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expenditures. Let’s all take some time to sketch out a revised structure for our supermarket.”

The vice president of store operations responded to the president: “Are you sure you are not expecting too much from changing the organization structure? No matter how much we switch around the boxes on the chart, we are still dealing with conventional thinking. Some of us are hesitant to change something that has gone so well for us. Our supermarket is looking very good in comparison to the many supermarkets that have failed in recent years. We all recall the hot new deepdiscounter that moved right next to one of our best locations, and failed within a year”.

Questions for discussion

1.What kind of company structure does Food Merchants have? What drawbacks in their structure do you see?

2.Draw a revised organization chart for Food Merchants that will help the supermarket be more responsive to new opportunities.

3.Explain why the structure you proposed should help the supermarket be more responsive to new opportunities.

4.What is your opinion of the operation manager’s belief that you can only expect so much from an organization structure?

VII. Delegation and Decentralization of Authority

Delegation of authority permits the transfer of authority from superior to subordinate. Delegation can be improved by following suggestions:

1.determine objectives

2.assign duties and grant authorities

3.establish necessary control

4.retain some important tasks for yourself

The major problems in delegation are often the result of the personality traits and behaviors of the delegator. Among such traits and behaviors are a delegator’s preference for detailed work, workaholism, avoidance of major issues, fear of failure, and distrust of others. The consequences of limited delegation include the sacrifice of valuable training experience and curtailment or reducing of suggestions and new ideas.

Decentralization is the delegation of decision-making authority to managers of lower ranking organization units. Decentralization is not necessarily synonymous with

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departmentalization and geographic dispersion. The decentralization of the decisionmaking function is relative, and the degree of decentralization depends on three factors: 1) frequency of decisions 2) breadth of the decisions, and 3) the control exerted over the decisions.

Centralization and decentralization each have advantages and disadvantages. The choice of a movement toward or away from centralization depends on a wide range of contingency factors, i.e. situations that might happen in the future, especially those that might cause problems.

Delegation of authority is favored if:

1)the organization reaches a certain size

2)top-level managers are highly competent and experienced and lower level managers are less competent and experienced

3)an organization succeeds in achieving its objectives; a more participative leadership style is enacted

4)the goals of superior and subordinates fit together well

5)subunits of the organization are widely dispersed or spread in different directions

6)tasks become more complex and dependant on advanced technology

7)decisions must be made quickly so that subordinates and subunits should have the authority to make those decisions

8)decisions are significant in terms of money or impact on the firm’s activities

9)the work flow requires the coordination and integration of a large number of

subunits

Professional managers tend to favor delegation and decentralization; traditional managers tend to prefer limited delegation and centralization.

Questions for discussion and review

1.Describe the delegation process. Explain why you think you would or would not be an effective delegator?

2.What are four suggestions for effective delegation?

3.Identify and explain behavioral aspects of delegation.

4.What is meant by the term decentralization? What is the meaning of centralization of authority?

5.What are the advantages of centralization and decentralization?

6.Under what circumstances and conditions is delegation likely to be effective?

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7.Would you hire a known workaholic for a key position within your firm? Why or why not?

Problems for action

1.Rick Hendrick is one of the automobile super dealers who owns and operates a number of car dealerships that sell many different makes of automobiles. Hendrick’s dealership sell over 12 varieties domestic and imported cars including Chevrolets,

Mercedes, and Volvos. Hendrick’s strategy is to shop for available franchises and failing dealerships in urban markets. Hendrick believes dependable service succeeds in the long run over promotional activity and big discounts. He then installs a general manager to handle daily operations and implement a management system. Hendrick believes in delegating responsibilities.

Develop a list of tasks Hendrick could delegate to be sure his business works efficiently.

2.You are involved in running a real estate firm. Your business is successfully developing. Recently you have formed three subsidiaries. You need a new top manager responsible for purchasing and selling buildings. You have been offered a woman, Cherney by name, who was described as a highly aggressive, driven, and ambitious person. To establish herself in business, Cherney worked from 7a.m. till 7p.m. on weekdays plus Saturdays and Sundays. She could be like a bulldog when felt strongly about a deal. !0 people were supposed to work under her.

Would you hire a known workaholic for a key position within your company? Why or why not? Describe all the advantages and disadvantages of taking such a person on board.

Case Study: The Chief Executive Officer of Primerica

Gerald Tsai, was appointed chief executive officer of Primerica Corporation (formerly American Can Company) in April, 1986, and the title of chairman was added in early 1987. He came to Primerica after a long series of successes in finance. Raised in Shanghai, China, he became a stock analyst for Fidelity Capital Fund in 1958 and pioneered an aggressive style of investment that was said to revolutionize money management. In 1966 Tsai raised $270 million to found the Manhattan fund

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that later took a dramatic decline in asset value. He sold Manhattan Fund to CAN Financial Corporation and worked there as an executive for five years.

Disappointed with his progress at CAN Financial, Tsai purchased a small brokerage company. In 1978, he acquired Associated Madison, a small insurance company that he used as a vehicle for purchasing other insurance companies. Tsai then sold Associated Madison to Primerica for $162 million, and was given responsibility for moving the company into financial services. In his capacity as an executive vice president, Tsai spearheaded (иметь преимущество) $1 billion worth of acquisitions. His success as a deal-making executive facilitated his promotion to vice chairman in 1983, and chief executive officer in 1986.

Under Tsai’s financial leadership, Primerica regained its former status as a profitable business corporation. Despite this improved financial picture, some critics would have preferred that Primerica concentrate more on its can business and less on buying and selling companies as a path to profits. By 1987 the company had sold all of its packaging operations to Triangle Industries. The can business was therefore absorbed into National Can Corporation, a subsidiary of Triangle Industries. Tsai responds to his critics by saying that his only job is to maximize shareholder value.

Tsai chooses to be heavily involved in financial deal making. For example, he worked late into the night and on weekends to sell the U.S. packaging operations to Triangle Industries for $570 million. Tsai spends the bulk of his work week formulating deals and working out their details. For example, he formed a partnership with a firm called Rosenberg Capital Management that manages large pension funds. Tsai’s specialty, however, is purchasing life insurance companies that occupy a niche in the market.

Many stock analysts doubt that Tsai has the management skills required to build lasting values in the companies purchased by Primerica. These critics are sure that Tsai is more of a deal maker than an executive with a broad point of view. At CAN Financial, Tsai experienced difficulty in accomplishing tasks through a bureaucratic system. An observer noted that he had difficulty in managing people who were not as smart or as quick as he is.

When Tsai was appointed CEO of Primerica, he decreased his working day to twelve hours instead of the usual fourteen. Shortly thereafter, however, he began his workday at 7:00 a.m., instead of 7:30 (as he did when he was a vice chairman). Tsai works about six hours on Sundays and schedules a business meeting every weekday night. Home at 10:00 p.m., he carefully reads magazines and reports of brokerage houses until 1:00 in the morning. Tsai says he would prefer that he didn’t have to