Yes, the three legs of the organizational architecture stool were out of balance. As a result, the

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Yes, the three legs of the organizational architecture stool were out of balance. As a result, the airline lost tens of thousands of dollars in revenues.
Decision rights regarding repair work were delegated (decentralized) to repair supervisors at airports.
Performance measurement of repair supervisors was based (in part) on their ability to stay within the budget, which could affect their performance reviews, promotions, and pay raises. Thus, the repair supervisor had incentives to do something that was bad for the overall airline.
The airline could change (rebalance) the organizational architecture in several ways. First, the airline could centralize the decision rights regarding mechanic assignments. Second, the airline could keep the decision rights delegated, but give repair supervisors incentives based (in part) on minimizing plane downtime. Third, the airline could allow repair supervisors to “write off” costs of repair work done at other airports, transferring these costs to top management or to the airport where repairs were needed.

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Financial And Managerial Accounting

ISBN: 9780357714041

16th Edition

Authors: Carl S. Warren, Jefferson P. Jones, William Tayler

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