may may make make decisions decisions without without seeing seeing the the “big
“big picture.” picture.” Disadvantages of
Decentralization
May
May be be difficult difficult to to spread spread innovative innovative ideas ideas in in the the organization. organization. 11-4
Responsibility Accounting
Cost
Cost
Center
Center
Cost, profit, and investment centers are all known as responsibility centers.
Profit
Profit
Center
Center
Responsibility
Responsibility
Center
Center
Investment
Investment
Center
Center
11-5
Cost Center
A segment whose manager has control over costs, but not over revenues or investment funds. 11-6
Profit Center
A segment whose manager has control over both costs and revenues, but no control over investment funds.
Revenues