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Abstract
The growing quality of operational and management level control has contributed to the increase
in organizational performance by evaluating performance at various levels in a firm; top
management, middle management, and operating level employees in various departments.
However, decentralization, a decision-making practice of delegating significant authority and
responsibility to strategic business units (SBU) managers, without stringent oversight and robust
level controls could potentially negatively impact the objectives of the firm and threaten its
sustainability goals. Previous research has primarily shown that there are numerous potential
benefits to a decentralized organizational structure, however, dangers and challenges such as
decreased control and coordination of financial resources, and conflict of interests derail the
organizational structure and subsequently organizational goals. This study analyzes the
problems, risks, and challenges associated with decentralization within Image Skincare
Manufacturing, LLC and how these can be mitigated through proper level controls and oversight
to ensure the strategic allocation of financial resources both in the short and long term goals of
the organization.
Keywords: operational level control, management level control, organizational
performance, decentralization, organizational structure, financial resources
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Operational Level Control
Operational level control plays a crucial role in organizational goals in the context of
strategic allocation of financial resources (Blocher et al., 2022). Financial resource allocation is
a critical decision-making process that determines how an organization’s funds are utilized.
Carmona and Ezzamel (2023) describe operational level control as the day-to-day monitoring
and regulation of activities within an organization, and focuses on establishing and implementing
control mechanisms to ensure that financial resources are used efficiently and effectively. This
level of control focuses on activities such as budgeting, cost control, and performance
measurement. By implementing operational level control, organizations can track their financial
performance, identify areas of improvement, and make necessary adjustments to achieve their
strategic objectives.
At this level of control, standard operating procedures are followed, quality checks are
conducted at each stage, and any deviations or issues are addressed promptly. Organizations can
minimize errors, defects, and variations by maintain control over processes leading to improved
quality (Antony et al., 2023). Operational level control includes implementing quality assurance
measures such as inspections, audits, and testing. For example, Alkhaldi and Abdallah (2020)
found these measures helpful in the identification and rectification of any quality issues before
the goods/products reach the customers. Similarly, Nartey et al., (2020) found that proactively
monitoring and controlling quality at the operational level, organizations can prevent defects,
reduce rework or scrap, and enhance customer satisfaction. Operational level control provides
training and development opportunities to employees to enhance their skills and knowledge.
Well-trained employees are more likely to perform their tasks accurately and efficiently, leading
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to improved quality of goods/products, and investing in training and development programs,
organizations can ensure that employees have the necessary skills to meet quality standards
(Ditkaew, 2023).
Operational level control is vital in the strategic allocation of financial resources.
Effective control mechanisms at the operational level help identify areas where financial
resources can be allocated to improve the quality of goods/products. Monitoring performance,
identifying bottlenecks or inefficiencies, and by analyzing data on quality issues, management
can make informed decisions on resource allocation. For example, Nartey et al. (2023) found that
in hospitals in sub-saharan Africa, if a particular process or equipment is consistently causing
quality problems, management may allocate financial resources to upgrade or replace it.
Similarly, Alkhaldi and Abdallah (2020) also found that if training and development programs in
the healthcare industry are found to be lacking, resources may be allocated to enhance employee
skills. By aligning financial resources with operational level control, organizations can
strategically invest in areas that will have the greatest impact on quality improvement.
Management Level Control
In contrast, management level control refers to the process of monitoring and regulating
the activities and performance of employees at different levels of management within an
organization, and involves setting goals, establishing standards, measuring performance, and
taking corrective actions to ensure that objectives are achieved (Dahlan, 2021). Management
level control provides a framework for aligning financial resource allocation with the
organization's long-term objectives and ensures that resources are allocated to projects and
activities that generate the highest return on investment. The various levels of management
control, including top-level, middle-level, and frontline management (Blocher et al., 2022).
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Top-level managers are responsible for setting overall strategic goals and objectives for
the organization and bear the responsibility of establishing policies and guidelines that impact
the quality of goods/products (Blocher et al., 2023; Teklay & Bobe, 2023). Managers of this
caliber of control focuses on long-term planning, resource allocation, and ensuring that the
organization's overall strategy aligns with quality objectives. Middle-level managers translate the
strategic goals set by top-level management into actionable plans and are responsible for
coordinating as well as supervising the activities of frontline employees (Pasch, 2019). Their
control involves monitoring performance, providing feedback, and ensuring that quality
standards are met. They play a crucial role in implementing quality measures and ensuring
adherence to quality processes.
Frontline managers directly supervise employees involved in the production or delivery
of goods/products, and as part of their responsibilities monitor the day-to-day operations and
ensuring that tasks are performed efficiently and effectively (Cescon et al., 2019). The control
level involves monitoring productivity, identifying and resolving quality issues, and providing
training and support to employees. Frontline managers play a critical role in maintaining
improving the quality of goods/products through their direct supervision and involvement.
Management level control play a key role in the strategic allocation of financial resources.
Effective control mechanisms help identify areas where financial resources can be allocated to
improve the quality of goods/products through monitoring performance and identifying
inefficiencies or bottlenecks. Therefore, management can make informed decisions on resource
allocation to enhance quality. Additionally, control systems help in identifying cost-saving
opportunities, optimizing resource utilization, and ensuring that financial resources are allocated
in alignment with quality objectives.
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Decentralization of Operational and Management Level Control
A top tier manufacturing company such as Image Skincare Manufacturing, LLC can not
simply reserve many decision rights for top level managers, and could potentially derail the
organizational performance of the business. Decentralization is an organizational structure and
decision-making approach where decision-making authority is distributed among various
strategic business units within a company such as cost, revenue and profit centers (Blocher et al.,
2023). These strategic business units (SBUs) are semi-autonomous divisions or departments
within a larger organization that have their own specific goals and objectives. Using
decentralization as a strategic performance measurement for SBUs means that each unit is
responsible for its own performance and is given the authority to make decisions related to its
operations, resources, and strategies. This approach allows for quicker decision-making, better
adaptation to local market conditions, and increased accountability at the unit level.
Challenges, Risks and Issues associated with Decentralization
However, decentralization can lead to a lack of coordination and communication between
different units, resulting in duplication of efforts, inefficiencies, and conflicting strategies.
According to Teklay and Bobe (2023), when decision-making authority is delegated to SBUs,
there is a risk of losing control over the overall strategic direction and performance of the
organization and this may result in inconsistent decision-making across different units, leading to
variations in quality, customer experience, and operational efficiency. For example, Dahlan
(2021) stated that decentralization can create challenges in resource allocation, as different units
may have varying resource needs and priorities. Similarly, Pasch (2019) found that 80% of SBUs
that focus solely on their own performance and objectives end up neglecting the overall strategic
goals of the organization.
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Mitigation of Risks and challenges associated with Decentralization
Most decision-making approaches are associated with risks and challenges. Regular
strategic reviews, performance evaluations, and incentives aligned with the overall
organizational performance can help mitigate this risk and encourage collaboration (Antony et
al., 2023). Alkhaldi and Abdallah (2020) determined that the issues associated with
decentralization can be mitigated through regular communication channels, cross-functional
teams, and clear reporting structures. For example, Nartey et al. (2020) reviewed the
performance measurement systems, regular monitoring, and periodic reviews and found out that
hospitals that implemented decentralization were able to mitigate risks associated with the
approach and ensure alignment with the overall organizational goals. Standardized processes,
guidelines, and training programs can help ensure consistent decision-making and to
organizational standards. Effective budgeting processes, resource sharing mechanisms, and
centralized oversight can address these challenges and ensure optimal resource allocation.
Conclusion
Although there are numerous benefits associated with decentralized organizational
structure, the decision-making approach also present some clear and present danger. By
implementing these operational and management level controls, organizations can effectively
mitigate the problems, risks, and challenges associated with decentralization and ensure that
SBUs contribute to the overall success of the organization. Designing incentive systems that
reward both individual SBU performance and overall organizational performance can help align
the interests of SBUs with the broader organizational goals. This encourages collaboration and
discourages sub-optimization.
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