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Centralized vs. Decentralized Organizational Structure. The Basic Business Framework The type of organizational structure utilized — whether centralized or decentralized — is important because it forms the basic framework for a business and how decisions will be made. Apple is an example of a business with a centralized management structure. Many businesses in rapidly changing technological environments have a centralized form of management structure.
The decisions made by the lower level management are limited in a centralized environment. The advantages of centralized organizations include clarity in decision-making, streamlined implementation of policies and initiatives, and control over the strategic direction of the organization. The primary disadvantages of centralized organizations can include limited opportunities for employees to provide feedback and a higher risk of inflexibility.
Decentralization is a business structure in which the decision-making is made at various levels of the organization. Typically, decentralized businesses are divided into smaller segments or groups in order to make it easier to measure the performance of the company and the individuals within each of the sub-groups. Many businesses operate in markets and industries that are highly competitive.
In order to be successful, a company must work hard to develop strategic competitive advantages that distinguish the company from its peers. To accomplish this, the organizational structure must allow the organization to quickly adapt and take advantage of opportunities. Therefore, many organizations adopt a decentralized management structure in order to maintain a competitive advantage.
There are numerous advantages of a decentralized management, such as:. While a decentralized organizational structure can be an advantage for many organizations, there are also disadvantages to this type of structure, including:.
The first factory had 14 employees: eight women and six men. This interview on successfully operating a decentralized organization shows it is clear that the key is the people within the organization. Weldon notes that to be successful, a decentralized organization must empower employees to innovate, develop expertise, and collaborate to achieve organizational goals.
An underlying assumption is that businesses possess a single structure either centralized or decentralized at any given point. That is not necessarily the case. For example, businesses often add employees who specialize in the various needs of the organization. Over the life of an organization, it is not uncommon for businesses to demonstrate aspects of both centralization and decentralization.
New businesses, for example, are often centralized. When a business first opens, it is common for the owner s to be highly involved in the day-to-day operations. In addition, the small size of a new business allows the owner to have a high level of involvement in both the daily and the strategic decisions of the business.
Strategic decisions, on the other hand, are made fairly infrequently and involve long-term goals of the organization. Being actively involved in the business allows new business owners to gain experience in all aspects of the business so that they can get a sense of the patterns of the daily operations and the decisions that need to be made.
Companies that rely on trade secrets and non-disclosure agreements are also usually best suited to a centralized organizational structure. Indeed Home. Find jobs. Company reviews. Find salaries. Upload your resume. Sign in. Career Development. What is a centralized organizational structure? What is a decentralized organizational structure? Decision-making speed. Creation of standard internal metrics. Relationship with customers. Talent deployment.
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