Does The Structure Allow For Appropriate Centralization Or Decentralization Of Authority?
The extent to which decision making should be systematically delegated downward in an organization depends upon a number of factors:
- Very large organizations tend to be more decentralized than very small ones.
- The number and type of business a firm in
- Firms with large numbers of unrelated businesses tend to be relatively decentralized, allowing the heads of the diverse business units to make most of the decisions affecting those units. By contrast, organizations in only one business can more easily be managed in a centralized fashion.
- The type of environment affects the need for decentralization
- Organizations in rapidly changing environments must be relatively decentralized so that decisions can be made quickly by those who are closest to the situation. Organizations in relatively stable environments can be managed effectively through centralized decision making.
- The degree of decentralization must be compatible with the organization's structure.
- Functional structures do not easily lend themselves to decentralization. Decentralization is far easier to attain in product divisional, geographic divisional, multidivisional, strategic business unit, and matrix structures, because each division, strategic business unit, or project can be operated as a relatively autonomous profit center.
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