Organizational Design (Centralization vs Decentralization)

 

Nowadays many organizations are re-evaluating their approach to organizational design. Before your organization considers embarking on decentralization, consider running this workshop with the senior management group.

 


Overview:

-          Differences in processes and decision making in a highly centralized organization as compared with one that is decentralized.

-          How various functional areas of management decision making are affected by higher or lower degrees of centralization

-          What the required changes are in the structure of decision making to ensure the organization’s efficiency and effectiveness

-          Centralization definition vs decentralization definition (examples)

 

Evaluate your organization’s current practices:

 

-          Factors influencing Decentralization: competence of employees, size of the organization, nature of the organization’s business, consistency of action required, information-processing capabilities and history of the organization amongst others.

 

-          Discussion of specific functional areas and to what extent the decision making is centralized: Production, Sales, Financial Management, Industrial Relations, Purchasing.

 

-          Does the decision-making occur at the top management level or middle/lower level management?

 

Decentralization in practice:

-          What is the formal structure and extent of decentralization?

-          How does centralized policy formulation occur specifically related to long-term growth and development of the enterprise?

-          Are any centralized controls to be implemented and to what extent?

 

Pre-Workshop Material:

 

https://hbswk.hbs.edu/archive/making-the-decision-to-decentralize

 

Thomas Malone, a professor at MIT Sloan School of Management, says that the cheap cost of communication—e-mail, instant messaging, the Internet—is making possible a new type of organizational structure. This organization of the future will be decentralized, the term defined as "participation of people in making the decisions that matter to them." Decentralization brings with it increased productivity and quality of life. But decentralization isn't right in every situation. In this chapter from Malone's new book, he asks: When should you decentralize?

 

This outlinewas recommended by AllaVolodina who teaches in university and corporate settings. Alla developed a variety of workshop outlines, as well course outlines for various institutions (e.g. York University). Check out AllaVolodina blog for more articles: allavolodina.com.

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