Importance Of Managerial Discretion

For any organization, the concern of management system is placed in priority. The reason came from the desire to have higher output of products, and gain more benefits. Managerial discretion, the concept created and brought to the discussion on how it influenced in the economic transition; in order to helps firm face the difficulties and challenges to survive. In addition, high managerial discretion brings benefit to firm by its flexible, in decision making process, forecasting and anticipating the unexpected outcome. Though its benefits can be seen through, without control and manage, high managerial discretion can bring harm to the organization as managers’ benefit is taken from the expenses of the owner or shareholders. The consequence, the two opposed perspectives: strategic management and corporate governance, bring the inside and approach to measure, evaluate and determine managerial …show more content…
They are the factors affecting to the level of managerial discretion, and by the end to be good or bad outcome for the firm. Factors include the product differentiability, market growth, industry structure, quasi-legal constraints, and powerful outside forces. Each factor has been proven that influence the level, and to give inside how to help bring higher managerial discretion. For example, a firm has product differentiability promote the latitude of managerial action. While product portfolios are large, it expands the capability of managers, they have higher chance to meet customers’ need. As in paint industry, if a company decides only to produce interior paint, it automatically drops its chance on exterior paint market. Hence, limit the action of manager whereas they can do more. Another factor promotes high managerial discretion will be the market growth, “increasing the number of resources and opportunities available within a market as well as an entrepreneurial mode of action”