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Decentralisation and responsibility centres
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Advantages and disadvantages of delegation and decision making. Responsibility centres and conditions for delegation. Detailed with images.
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Managerial Accounting 5.10.20Decentralisation and responsibility centres
Delegation of decision making
o Decentralisation: The delegation of decisions making authority to employees at lower
levels
o Necessary when organisations grow as top management are unable to take on all the
responsibility
Advantages:
- Allows organisations to respond quickly to events
- Frees top management from day to day operating activities
- Uses specialised knowledge and skills of managers
- Promotes development
- Control and supervision
- Motivation
Challenges:
- Goal congruence: managers of all subunits make decisions that achieve top management
goals
- Managers must work in accordance with objectives
- Difficult to ensure consistent practices
- Duplication of roles
Responsibility of accounting
o Measures the performance of people and departments to foster goal congruence
o Ensures the company makes goal congruent decisions
o Measures the performance of employees and departments
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