Advantages of a decentralized organizational structure over a centralized one.


Date Posted: 8/9/2018 8:50:35 AM

Posted By: Faimus  Membership Level: Silver  Total Points: 892

Decentralization of decision making authority refers to a situation where this authority is delegated to subordinates while centralization of decision making authority refers to a situation where the same authority is retained by the top level managers. Decision making authority is the discretion to make decisions on the issues in an organization without having to obtain permission from any other member of the organization. Decision making authority is vested in the position and not on the incumbent so as to ensure that the goals of the organization prevail over individual goals and the incumbent only retains the position based on satisfactory performance. Most organizations employ both a decentralized and a centralized organisational structure while a few employ either. In practice, the decentralized structure has several advantages over the centralized structure.
Some of those advantages are discussed below.

A decentralized structure has increased promotion chances in comparison to a centralized structure. In the centralized structure, there are fewer positions in the hierarchy of levels of positions in the organization and thus requires less personnel. This is because the decision making authority is retained by the top managers who may be a few individuals. The promotion chances in such a case are less. On the other hand decentralized structures tend to be tall or flat depending on the span of control. A tall structure is realized where the span of control is narrow while a flat structure is realized where the span of control is wide. These structures have increased number of positions in the hierarchy of levels of positions in the organization. This therefore increases the chances of promotion of the employees in the organization. This is because all the positions in the organizational structure are supposed to filled at all times. Promotion chances arise where the incumbent retires, dies, resigns or

is sacked.

In a decentralized structure there is speedier decision making. In a centralized structure, the process of decision making is relatively slow. This is because all changes to the set standards have be consulted with the top level managers before implementation. This introduces a time lag in the decision making process. However, in a decentralized structure, all necessary decisions are made the subordinates to whom the decision making authority has been delegated. Take the example of one of the regional campuses of a given university where a student has broken the rules and regulations governing the conduct of students in the University and against whom disciplinary action must be taken. In a centralized structure, the matter would have to be referred to the top administrators in the main campus for decision making after conducting an investigation. The decision making process will take longer as compared to a decentralized structure where an investigation is conducted and a decision is reached in the regional campus.

In a decentralized structure, there is also greater enthusiasm and interest in the decision making process. Take the example of an organization with various branches in different regions of the country. If this organization employs a centralized structure then any issues that face any of the branches have to be reported to the top managers at the head office who then give direction on the course of action. While the managers in some organizations may go to access the situation personally, in big organisations, the managers may not have the time to do so. The managers therefore rely on the reports submitted to them by the subordinates working in those branches to make decisions. If the same organisation employs a decentralized structure then the task of decision making would fall on the management of that given branch. The management is therefore well aware of the local conditions and the localized issues that the organization is facing. The management will therefore reach decisions according to the prevailing conditions with the aim of solving the problems the branch is facing in order to create a good working environment for the branch.

In addition, a decentralized structure permits better communication within the organization. Most organizations have more than one branch. In a centralized structure, the decision making authority is held by the top managers in the head office. The managers are source of the policies and any strategies that have to be implemented within the organization. This information has to be passed to all the other branches for implementation. In most cases, the managers do not have time to visit all the branches and explain the policies and strategies agreed upon. This information is therefore compiled in documents which are then distributed to all the branches. However, in decentralized structure , policies and strategies in a certain branch are agreed upon by the managers in that branch. This information is therefore easily passed to the subordinates through meetings and forums where all the details are explained. This is possible because all the concerned personnel are localized in the same branch. The policies and strategies agreed upon are therefore better integrated in the organization since the communication is also better compared to a centralized structure.

Furthermore, a decentralized structure ensures close control of activities in the organization. Control is the process by which the performance of an organisation is measured, compared with the set standards, deviations from the set standards are identified and the necessary corrective action taken. In a centralized structure, control is a function of the top managers who enjoy positional power. Since top management comprises of a few individuals, then the task of control many prove cumbersome. This is because each of top managers would have to have a wide span of control to ensure that all the activities in the organization are performed under close supervision. In a decentralized structure, the task of supervision is delegated to subordinates by the managers and hence narrow spans of control are possible. This therefore ensures close supervision of the activities of the subordinates which helps in detection of any deviations from the proposed plans. Corrective action is then taken which aids in the achievement of the goals of the organization.

Although a decentralized structure has advantages over a centralized structure, so do a centralized structure. Most organizations therefore prefer a blend of both for more efficiency.

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