GMAT Essays (AWA)

"When Apogee Company had all its operations in one location, it was more profitable than it is today. Therefore, the Apogee Company should close down its field offices and conduct all its operations from a single location. Such centralization would improve profitability by cutting costs and helping the company maintain better supervision of all employees."
Discuss how well reasoned ....




The argument states that since Apogee Company was earning more profits when it had its operations in one location, therefore centralization of all operations and their shift to a single location is necessary for the company to improve its profitability. Although the argument has some merit, it has some serious flaws that undermine its validity. It attributes a particular condition as the cause of another event, which could be due to mere coincidence or be one of the many factors leading to an outcome.

It is essential for the company to conduct an internal and external audit of its work environment to see what all could have lead to a decline in profitability. A host of factors such as increased in competition, disturbed supplies, and human resource management problems could be responsible for the decline in profitability. Centralisation may turn out to be one of the factors, but should be compromised if its costs outweigh its benefits.

The management believes that further centralization would improve profitability by cutting down costs and maintaining better supervision. While it is true that in an overly decentralised company, such measures might help in producing the desired results, it is difficult to comment on the intended effects on Apogee Company without proper assessment of the same. The company should determine if it is incurring any extra costs due to decentralisation and weigh it against the benefits of the same. The company may then choose to centralise, if the net benefits outweigh the costs of conversion.

The company should also determine if it is practically possible to carry out the intended tasks. A change in the organisational structure frequently and a reduction in the freedom given to employees might not be warmly welcomed by them and they might resent the change. The company might also find it helpful to prioritise its goals, which it aims to achieve. It may find that it is able to achieve goals other than high profitability such as employee satisfaction through decentralisation, for which it may be willing to compromise on its profitability.

The argument seems to be lacking in supportive content that needs to be established in order to evaluate its accuracy. The factors that might have lead to a decline in the profitability should be determined and the pros and cons of centralisation need to be determined as well. The organisation needs to make an informed choice considering all the essential information as a frequent change in the structure will definitely do more harm than benefit.