Lower- level managers are empowered to make decisions in a decentralized organization, which can increase motivation and job satisfaction.
What is decentralized organisation ?
A company with a decentralized organizational structure is one where mid- and lower-level managers make most of the decisions, rather than the senior management team. Sometimes the employees themselves are even involved in the decision-making process. The opposite of a decentralized organization is a centralized one, where the highest-ranking leaders within the company make all major decisions, and there is a strict decision-making hierarchy. Most companies are not fully decentralized or centralized, having various degrees of both instead.
Some of the main situations where decentralized organization works well include:
- When a company has different points of contact with its customers and each requires highly individualized customer service.
- When an organization has a large number of different store locations and its upper management cannot monitor all of them and make important decisions for them.
- When the market for a specific product is fast-paced and there is intense competition, so all decisions need to be made as quickly as possible.
- Where new developments constantly alter the business model, making centralized control less effective.
Centralized organization :
A centralized organization is an organization that has a consolidated management system with decisions made by the top management then trickling down the chain of command to reach the organization's employees. Centralized organizations are distinguished by specific characteristics, which include;
- The management has a top-down approach where the subordinates follow orders without question.
- The organization has a well-established bureaucracy with a distinct chain of command.
- All the decisions are centrally made, and the opinions of subordinates are hardly considered.
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