Hexton Chemicals consists of seven independent operating divisions. The operating divisions are assisted by a number of support groups, such as R&D, human resources, and environmental management. The environmental-management group consists of 20 environmental engineers. These engineers must seek business from the operating divisions—that is, the projects they work on must be mutually agreed to and paid for by one of the operating divisions. Under Hexton’s rules, the environmental group is required to charge the operating divisions for environmental services at cost.
REQUIRED
1. Is the environmental-management group centralized or decentralized?
2. What type of responsibility centre is the environmental-management group?
3. What benefits and problems do you see in structuring the environmental-management group in this way? Does it lead to goal-congruence and motivation? Explain.