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Organizational Decentralization I. Organizational Decentralization Rationale of Decentralization The term decentralization is often used in business environments
Birch Paper Company OBJECTIVES Today's organizational thinking is oriented towards decentralization. One of the principal challenges in operating a decentralized
15 2.9. Span of control 17 2.10. Centralization versus decentralization 18 2.11. The Informal Organization 19 3. Chapter 3 ? Organizational Design and Structure 21
Baack and Cullen as providing (1994) "a framework to consider the centralization or decentralization of organizational decision-making." (p1) The theory specifically
focused and develop as autonomous enterprises under a single unified brand name. This decentralization of organizational structure and decision making allows an entrepreneurial
Submitted by suchalady3 on March 10, 2008
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I. Organizational Decentralization
Rationale of Decentralization
The term decentralization is often used in business environments and can be defined as the organizational severance and division of power, capital, and technical procedures and control into multiple units of the business.1 Decentralized corporations make it possible for managers to control without ownership. 4 In decentralized organizations, the breakdown is that the president of each unit of a business is on his or her own management-wise. The president of each unit is provided a board of directors and a financial budget from the parent company, but is allowed to run the company with no hindrance as long as financial goals are met. 2
Decentralization is seen as an issue of power as opposed to centralized units, where the chief executives keep as much power to themselves as possible and delegate as little power as possible to lower-level management. Many believe that decentralization is an organization's form of freedom, which opens the gate to perception and leads to advancement. 1 There are some experts that believe decentralization brings greater awareness and sensitivity to individual and community needs as well. With decentralization, there is also the idea of prevention of overload and clogging of communication channels, causing lengthy holdups within the structure. 5
Studies show that employees that are happy in their work environment and enjoy their career, are likely to have increased job performance. Decentralized organizations provide the freedom for employees to enjoy their work.3 Many prefer decentralization over centralization due to the former's style of focusing on an aspect called the "human factor". This refers to employees in organizations making decisions based on insight and observation along with statistical data. Centralized companies tend to depend a great deal on statistical data, computer program findings, and past events alone.2
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