INTERNATIONAL CASE – RESTRUCTURING AT
Question – 1.
What are the advantages and disadvantages of a hands-off, decentralized management approach ?
Answer – 1
It is the “tendency to disperse decision making authority in an organized structure”. 2.
A decentralized organization is one in which decision making is not confined to a few top executives rather is throughout the organization, with managers at various levels making key operating decisions relating to their sphere of responsibility. Decentralization is a matter of degree, since all organizations are decentralized to some extent out of necessity. At one extreme, a strongly decentralized organization is one in which even the lowest-level managers and employees are empowered to make decisions. At the other extreme, in a strongly decentralized organization, lower-level managers have little freedom to make decisions. Although most organizations fall somewhere between these two extremes, there is a pronounced trend toward more and more decentralization. 3.
Advantages & Disadvantages of Decentralization. Advantages of decentralization include faster, more responsive decisions, greater flexibility, more initiative at lower levels, reduced coordination efforts, reduced administration, and redundant capabilities. By moving decision making down the structure, response time is cut as the person making the decision is closer to the situation. The organization can react more quickly in this arrangement than if it had to route all decisions through a central location. In addition to more rapid decisions, decentralization can lead to greater flexibility in dealing with problems. A small unit is able to adapt to unexpected circumstances with more ease than a large, cumbersome organization.
Flexibility is often the by-product of innovation. As responsibility and functions are dispersed throughout the agency, individuals can express an amount of initiative rarely seen in centralized structures. Given the opportunity to “strut their stuff,” some employees will take risks and make valuable, new contributions in the process. More autonomy leads to a reduction in the coordination game. Since not every aspect of a decentralized organization must be standardized, the costs of ensuring that all subunits are performing identically are eliminated. Also eliminated is much of the administrative work at the headquarters. With each dispersed portion of the whole responsible for its own operations, those at headquarters do not have to deal with the day-to-day minutiae. Several of the smaller agencies when decentralized, might perform identical functions but with a focus on certain areas. If for some reason one of the units failed to operate, the others could pick up the slack. This redundancy could avert a catastrophic failure, which might occur if there was only one unit performing a critical function. Decentralization offers many advantages, but there are some drawbacks as well. Included among these are duplication of effort, localized use of expertise, difficulty in standardizing change, and lack of uniformity in decisions or output.
If two agencies perform similar functions, but in separate locations, this duplication of effort is wasteful. The resources and manpower required to maintain these duplicate operations can be a drain on the parent organization. Separate operating locations demand the careful disbursement of expertise and specialized equipment. If there are but two experts on a certain procedure and more than that number of operations requiring their services, how are they to be assigned? Some units will not function as well as those that get the expertise. When changes are necessary throughout a decentralized organization, it is difficult to ensure all subunits react the same way. Detailed instructions go to subordinate managers, who must all interpret the instructions similarly. The possibility for...
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