Cenralistaion vs Decentalisation
Centralisation and Decentralisation
Centralisation
The main decisions are made by senior management, where little authority is passed down the organisation. advantages
• decisions are made by experienced people with an overview of the company.
• ensures policies are consistent throughout the company.
• ensures quick decisions can be made without consultation.
• procedures such as ordering and purchasing can be standardised throughout the company, leading to economies of scale.
• in times of crisis the firm may need strong leadership by a central group of senior managers. disadvantages (mainly advantages of decentralisation)
• centralisation reduces the input of the day to day experts, e.g., the shop floor staff, into the firms decision making.
• it risks demoralising branch managers who may feel mistrusted or powerless.
Decentralisation
Decisions are made by junior management as authority is passed down the organisation, thereby accepting less uniformity in how things are down. There has been a trend in the 1980s and 1990s is to decentralise to provide greater flexibility. advantages
• reduces the stress and burdens of senior management
• it can empower local managers encouraging them to be more innovated and motivated.
• it reduces the volume of day to day communication between head office and the branches, therefore giving senior managers the time to consider long term strategy.
• subordinates may have a better knowledge of local conditions affecting their areas of work. This should allow them to make more informed well judged choices, e.g., salespersons have detailed knowledge of customers.
• management at middle and junior levels are groomed to take over higher positions. They are given the experience of decision making when carrying out delegated tasks (management development).
• could allow greater flexibility and a quicker
Centralisation
The main decisions are made by senior management, where little authority is passed down the organisation. advantages
• decisions are made by experienced people with an overview of the company.
• ensures policies are consistent throughout the company.
• ensures quick decisions can be made without consultation.
• procedures such as ordering and purchasing can be standardised throughout the company, leading to economies of scale.
• in times of crisis the firm may need strong leadership by a central group of senior managers. disadvantages (mainly advantages of decentralisation)
• centralisation reduces the input of the day to day experts, e.g., the shop floor staff, into the firms decision making.
• it risks demoralising branch managers who may feel mistrusted or powerless.
Decentralisation
Decisions are made by junior management as authority is passed down the organisation, thereby accepting less uniformity in how things are down. There has been a trend in the 1980s and 1990s is to decentralise to provide greater flexibility. advantages
• reduces the stress and burdens of senior management
• it can empower local managers encouraging them to be more innovated and motivated.
• it reduces the volume of day to day communication between head office and the branches, therefore giving senior managers the time to consider long term strategy.
• subordinates may have a better knowledge of local conditions affecting their areas of work. This should allow them to make more informed well judged choices, e.g., salespersons have detailed knowledge of customers.
• management at middle and junior levels are groomed to take over higher positions. They are given the experience of decision making when carrying out delegated tasks (management development).
• could allow greater flexibility and a quicker