“Since the manager is ultimately accountable for whatever is delegated to subordinates, then a free rein reflects great confidence in subordinates.” Discuss.

In a decentralized organization, top management delegates considerable decision-making authority to subordinates. Such decentralization—often called a “loose rein”—tends to be more prevalent with foreign subsidiaries, such as UK Hoover. Corporate management in the United States understandably feels less familiar with the foreign environment and more willing to let the native executives operate with less constraints than it might with a domestic subsidiary. In the Maytag/Hoover situation, decision-making authority by British executives was evidently extensive, and corporate Maytag exercised little operational control, being content to judge performance by ultimate results achieved. Major deviations from expected performance goals, or widespread traumatic happenings—all of which happened to UK Hoover—finally gained corporate management attention.
Major advantages of extensive decentralization or a loose rein are:
(1) Top management effectiveness can be improved since time and attention is freed for presumably more important matters.
(2) Subordinates are permitted more self-management, which should improve their competence and motivation.
(3) In foreign environments, native managers presumably better understand their unique problems and opportunities than corporate management, located thousands of miles away, possibly can. But the drawbacks are as we have seen: Parameters within which subordinate managers operate can be so wide that serious miscalculations may not be stopped in time. Since top management is ultimately responsible for all performance, including actions of subordinates, it faces greater risks with extensive decentralization and giving a free rein.