Account Question

Comments
The general principle in an organization is to allow people with knowledge about a topic to make decisions related to the
topic. However, the knowledge might (1) be used in ways consistent with organizational goals or (2) not used in ways
consistent with organizational goals. The chapter describes the authority to make decisions as a decision right and
decisions that are consistent with organizational goals are goal congruent.
• We are happy to let a knowledgeable manager make decisions when the manager naturally tends to make decisions
consistent with organizational goals.
• If the manager might use the knowledge in ways incongruent with organizational goals we need a way to prevent or
detect the dysfunction. An organizational design element to prevent or detect decisions inconsistent with organizational
controls is part of Internal Control. There are multiple strategies for preventing the manager from making the decision
inconsistent with organizational goals or detecting the decisions after they are made. Here are two:
▪ we might not allow the manager to make that decision. Someone elsewhere in the organization will make the
decision. Here are two examples from the text:
▪ A sales person might not have the right to negotiate prices with a customer, even though the sales person
might be knowledgeable about the customer’s demand curve. Separating the decision from the sales
person’s knowledge perhaps reduces the likelihood that the salesperson will offer a low price and receive
a kickback from the customer.
▪ Supervisors of flight attendants might not have the right to allocate routes to flight attendants. Flight
attendants probably have preferences for some routes. The supervisor might allocate preferred routes to
friend-colleagues. We might install a bureaucratic rule that allocates routes based on seniority which
would prevent allocation based on favoritism. The rule separates the decision from the knowledge.
▪ we might allow the manager to make, or at least propose, the decision with some form of check, like prior
approval (ratification) or follow-up review (monitoring). Here are two examples:
▪ The purchase of supplies might require a supervisor to review the list of supplies to see that they have a
legitimate connection to the activities of the office.
▪ A new project that requires funds above a certain level might need to be vetted by a capital budgeting
committee. If the project is agreed-to by the capital budgeting committee, the project is will be subject to
continuous reports during the course of development and then reports on its profitability after it begins
operations.
Problem statement
Read the article related to Disney’s proposed change in decision rights. Centralizing project decisions were argued to
provide these benefits.
1. Improve forecasting results from more data (forecasts of profits from releasing a project on various platforms). The
article suggests that some Disney executives believed that the centralized unit access to performance data that put it
in a better position than the creative units to determine which movies and television series were likely to draw large
audiences on various platforms and how much to spend to market each project.
2. Wield leverage with advertising vendors. Centralized decision making could negotiate advertising rates for multiple
entertainment units and projects.
3. Reduce personnel. A single centralized staff reduces redundant activities at each creative unit.
Required
1. Some resource allocation decisions were decentralized before Mr. Daniels and Disney Media and Entertainment
Distribution began the centralization process. What were those decentralized decisions?
2. Mr. Daniel had already accumulated significant influence or final say or some decisions? What decisions does the
article suggest had already been centralized?
3. What remaining decisions were intended to be centralized?
4. What did the creative executives stand to lose, exactly? I’m asking you to put yourself in their shoes and speculate
about what their personal and professional loss is. Their losses seemed to lead to a sort of revolt.
5. In retrospect, why and how did Chapek evidently miscalculate?
Disney Proposal to Restructure, on McKinsey’s
Advice, Triggered Uproar From Creative
Executives
Tension flared over plans to take control of marketing, other
decisions away from content chiefs
LOS ANGELES— Disney Co. was working with consulting firm McKinsey & Co. in recent months on an effort to
centralize control of major spending decisions, triggering an uproar from top creative executives at the
entertainment giant, according to people familiar with the matter.
Discussions regarding the plan were under way in the weeks leading up to Nov. 20, when Disney’s board of
directors fired Bob Chapek as chief executive and replaced with his predecessor, Robert Iger.
Disney’s Chief Financial Officer Christine McCarthy spearheaded the wide-ranging cost-cutting effort, which
was blessed by Disney’s board of directors and given the go-ahead by Mr. Chapek, the people said.
The company hired McKinsey in September to review Disney’s operations and identify redundancies and costsaving opportunities. The McKinsey team quickly set about interviewing senior executives as part of its review,
with a particular focus on how Disney marketed its content, the people familiar with the matter said.
One potential change McKinsey was exploring was taking decisions about spending on marketing and publicity
for films and television programs out of the hands of studio executives and instead centralizing them in
another part of the company, the people said.
Disney itself had already considered shifting oversight of marketing spending to Disney Media and
Entertainment Distribution, or DMED, some of the people familiar said. Led by executive Kareem Daniel, a top
lieutenant of Mr. Chapek, that division already had considerable influence over content.
In addition to recommending restructuring related to content decisions, McKinsey had also suggested
consolidating tasks related to hiring, communications and legal services, some of the people familiar with the
matter said.
CFO Christine McCarthy spearheaded the wide-ranging cost-cutting effort.PHOTO: MICHAEL KOVAC/GETTY
IMAGES
The plans that were emerging rankled some of the entertainment company’s top content executives, already
reeling from losing power over spending decisions on content, and became one of several points that exposed
a further rift between the creative and corporate leadership of the company during Mr. Chapek’s brief reign as
CEO. Some executives told colleagues they felt that the changes would strip them of nearly all of their power,
people familiar with the situation said.
In one of his first moves after being reinstalled as CEO, Mr. Iger, who led Disney from 2005 to 2020, announced
that he would do away with the DMED structure and said that he planned to empower Disney’s content
creators. Mr. Daniel exited Disney the day after Mr. Chapek’s ouster.
“It is my intention to restructure things in a way that honors and respects creativity as the heart and soul of
who we are,” Mr. Iger said in a memo to employees last week.
The McKinsey plans weren’t completed, and it isn’t clear whether Mr. Iger will implement any of the
consultants’ recommendations, according to people familiar with the situation.
At a town hall meeting on Monday, Mr. Iger said Disney needs to spend more wisely on content and the
ancillary costs that come with it.
Disney and other media companies have been under pressure from investors to reduce their spending amid
intensifying competition and a weakening economy. Disney has been trying to maneuver its streaming
business from focusing on adding new subscribers to its services such as Disney+ and Hulu, to generating
profits.
After its q4 earnings report, the company detailed plans for cost cuts, layoffs, and hiring freeze, saying that it
was taking a close look at marketing and administrative costs. Shortly before Mr. Chapek was fired, Ms.
McCarthy told directors on Disney’s board that she had lost confidence in his leadership.
Even before the recent proposals, some creative executives at Disney were frustrated with the DMED division,
which Mr. Chapek created in late 2020, said people familiar with the matter. Mr. Chapek said at the time that
the reorganization would better accommodate changing consumer habits and help the company give priority
to streaming.
Mr. Daniel had significant influence over content budgets for Disney’s studios and final say about how to
distribute movies and TV shows, whether in theaters, on network TV or on streaming services like Disney+.
Relations between Mr. Daniel’s unit and Disney’s creative leaders were often strained, people familiar with the
matter said. People close to Mr. Daniel said he was seen as an agent of change for a business reluctant to
embrace it.
Ms. McCarthy has previously clashed with creative executives over managing costs and programming strategy,
people close to her said. She played a role in Mr. Chapek’s decision to remove Peter Rice as chairman of
Disney’s General Entertainment Content unit earlier this year.
Throughout his career, Mr. Chapek has used and praised a management framework that emphasizes
accountability and a structure for corporate responsibility. The method, called ARCI, is often taught in business
schools. Under the philosophy, there should be no ambiguity about who is responsible for the success or
failure of an effort.
Under the ARCI framework, each time a company makes a big change, it must identify personnel who are
accountable for the decision, responsible for its success or failure, consulted for feedback and informed of its
impact.
“Who’s got the ‘A’ on this project?” Mr. Chapek would often ask in meetings, according to people familiar with
the matter—meaning, who is accountable for it?
Some executives found the approach irritating because they felt it invited other managers to get involved with
decisions that ordinarily would be made by a single segment head, people familiar with the matter said.
Proponents of the plans argue that such a restructuring made sense as a way of addressing redundancies
under the current model. Among the advantages cited by those with knowledge of the proposal was that one
group could negotiate advertising rates for multiple entertainment units. Such a plan would have also led to
reductions in staff as a result, people familiar with plans said.
Some Disney executives also believed that the DMED unit would be in a better position than the creative units
to determine which movies and television series were likely to draw large audiences on various platforms and
how much to spend to market each project given its access to performance data, the people familiar with the
plans said.
In a memo he circulated on his first day back in the job, Mr. Iger named a committee consisting of top Disney
executives including Ms. McCarthy, studios chairman Alan Bergman, Disney General Entertainment
Chairman Dana Walden and ESPN Chairman James Pitaro to work on “the design of a new structure that puts
more decision-making back in the hands of our creative teams and rationalizes costs.”
ARCI – which is an acronym for Accountable, Responsible, Consulted and Informed – is a responsibility assignment
framework designed to bring structure and clarity to the roles people play on a project and its individual goals.
Accountable: person who is ultimately accountable and has Yes/No/Veto.
Responsible: person who performs an activity or does the work.
Consulted: person that needs to feedback and contribute to the activity.
Informed: person that needs to know of the decision or action.