Page 204 - Introduction to Business

178 PART 2 Managing Business Behavior

Perhaps, though, you got lucky and made your reservations at a Ritz Carlton
Hotel. In the Ritz Carlton Hotel chain every employee, including junior bellhops,
can spend up to $2000 on the spot to fix a guest’s problems—no questions asked! At
Ritz Carlton a front desk clerk quickly makes reservations for you at another nearby
deluxe hotel and hands you a check for $700 to help pay for your stay at the other
establishment. Ritz Carlton is an example of a decentralized organization. 22
Issues related to centralized versus decentralized organizations also come into
play in areas more weighty than mixed-up hotel reservations. In the U.S. govern-
ment, the president is technically supposed to delegate foreign and defense policy
authority to the heads of the two appropriate cabinet departments, the secretary of
state and the secretary of defense. President Richard M. Nixon, though, did not
want to delegate authority in this area. He set up a centralized organization and
hired a very strong White House staff assistant, National Security Advisor Henry
Kissinger, to deal with foreign and defense policies; he also appointed relatively
weak secretaries of state (William P. Rodgers) and defense (Melvin R. Laird). In con-
trast, 30 years later, President George W. Bush decided to establish a decentralized
organization for governing foreign and defense policies. He appointed very strong
secretaries of state (Colin L. Powell) and defense (Donald H. Rumsfeld) and dele-
gated primary authority to them, while maintaining a coordinating role in the top
national security staffer Condoleeza Rice.
SPAN OF CONTROL. The degree of delegation of authority and responsibility in an
span of control The number of organization also directly impacts the managerial span of control. The span of
employees directly reporting to, or control, also referred to as the span of management, is the number of employees
being supervised by, a given manager
directly reporting to, or being directly supervised by, a given manager (see
Exhibit 5.5). A manager with a large number of direct subordinates has a wide span
of control, while a manager with few direct reports has a narrow span of control.
For example, a partner in a top management consulting firm may have a dozen
firm associates reporting directly to him or her. This represents a relatively wide

EXHIBIT 5.5
Management Consulting Firm
Span of Control Flat organization, relatively wide span of control

Partner

Associates

Major Corporation
Tall organization

CEO

COO

Division Division Division
head head head

Plant
superinten-
dents

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