ok hi gamer Flashcards
What is Decentralization?
The delegation of decision making in an organization.
What are the advantages of Decentralization?
5 advantages
Better use of local knowledge.
Faster responses to changing environments.
Better use of top management’s time.
Reduction of problems to manageable sizes.
Training, evaluation and motivation of local managers.
What are the disadvantages of Decentralization?
3 Disadvantages
Dysfunctional decision-making– local level managers make decisions that benefit their personal interests rather than the organization as a whole.
Administrative duplication.
The possibility of poor decisions being made on incomplete information.
What does a management control system do?
A management control system uses structures and procedures to influence agents to take actions to implement organization’s strategies to achieve its goals.
What are the 3 elements of a management control system?
Delegated decision making authority
Performance evaluation and measurement systems
(Costs of monitoring vs benefits of better information must be considered)
Compensation and rewards systems
What are cost centers?
Managers are responsible for controlling costs when there is a well designed relationship between inputs and outputs e.g production departments.
What are Discretionary cost centers?
Managers are responsible for controlling cost when there is NOT a well designed relationship between inputs and outputs eg. R&D, advertising
What is a revenue center?
Managers are responsible for generating revenues.
What is a profit center?
Managers are responsible for both controlling costs and generating revenues eg. store or hotel managers.
What are Investment Centers
Managers are responsible for controlling costs generating revenues and making desisions about capital budgeting and other uses of assets. High level executives
What is Goal congruence?
Decisions made in an individual’s best interests are also in the organization’s best interests.
What is the difference between Relative Performance and Absolute Performance?
Relative performance is comparison with peers, and absolute performance is when you are comparing against specific targets.
What is the controllability concept?
The Controllability Concept indicates that only these costs and revenues that a manager can control or influence should be used in performance evaluations.
