1. In what ways can (a) decentralizing and (b) centralizing authority help an organization like Home Depot to improve its performance?
From 2000 to 2007, Robert Nardelli, a former senior executive at GE (General Electric), served as CEO of Home Depot. Almost immediately, he transformed Home Depot’s logistics and leadership structure from decentralized to centralized. It was one way to respond to the pressures of competition from the Internet and other rivals, and sales increased.
With that said, we can see in the scenario that Nardelli (Jones, p. 145):
“Over time, he recentralized authority and removed store managers’ ability to choose what products to stock for their individual …show more content…
It also allows a clear vision to flow down from management to each employee. If the vision is strong, workable, and sustainable, then success is sure to follow.
In many ways, centralization of authority is basically increasing bureaucracy. Gareth Jones (2010, p. 134) describes bureaucracy as “a form of organizational structure in which people can be held accountable for their actions…” Rules, SOPs (Standard Operating Procedures), and norms clarify expectations from higher management, and ensure every in the organization is aware of the rewards and punishments for performance and poor behavior. The problem arises when managers fail to control the bureaucracy and it becomes “tall, centralized, and inflexible.” (Jones, p. 138)
Decentralizing authority, however, has two distinct advantages. First, it allows the local leader on the ground to make decisions they feel is in their store’s best interests. This, in turn, generally reflects well on the company’s best interests. By ensuring customized shopping experiences for each store, specific to certain geographic regions or customer demographics (e.g. more roofing supplies in Seattle, less insulation in South Carolina), consumers are more satisfied and become repeat customers. Also, ensuring local management teams are “empowered” is essential to continued success. This second …show more content…
142), empowerment is the “process of giving employees at all levels in an organization’s hierarchy the authority to make important decisions and to be responsible for their outcomes.” It has been extremely successful in organizations as diverse and varied in scope as Southwest Airlines (Jones, 2010, p. 18) and the U.S. military. Contrary to popular belief, though the military is by nature a hierarchical, top-down organization, there is a great deal of autonomy and leeway afforded lower-level leaders to get the job done. This type of empowerment is vital in ensuring mission goals are met and a minimum of trouble