Decentralization, goal congruence, responsibility centers.
Hexton Chemicals consists fo seven operating divisions that operate independently. The operating divisions are assisted by a number of support groups, sucj as R&D, human resources, and environmental management. The environmental management group consists of 20 environmental engineers. These engineers musgt seek business from the operating divisions - that is, the projects they work on must be mutually agreed to an paid for by one of the operating divisions. Under Hexgton's rules, the environmental group is required to charge the operating divisions for environmental services at cost.
1. Is the environmental management group centralized or decentralized?
2. What type of responsibility center is the environmental management group?
3. What benefits and problems do you see in structuring the environmental management group in the way? Does it lead to goal congruence and motivation? Explain.
There are seven operating divisions that operate independently and assisted by support departments. The projects are mutually agreed thus what the environmental department group does is controlled by the engineers in mutual consultation with operating divisions, the group is therefore decentralized.
Q2: Since environmental management group charges the operating divisions for the work at cost basis, it is a cost center.
1. Since environmental group adds to the cost of operating ...
Short clear answers. Three advantages and three disadvantages provided.