Planning and Control in

Decentralized Operation
Prepared by:
Augusto B. Agosto, REA, REB
Topic Outline
Definition of decentralization
Decentralization & segment reporting
Decentralization in organization
Definition of Decentralization
Decentralization (or decentralisation) is the process of
redistributing or dispersing functions, powers, people or things
away from a central location or authority.
Wikipedia
Definition of
Decentralization
A decentralized organization is one in which decision
making is not confined to a few top executives but
rather is throughout the organization, with managers at
various levels making key operating decisions relating
to their sphere of responsibility. Decentralization is a
matter of degree, since all organizations are
decentralized to some extent out of necessity.
Advantages of Decentralization
Relieves the Top Executives of Excessive Workload.
Managerial Development
Increase in morale of employees
Quicker and better decisions
Improvement in Industrial Relations
Disadvantages of
Decentralization
Dependence on the ability of subordinates
Lack of cooperation
Lack of uniformity of decision
difficult to effectively spread innovative ideas.
Decentralization & Segment Reporting
What is the segment?
A segment is a part or activity of an organization about
which managers would like cost, revenue or profit data.
Examples of segments include divisions of a company,
sales territories, individual stores, service centers,
manufacturing plants, marketing departments, individual
customers and product lines.

Decentralization & Segment Reporting
Relationship of D&SR
Effective decentralization requires segment reporting. In
addition to the company-wide income statement, reports
are needed for individual segments of the organizations.
These segmented income statements are useful in
analyzing the profitability of segments and measuring the
performance of segment managers.

Decentralization & Segment Reporting
Categorization of business segment
cost centers
profit centers
investment centers
responsibility centers
Decentralization in
organization
In a decentralized company, managers of separate divisions or
units are delegated operating responsibility. The division (unit)
managers are responsible for planning and controlling the
operations of their divisions.
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