Centralized Organizational Structure, Its Importance And Advantages: Decentralization entails the spread of authority. Decentralization refers for delegation of decision-making authority to lower-level management.
Its authority is fundamental phase of delegation, and centralization refers to the extent to which authority is not delegated.
Centralized Organizational Structure, Its Importance And Advantages
What Exactly Is Decentralization?
Decentralization refers to anything that increases the importance of the subordinate’s role.
Decentralization in the workplace refers to the dispersion of office services and activities. When official activities performs at the functional departmental level, the need for decentralisation of office services arises.
The most important benefits of decentralisation:
Lessens Burden On Top Executives.
Decentralization of authority frees top executives from operational details or routine work, allowing them to focus on more important functions such as policy formulation, coordination, and control.
Decentralization becomes necessary as a company grows beyond the reach of the CEO. Top management can extend its control over a massive enterprise by delegating authority for operational decisions.
Decisions That Are Made Quickly And Effectively
Decentralization allows for quicker and more accurate decisions because decisions are made by those who are fully aware of the situation’s realities.
Decisions makes near the point of action without consulting higher levels or waiting for top executives’ approval.
Expansion And Diversification
Decentralization promotes product and market growth and diversification. Decentralization treats each product line as a separate division, allowing it to respond quickly to the changing demands of its specific market.
The self-contained product divisions have significant independence, and proper emphasis can be placed on each product line under top management’s overall coordination and control.
Because there are fewer levels of authority, decentralisation improves organisational communication and efficiency. Red tape and bureaucratic delays are less of a problem.
Decentralization allows subordinate managers to take the initiative and develop leadership skills. Lower-level executives learn to manage through delegation of authority.
A pool of promoteable managers becomes available, which simplifies management successions and helps to ensure management continuity.
Decentralization encourages subordinates’ autonomy, initiative, and creativity.
Because the organization’s success and survival are not dependent on a few individuals at the top, decentralisation ensures the enterprise’s stability and continuity.
Increased Motivation And Morale
Decentralization boosts subordinates’ job satisfaction, motivation, and morale. The ability for making decisions fosters a sense of belonging and satisfies desires for power, prestige, status, and independence.
A competitive environment is created. High levels of motivation and morale aid in the improvement of productivity and working relationships. It is possible to make better use of talents at lower levels.
Control And Supervision That Is Effective
Because managers at the lower levels completes authority to change work assignments, take disciplinary action, recommend promotions, and change production schedules, decentralisation results in effective supervision.
The Benefits Of Decentralization
The following are the primary benefits of decentralisation:
Top management can focus on larger issues such as overall strategy by delegating day-to-day problem solving to lower-level managers.
Giving lower-level managers decision-making authority places decision-making authority in the hands of those who have the most detail and up-to-date information about day-to-day operations.
Organizations can respond to customers and changes in the operating environment more quickly by eliminating layers of decision making and approvals.
Giving lower-level managers decision-making authority aids in their preparation for higher-level positions.
Giving lower-level managers decision-making authority can boost their motivation and job satisfaction.
Lower-level managers may make decisions without fully comprehending the overall picture.
Coordination may be lacking if lower-level managers make their own decisions.
Lower-level managers’ goals may conflict with those of the organisation as a whole. 1 A manager, for example, may be more concerned with increasing the size of his or her department.
Which leads to more power and prestige, than with increasing the department’s effectiveness.
It may be difficult to spread innovative ideas in a decentralised organisation. Someone in one part of the organisation may have a fantastic idea that would benefit other parts of the organisation, but unless there is a strong central direction.
The idea may not be share with, and adopt by, other parts of the organisation. This issue can be mitigated by making effective use of intranet systems that facilitate information sharing across departments.
Participatory Management And Decentralisation
Some people believe that the more decentralised an organisation is, the more democratic or participative it is when managers share decision-making with subordinate employees. This is not always the case.
Decentralization, on the other hand, entails delegating some decision-making to subordinate managers, which fosters greater participation in decision-making.
This does not, however, imply that all subordinates will involve in all decision-making.
First and foremost, as previously stated, decisions on some matters are reserved for upper-level managers, while others may be made only by top managers and, in some cases, the board of directors.
Second, delegating authority to subordinate managers to make decisions at their respective levels does not imply that these managers will allow their subordinates to participate in top-level decision-making.
Some upper-level managers may be highly participative or democratic in their decision-making processes, while others may not be. Decentralization and participative management are fundamentally distinct issues.
Segment Reporting And Decentralisation
Segmented reporting require for effective decentralisation.
Reports for individual segments of the organisation require in addition to the companywide income statement.
A segment is a component or activity of an organisation about which managers want cost, revenue, or profit information.
Sales territories, individual stores, service centres, manufacturing plants, marketing departments, individual customers, and product lines are all examples of segments.
The operations of a company segment in a variety of ways. Managers easily drill even deeper into the organisation with the right database and software.
In California, for example, sales segment by product family, then by product line.
This drill-down capability assists managers in determining the causes of strong or poor overall financial performance.
These segmented income statements are useful for analyzing segment profitability and measuring segment managers’ performance.