Advantages and Disadvantages of Decentralization
In an organization, centralized way of making a decision entails less autonomy to everyone except the central leadership. In contrast, decentralization involves delegation of responsibility and the associated decision-making powers across various levels in the organization. Let us discover the pros and cons of this concept. A central command structure derives from an autocratic style of management. Autocracy is not necessarily an intention and could be incidental. For example, typically start-ups and business that have just been founded are naturally autocratic with the founding members primarily running the show. Gradually, as the business grows and the headcount expands, the organization begins to take on a different structure with departmental heads and other teams. The top management is unable to keep tabs on all organizational functions and prefer to delegate responsibility and distribute the power of making decisions.
Decentralization: Inspecting the Tradeoffs
Decentralization often comes into picture to tackle the disadvantages of centralization. Although a decentralized command structure does help to overcome the cons of autocratic management such as lack of ownership and authority, as you go down the hierarchical organization structure, it has its own unique set of pros and cons. Let us explore these merits and demerits of decentralization and put into perspective the tradeoffs involved when adopting this management concept.
Advantages of Decentralization
The top management and promoters of the firm have distributed the decision-making authority and are therefore, left with more time to pursue the strategy for realizing the organization's long-term vision. Day-to-day problem solving is no longer the biggest concern for the higher-ups. Operational independence makes it easier for the organization to grow overall. Activities such as franchising, diversification and hiring of employees at the...
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