Question

Thanks to his firm's decentralization and use of responsibility accounting, Matt has more time to review a proposed new joint venture with one of the firm's business partners. What advantage of decentralization does this illustrate?

Answer 1

Answer:

Encourage the top echelon of the management focus on strategic decisions.

Explanation:

To begin, Decentralization is one of the tools of management aimed at delegating tasks to the lower level of staffs. Decision in an organization is often at:

1. Strategic level

2. Tactical level

3. Operational level

Strategic decisions are often reserved for the top management. However, being the top management, they are responsible for the activities done at all levels of decision taking. Hence, decentralization has become a tool through which management delegate otherwise important functions to trusted and competent staff.

Now, with the decentralization, Matt now has more time to review proposed new joint venture - a strategic function, with one of the business partners. This is one of the advantages of decentralization, as a competitive advantage has thus been created in the time and resources used in reviewing the new joint venture.

Answer 2

Answer:

It encourages top level management to concentrate and focus on strategic and profitable decisions.

Explanation:

As organizations expand, decentralization becomes very necessary and crucial. This is because responsibilities increase for top managers/group of managers who run the entire organization as a result of increase in products and services offered by the organization.

As organizations expand, the need for strategic decision-making for organization's progress increases. As decentralization plays in,

1. it helps to make quicker strategic decisions

2. develops performance measures

3. it motivates local managers who are given more responsibility and the control necessary to manage their responsibility

4. it helps to refocus top management on issues important to specific segment and on broader organization-wide issues.

5. it increases expertise as local managers who have expertise are delegated with decision-making authority in specific products.

As decentralization and responsibility accounting played in, Matt and one of the firm's business partners now had more time to strategically plan and make profitable decisions for the proposed new joint venture.