Advantages of decentralization include better, more timely decisions and increased motivation. Without this experience, they would not be prepared to act decisively when they are promoted into higher-level positions. The couple themselves order inventory, decide the marketing direction, and hire new employees. As companies centralize and decentralize, the main question is how exactly is the role of each manager and employee being defined. It promotes motivation: To quote Louis A.
Centralization is not applicable in dynamic environment as flexibility will not come promptly from the top level. For example, typically start-ups and business that have just been founded are naturally autocratic with the founding members primarily running the show. It is the systematic delegation of managerial authority to middle and lower level management according to their weight age of responsibility. Advantages of Decentralization Decentralization comes with many advantages… First it helps managers make better, more timely decisions. Requires more effective communication abilities because decision-making is remove from the home office. The growth of the company greatly depends on the talented executives.
Gradually, as the business grows and the headcount expands, the organization begins to take on a different structure with departmental heads and other teams. A more centralized organization, where authority is concentrated in top management, would really find it difficult to diversify activities, products, and markets. This is the main reason that many companies choose against decentralization. Departmental employees are conversant with the problems of the department and have knowledge of technicalities of the department. Further, decentralization and the granting of local autonomy actually promote closer, more integrated sub-units. Like any management approach, there are always two sides to a coin.
More cost—Decentralisation is costly because it encourages duplication of functions and equipments. This reduces the time at the disposal of top executives who should concentrate on other important managerial functions. They may even have goals that clash with the company's overall goals. For businesses with multiple offices spread across the country or with separate departments with very specific needs, decentralization can have its advantages. This causes these managers to begin competing with each other, and possibly doing things that are unethical in order to pull ahead and look better in front of upper management. A centralised enterprise with the concentration of authority at the top will find it difficult and complex to diversify its activities and start the additional lines of manufacture or distribution. Decentralisation means diffusion of authority.
Grooming future leaders is also much easier in such an atmosphere. Rather than looking at things from a company wide perspective, they look at it from their own perspective. Second, it eases the burden on top management. No specialisation — Specialisation suffers in decentralisation because everyone becomes jack-of-all-trades but master of none. Decentralized Organization would have virtually no central authority, and each subunit act as a totally independent entity.
As a result, these processes can be done more efficiently and more quickly, speeding up the growth potential of the company. Heavily centralized organizations involved in a fast-paced product and rapidly-changing industries are not able to react quickly to changing demands of their customers. Disadvantages of a Decentralized Organization The main disadvantage of a decentralized organization is that you lose control over the day-to-day activities of your company. They are to be paid remuneration on the basis of their qualification and experience. By distributing the responsibilities down the chain in the company, they are able to focus on more pertinent issues and projects. This can have a serious impact on product and service quality and customer satisfaction.
Failed attempts at decentralization usually stem from lack of communication between the middle and lower level managers, and lack of clearly-defined goals for each employee. Timely All goals within a company small or large should be developed with a timeline and pre-staged points of work submittal before the final deadline to establish an organizational basis and allow for management feedback prior to the final submission of work on the deadline. Aside from that, those who are in specialized or local departments have a better understanding of the unique needs and challenges of their job and market, so they can provide appropriate solutions to quickly adapt to changes in their field or market. This is possible because it involves delegation of authority and responsibility. Delay in performing the operation is avoided because it is performed at the department where it is needed. A particular sub-unit may have innovative and better ways of doing things, but without a centralized body that will spearhead the adoption and implementation of these ideas in other sub-units, knowledge and technology transmission may be difficult to achieve. Most organizations fall somewhere between these two extremes, and there is a current trend toward more decentralization.
Since a worker is working, in a functional department, work can be performed promptly. There is a mixture of the two because some activities are centralised and some are decentralised. Also, if lower-level and s have specific ground-level information that can enhance operational , then a centralized organizational could be the wrong design. The top executive is relieved of some burden and concentrates his activities to think for the future of the organisation. It is not suitable for specialized nature of services like accounting, human resource, engineering, surgery etc. There is a danger that senior management may lose control of the organisation, as they become far removed from the detail of underlying operations and unaware of the decisions being made by lower level managers.
It breeds innovation and flexibility. However, in a decentralized organization, John would have the authority to make the deal with the vendor without having to obtain approval from those above him. The last drawback is that lower level managers don't always see the big picture. In a strongly decentralized organization, it may be more difficult to effectively spread innovative ideas. Since these local managers are often with the employee throughout their time in that office or department, they can deliver more accurate assessments on employee performance. Spotting The Problem Is Easy Many times, people can fly under the radar when they are not doing their job, simply because the problems that they cause will fall onto upper management.
Most dictators are created by taking control of all the forms of government and making decisi … ons and rules on their own. Advantages Decentralization has a broader immediate contact with customers by allowing management to have more decision-making ability. This allows managers to delegate responsibility and hold employees accountable for their results and focus less on the process of how the desired outcomes were achieved. Each manager will work and frame policies according to his talent. Decentralization is not always a good strategy to begin with, especially when the organization is still to find its footing in the market. Decentralization Maximizes Risk In decentralization, decision making authority is delegated to the subordinate level. Decentralisation occurs at the time of decisions of routine nature but if decisions are vital, the authority is not decentralised.