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Companies the operational activities. Centralization or Decentralization

Companies in any kind of industry, they keep a certain type of management structure. In a sense that the full authorities and responsibilities are well maintained and followed. No matter how big or small is the company, the management structure is in place. It is like the skeleton of the company – a framework and guidelines that are essential in managing the overall operations of the company.  In an organization, decision-making is very critical. It is about authority. Hence, it must be set and clear to all the model of decision-making structure so that all the members would be keen enough to channel properly all the matters and issues and even a simple confusion along the operational activities. Centralization or Decentralization Who must make the decision? Is it the top management or several individuals in the organization? To answer the above questions, let us identify the difference between the two by naming them as Centralized Organizational Structure and Decentralized Organizational Structure. First, let us define them or we could also mention some characteristics to describe each. Now, we know already the traits of each structure, let us deepen our understanding by mentioning the advantages and disadvantages as well.Which is better to be practiced in a certain organization? In the posted assignment question, we have to discern whether centralized or decentralized is the option for every CEO in order to manage the company well. Now, let us consider the pros and cons of each:It is important to consider the size and type of the business in order to decide of which type of management could be practiced in a company. Take note, centralized organizational structure fits best to small size business and the nature of activities does not require several departments to employ numbers of managers. While in a decentralized organizational structure, it is best in a multi-level and big size companies. Wherein several departments and managers are required in order to ensure the smooth flow of the business operations.I believe, the CEO of the company is considering all of the above in ensuring the success in his organization. He must always take note of the advantages and disadvantages of whichever he may adapt for his organization, whether it is centralized or decentralized as long as the holistic business operations are on the top of his objectives.1- The authority to decide is at the level of the top management.2- It is a characteristic of industry type organization (mechanic type).3- Small businesses used this kind of structure, i.e the owner is the sole responsible for the business operation.4- No delegation of authority. He alone has the power over matters that require decision.1- The authority to decide is delegated from the top management to the lower level management.2- It is a characteristic for the new organization (organic type).3- Heads of individual departments are responsible for decision-making and operation of the business.4- No uniform decision most of the time.1- There is uniformity in the decision.2- Implementation of standardized policies and practices for the entire organization is easier.3- Controlling overall operations is easier too.4- The tendency of other departments to become independent to another department is prevented.5- Purchasing and accounting is centralized, hence it can save costs.6- During the time of crisis, the situation can be easily addressed. 7- Quicker decision-making and usually it is “strategic”.8- It can be practiced in small business since less costs in operational and staffing could do.9- The flow of communication is vertical, making it easier for the manager to convey the policies and avoid arguments with self-centered type of departmental managers.10- Tight financial control in overall. 1- Tends to become strictly bureaucratic since the decision is only with the owner or top manager.2- It could result to low motivation to lower managers in the hierarchy due to lack of authority.3- Lower level managers tend to develop the feeling of disconnection towards the management which may result to an apathy towards the success of the business or the entire company.4- In this type of management, it does not provide the on-site employees the ability to share their expertise with the management in decision making, most particularly if they are the ones directly knowledgeable of the matters to be decided.5- For some matters that require development, it could take time to notice the improvement and for finalizing it as a policy may also take years.6- In some cases, there is an abuse of power or authority in centralized management. Misuse of power is possible i.e. basis of their personal judgment. 7- On the other hand on the part of the top manager or owner, since all decisions to be made are on his desk, he could feel overburdened and the efficiency of operations is at stake.8- One of the drawback of this type of management is that, it is not applicable to a business environment to be dynamic and flexible. 9- In terms of creativity, in this type of management, the innovative ideas usually come from the front line managers, i.e. to promote new products and services or marketing ideas.1- Responsibilities are shared with the lower-level management. Top management could focus on the most important decisions to make.2- Provides training to the would-be managers in case the company is growing.3- There are effective control and supervision of the staff and operation.4- It helps to improve the morale of the managers.5- It is a tool to satisfy human needs for having an authority or power, independence, and status change.6- It provides a timely and wise decision. . Employees have their direct managers with them to support them and to be consulted.7- Better utilization of middle and lower management.8- Activities are well coordinated within the department.9- Flexibility is developed to meet the competition and to come up with on the spot decisions. 1- Increase in administrative expenses. Having several department heads would mean also cost of paying them with bigger salaries than normal employees.2- Since a number of the department is involved, there would be an increase in operational costs as well.3- Different opinions and decisions would lead to lack of uniformity.4- This is completely not suitable for small business firms, as the costs and expenses would be higher.5- Risks is high also should the departmental manager is not competent enough and lack the essential skills to manage the department, it can cause losses to the company.6- There is a tendency for each department to become self-centered, ignoring the common interests of the other department and the company itself.7- Chances of not practicing “strategic” decision is high also.8- Inconsistency in practices and policies in every department.9- There is a high risk of cost overruns due to uncontrolled budgets in each department.

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