Differentiate between centralized and decentralized management structure

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kipling2448 | (Level 3) Educator Emeritus

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A centralized management structure consolidates decision-making authority in the fewest hands or offices within an organization or business. To a certain degree, it involves micromanagement of decisions that could, under a more decentralized management structure, be delegated to personnel further down the hierarchy. In organizations where there is little or no confidence in the ability of subordinates to manage their divisions or offices, or in cases where the limited size of the organization does not necessitate the delegation of authority, then a centralized system, in which decisions are made by the highest level individual(s) in the organization, are generally adopted. The larger the organization, and more horizontal its structure, then the more imperative may be the need to allow for a more decentralized structure. A centralized management structure in a large organization will invariably prove unwieldy and slow to adapt to change and to respond to opportunities and problems alike. Vesting unit or office managers with the authority to make decisions, including with regard to personnel, rather than having to laboriously push decisions up a chain-of-command before anybody can act, allows for far greater flexibility and responsiveness to both customer and employee needs.

Even in a decentralized management structure, there are certain decisions that will of necessity be left to the those who occupy the upper-most rungs of the organizational hierarchy. Major acquisitions, for instance, and decisions on recapitalization of plants or adding or phasing out of operations or departments are generally left to those at the upper-most level of management, including chief executive and operating officers. For more mundane, everyday decisions, however, delegation of authority and responsibility is often warranted -- assuming, of course, that human resources has done its job of providing personnel capable of initiative and competent to execute plans and projects.

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