When an organization decentralized it leads to a more participative structure
Centralization: hierarchical command and control; decentralization: participative decision making, delegation of authority. Show
DefinitionsCentralization refers to organizational structures and procedures that concentrate power and decision-making authority at the highest levels of the organizational hierarchy. Decentralization refers to organizational structures and procedures that allow for power sharing and delegation of decision-making authority to lower levels of the organizational hierarchy, including decision making by front line employees. IntroductionIn the past few decades, much organizational literature from both the public and private sectors has argued for the benefits of reducing bureaucracy. Indeed, many public management scholars have asserted that bureaucratic characteristics such as red tape, rules, and standardized procedures negatively affect organizational effectiveness and responsiveness to constituents and lead to such negative employee work outcomes as... This is a preview of subscription content, access via your institution. Adler PS (2012) The sociological ambivalence of bureaucracy: from weber via Gouldner to Marx. Organ Sci 23(1):244–266 CrossRef Google Scholar Berings D, De Fruyt F, Bouwen R (2004) Work values and personality traits as predictors of enterprising and social vocational interests. Personal Individ Differ 36(2):349–364 CrossRef Google Scholar Cools E, Van den Broeck H, Bouckenooghe D (2009) Cognitive styles and person–environment fit: investigating the consequences of cognitive (mis)fit. Eur J Work Organ Psy 18(2):167–198 CrossRef Google Scholar Hofstede G (2001) Culture’s consequences. Comparing values, behaviors, institutions, and organizations across nations, 2nd edn. Sage, Thousand Oaks Google Scholar Im T, Campbell JW, Cha S (2013) Revisiting Confucian bureaucracy: roots of the Korean government's culture and competitiveness. Public Adm Dev 33(4):286–296 CrossRef Google Scholar Jansen KJ, Kristof-Brown A (2006) Toward a multidimensional theory of person-environment fit. J Manag Issues 18(2):193–212 Google Scholar Meyer RE, Hammerschmid G (2010) The degree of decentralization and individual decision making in central government human resource management: a European comparative perspective. Public Adm 88(2):455–478 CrossRef Google Scholar Pollitt C (2005) Decentralization. In: Ferlie E, Lynn LE Jr, Pollitt C (eds) The Oxford handbook of public management. Oxford University Press, Oxford, pp 371–397 Google Scholar Download references Author informationAuthors and Affiliations
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Rights and permissionsReprints and Permissions Copyright information© 2021 Springer Nature Switzerland AG About this entryImportance of DecentralizationThe major importance of decentralization include:
Decentralization of authority relieves top executives from operating details or routine work so that they can concentrate on more important functions of policy-making, coordination, and control. As a company grows beyond the reach of the chief executive, decentralization becomes necessary. By delegating authority for operating decisions, top management can extend its lead over a giant enterprise.
Decentralization permits prompt and more accurate decisions because decisions are made by those who are fully aware of the realities of the situation. Decisions can be made near the point of action without consulting higher levels and without waiting for the approval of top executives.
Decentralization facilitates growth and diversification of products and markets. Under decentralization, each product line is treated as a separate division so that it can respond quickly to the changing demands of its special market. The self-contained product divisions enjoy considerable independence and proper emphasis can be put on each product line under the overall coordination and control of top management.
Decentralization improves organizational communication and efficiency because there are fewer levels of authority. The problems of red-tape and bureaucratic delays are reduced.
Decentralization provides an opportunity to subordinate managers to take initiative and acquire leadership qualities. Lower-level executives learn to manage by exercising delegated authority. A reservoir of promotable managers becomes available which -simplifies management successions and helps to ensure continuity of management. Decentralization promotes autonomy, initiative, and creativity on the part of subordinates. As the success and survival of the organization do not depend upon a few individuals at the top, decentralization makes for stability and continuity of the enterprise.
Decentralization improves job satisfaction, motivation, and morale of subordinates. Opportunity to make decisions provides a sense of belonging and satisfies the needs for power, prestige, status, and independence. A climate of competition is generated. High motivation and morale help in improving productivity and working relationships. Better utilization of talents at lower levels can be made.
Decentralization results in effective supervision because managers at the lower levels have complete authority to make changes in work assignments, to take disciplinary action, to recommend promotions and to change production schedule. Decentralization also promotes effective control through a comparative evaluation of performance and clear-cut accountability for results.
Decentralization makes for democratic management and flexibility of operations. People at lower levels do not feel alienated from the top and there is little danger of administration becoming top-heavy or monolithic. Necessary changes can be made without dislocating the entire structure. Advantages of DecentralizationThe major advantages of decentralization include:
Disadvantages of Decentralization
Decentralization and Participative managementSome people get the idea that the more decentralized an organization is, the more democratic or participative it is in terms of managers sharing decision-making with subordinate employees. This is not necessarily true. Decentralization, however, involves pushing some decision-making down the line to subordinate managers, and, in this sense, it develops more participation in decision-making. However, this does not mean that all subordinates will participate in all decision-making. In the first place, as has been noted, decisions on some matters are reserved by upper-level managers and others may be made only by the top managers and, in some cases, even by the board of directors. In the second place, delegation to subordinate managers of authority to make decisions at their respective levels does not mean that these managers will allow their subordinates to share in top-level decision-making. Some managers at upper levels may be highly participative or democratic in the way they make decisions, and others may not be. Essentially, decentralization and participative management are different matters. Decentralization and Segment ReportingEffective decentralization requires segmented reporting. In addition to the companywide income statement, reports are needed for individual segments of the organization. A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. Cost, profit, and investment centers are segments as are sales territories, individual stores, service centers, manufacturing plants, marketing departments, individual customers, and product lines. A company’s operations can be segmented in many ways. With the appropriate database and software, managers could easily drill even further down into the organization. For example, the sales in California could be segmented by product family, then by product line. This drill-down capability helps managers to identify the sources of strong or weak overall financial performance. These segmented income statements are useful in analyzing the profitability of segments and in measuring the performance of segment managers. What happens when an organization decentralized?What is a decentralized organization? Decentralization in business is when daily operations and decision-making power are delegated by top management to middle-and lower-level managers — and sometimes even team members.
What is decentralization organizational structure?A decentralized organizational structure is one that tasks department heads and project managers with key decision-making responsibilities, thus freeing top management and business owners to focus on strategic planning and big picture decisions.
What are the benefits of a decentralized organization?Advantages of decentralized organizations include increased expertise at each division, quicker decisions, better use of time at top management levels, and increased motivation of division managers.
Can decentralization affect the organization?Decentralization will lead to a loss of control at top management levels, which can have negative consequences for the organization's reputation if local managers struggle to maintain the level of quality that customers expect.
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