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An organization can use a centralized or decentralized decision-making process. The choice of process depends on the company’s complexity and range of activities. A company with fewer and less complex operations can prefer a centralized decision-making process to a decentralized one. Tiller Components has diverse activities since it operates in over 35 areas in a country, hence the need to apply a decentralized approach in the decision-making process. A decentralized approach allows lower-level and branch managers to make crucial decisions about their scope of responsibility.

There are various advantages that Tiller Components will experience for applying a decentralized operations approach. It is difficult for top management in large companies to monitor daily operations and operating expertise in all product lines and services (Warren & Tayler, 2020). This calls for delegation of authority and responsibility to the unit and branch managers who might be close to the operations. Tiller Components branch managers are close to the daily operations in their areas, hence having a high probability of making better decisions compared to the top manager in the head office.

Despite its benefits, decentralization is faced with a number of drawbacks. An individual manager’s decision can adversely affect the company’s operations. For example, deciding to pursue a particular product line or service can negatively affect the company’s profits. For the Tiller Components, different local and regional managers can start the price war as a mode of competition, affecting the company’s overall profitability.

While decentralization will work for Tiller Components, not all functions and operations should be delegated for the efficient and effective running of the company. The functions responsible for the company’s long-term health should not be decentralized but centralized and left under the discretion of the head office (Vantrappen & Wirtz, 2017). Some of these functions include investment decisions, decisions involving cross-unit arbitration, product or service withdrawal decisions and decisions related to the brand and capital assets that are the sole property of the company. The functions likely to have major disruptions on the overall company should be centralized. Decentralized operations will influence the way the company’s authority and the way of making decisions. It will become impossible for the top management to make every decision. Senior management will be forced to delegate some decisions to lower-level managers. The company’s centralized structure will be replaced with the decentralized structure and ensure each local and regional manager is responsible for their decisions (Lee, Min, & Lee, 2016).

Warren and Tayler (2020) discussed return on investment (ROI) and residual income as useful tools for understanding a company’s performance with various divisions and segments. The division and segment managers control the use and investment of resources, including assets in their centers. Therefore, ROI can be used to evaluate their performance based on the use and investment of assets in the divisions and centers. The higher return on investment denotes the better utilization of assets by the divisional manager to generate profits. The residual income is a measure of the division, and segment performance by acting is complimentary for the ROI. It addresses the disadvantages of ROI by revealing the operating income above the acceptable operating income. The division with higher residual income is considered as high performing. Residual income is more comprehensive than ROI in measuring the division’s performance since it considers invested assets, minimum acceptable ROI, and each division’s operating income. Therefore, the two tools: return on investment and residual income, are sufficient metrics for assessing each division’s performance, although additional metrics, such as profitability ratios, can be applied. Profitability ratios measure the profitability of the business, and applying them will lead to duplication because operating income is already considered before attaining the residual income.

A decentralized operations approach is essential for a company with complex and diverse activities. It makes the work of the senior management easier by ensuring the authority and responsibilities are delegated to local and regional managers. The managers are responsible for their decisions, challenging them to make the most appropriate decisions and for the company’s betterment. It is the right approach for Tiller Components company considering its wide area of operation that comprises many branches and divisions.