Centralized or Decentralized? View the resources here before answering the questions below. Characterize businesses that you have previously worked for or currently work for as centralized or decentralized, more vertical (taller) or flatter. How did you make this determination? What impact would this have on the three types of company responsibility centers? If you were to structure your own company would it be centralized or decentralized, taller or flatter and why? What are the benefits or drawbacks to the type of business you would own and explain whether you would use flexible or static budgeting and why? Solution A business is centralized if the decision making is focused on the top management. The top management decides on various issues, formulates policies and then distributes this information to the levels below it in the hierarchy. In a decentralized business, the managers working in the lower order of hierarchy make decisions for their business units. Their decisions are then given to the hierarchies above them. In a vertical structure the CEO sits at the top, followed by different levels of management. In a flatter structure, there are fewer levels of management. I previously worked in a consultancy firm, having different departments like financial consultancy, IT consultancy, and forensic. The firm had a decentralized structure as each department were taking their own decisions, suiting to their needs and requirements. The firm was more vertical as there was a CEO on top and there were different levels of management i.e team leads, group managers, AVP, VP and CEO. Having a decentralized structure in the consultancy firm made each employee and manager at each level equally responsible for the responsibility centers like revenue centers, cost centers and profit centers. If i were to structure my own company, i will make it a decentralized company with a flatter structure. This type of a structure empowers employees to contribute to the decision making process. Sales employees will be in a better position to make decisions regarding the sales department as they are more familiar to the requirements of the sales department. So this works best for the interest of the company. I will use flexible budget, as it is more connected to the reality. Flexible budget changes with the actual activity, whereas static budget never changes. As flexible budget changes with actual activity, a real time analysis of the company\'s profit and loss can be done. .

1. Centralized or Decentralized? View the resources here before answering the questions below.
Characterize businesses that you have previously worked for or currently work for as centralized
or decentralized, more vertical (taller) or flatter. How did you make this determination? What
impact would this have on the three types of company responsibility centers?
If you were to structure your own company would it be centralized or decentralized, taller or
flatter and why? What are the benefits or drawbacks to the type of business you would own and
explain whether you would use flexible or static budgeting and why?
Solution
A business is centralized if the decision making is focused on the top management. The top
management decides on various issues, formulates policies and then distributes this information
to the levels below it in the hierarchy.
In a decentralized business, the managers working in the lower order of hierarchy make
decisions for their business units. Their decisions are then given to the hierarchies above them.
In a vertical structure the CEO sits at the top, followed by different levels of management. In a
flatter structure, there are fewer levels of management.
I previously worked in a consultancy firm, having different departments like financial
consultancy, IT consultancy, and forensic. The firm had a decentralized structure as each
department were taking their own decisions, suiting to their needs and requirements.
The firm was more vertical as there was a CEO on top and there were different levels of
management i.e team leads, group managers, AVP, VP and CEO.
Having a decentralized structure in the consultancy firm made each employee and manager at
each level equally responsible for the responsibility centers like revenue centers, cost centers and
profit centers.
If i were to structure my own company, i will make it a decentralized company with a flatter
structure. This type of a structure empowers employees to contribute to the decision making
process. Sales employees will be in a better position to make decisions regarding the sales

2. department as they are more familiar to the requirements of the sales department. So this works
best for the interest of the company.
I will use flexible budget, as it is more connected to the reality. Flexible budget changes with the
actual activity, whereas static budget never changes. As flexible budget changes with actual
activity, a real time analysis of the company's profit and loss can be done.