A rapidly expanding retail organization continues to be tightly controlled by its original small management team. Which of the following is a potential risk in this vertically centralized organization?
A.
Lack of coordination among different business units
B.
Operational decisions are inconsistent with organizational goals.
In a vertically centralized organization, decision-making is concentrated among a small management team, potentially leading to various risks.
Risk Analysis:
Option A: Lack of coordination among business units is less likely in a centralized structure as decisions are made by a central authority.
Option B: Inconsistent operational decisions are less common as central management typically ensures alignment with organizational goals.
Option C: Centralized decision-making can lead to suboptimal decisions due to a lack of diverse perspectives and delayed responses to local issues.
Option D: Duplication of business activities is less relevant in a tightly controlled central structure.
Conclusion:
The primary risk in a vertically centralized organization is suboptimal decision-making, as the concentration of authority can result in a lack of responsiveness and consideration of all relevant factors.
Organizational Structure and Internal Control Theory.
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