Strategic Management: Formulation and Implementation

Positive Aspects Of Centralization

If all major decisions are made at the top levels, it can be easier to keep the activities of various units and individuals coordinated.

Top managers usually have the most experience and make better decisions than individuals at lower levels.

Toplevel managers usually have a broader perspective and can better balance the needs of various parts of the organization in making decisions.

Coordination from the top can help reduce duplication of effort and resources by ensuring that similar activities are not carried on by different organizational units.

Major Advantages Of Decentralization

Encouraging decision making at lower levels tends to easy the heavy work loads of executives, leaving them more time for major issues.

Decentralization enriches lower level employees jobs by offering workers the challenge associated with being able to make significant decisions affecting their work.

Decentralization leads to faster decision making at the lower levels, because most decisions do not have to be referred up the hierarchy.

Individuals at lower levels may be closer to the problem and therefore, in a better position to make good decisions.

Decentralization often leads to the establishment of relatively independent units, such as divisions, whose output is easier to measure than that of units in a functional design.

However, a divisional structure is not synonymous with decentralization. It is possible to have a divisional structure with the high degree of centralization.