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Untangling Decentralization

12 important questions on Untangling Decentralization

The words centralization and decentralization have been bandied about for as long as anyone has cared to write about organizations. Yet they represent probably the most confused topic in management. Describe the concept of centralization:

The structure of an organization is centralized when all the power for decision making ultimately lays in the hands of one person.

Centralization is the tightest means of coordinating decision making in the organization. All decisions are made by one person, in one brain, and then implemented through direct super- vision. Why, then, should an organization decentralize?

Because not all its decisions can be understood at one center, in one brain.
Related reason for decentralization is that it allows the organization to respond quickly to local conditions. - man-on-the-spot.
A stimulus for motivation. - Creative and intelligent people require plenty of room to maneuver.

In other words, control over the making of choices—as opposed to control over the whole decision process—does not necessarily constitute tight centralization. With this in mind, let us now look at vertical and horizontal decentralization. Describe vertical decentralization:

Vertical decentralization is concerned with the delegation of decision making power down the chain of authority, from the strategic apex into the middle line.

The focus here is on formal power—to make choices and authorize them—as opposed to the informal power that arises from advising and executing. This characteristic belongs to a certain form of decentralization. Which form is described above?

Vertical decentralization.

The only way to grant market-based units the power they need to function in a quasi-autonomous manner. What is described above?

Selective parallel decentralization.

Describe parallel decentralization:

Dispersal of power for many kinds of decisions to the same place. Example: Finance, marketing, production decisions delegated to the division managers in the middle line.

Associated with work constellations grouped on a functional basis.

Selective vertical decentralization.

Decisional power flows to people outside the line structure > To analysts, support specialists and operators. Non managers control decision processes. Name five horizontal decentralization characteristics:

Direct supervision. > The tightest coordination mechanism; close control by managers; the boss is all around.
Standardization of work processes. > Many rules; the operator knows what he/she can and cannot do.
Outputs standardized. > Allowed to choose their own work processes.
Standardization of skills. > Trainend and indoctrinated before they started to work; thereafter left alone to choose their work processes and determine their outputs.
Mutual adjustment. > Employees completely free to work out their own coordination.

Decisional power here is concentrated in the hands of a single individual, the manager at the top of the line hierarchy—namely, the chief executive officer. The chief executive retains both formal and informal power, making all the important decisions himself and coordinating their execution by direct supervision. What type of the decentralization in fives is described above?

Vertical and horizontal centralization.

In this type we find the bureaucratic organization with unskilled tasks that relies on standardization of work processes for coordination. As a result, the structure is centralized in the vertical dimension; formal power is concentrated in the upper reaches of the line hierarchy, notably at the strategic apex. Because of their role in formalizing behavior, the analysts are, however, able to gain some informal power, which means limited horizontal decentralization. What type of the decentralization in fives is described above?

Limited horizontal decentralization (selective).

Here we find the organization that is divided into market units, or divisions, to whose managers are well up in the middle line and minor ones in the strategic apex and at the top of the technostructure. What type of decentralization in fives is described above?

Limited vertical decentralization (parallel).

Decision power here is concentrated largely in the operating core because its members are professionals, whose work is coordinated largely by the standardization of skills. What type of decentralization in fives is described above?

Vertical and horizontal decentralization.

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Management and organization 2

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Untangling Decentralization

12 important questions on Untangling Decentralization

The words centralization and decentralization have been bandied about for as long as anyone has cared to write about organizations. Yet they represent probably the most confused topic in management. Describe the concept of centralization:

Centralization is the tightest means of coordinating decision making in the organization. All decisions are made by one person, in one brain, and then implemented through direct super- vision. Why, then, should an organization decentralize?

In other words, control over the making of choices—as opposed to control over the whole decision process—does not necessarily constitute tight centralization. With this in mind, let us now look at vertical and horizontal decentralization. Describe vertical decentralization:

The focus here is on formal power—to make choices and authorize them—as opposed to the informal power that arises from advising and executing. This characteristic belongs to a certain form of decentralization. Which form is described above?

The only way to grant market-based units the power they need to function in a quasi-autonomous manner. What is described above?

Describe parallel decentralization:

Associated with work constellations grouped on a functional basis.

Decisional power flows to people outside the line structure > To analysts, support specialists and operators. Non managers control decision processes. Name five horizontal decentralization characteristics:

Here we find the organization that is divided into market units, or divisions, to whose managers are well up in the middle line and minor ones in the strategic apex and at the top of the technostructure. What type of decentralization in fives is described above?

Decision power here is concentrated largely in the operating core because its members are professionals, whose work is coordinated largely by the standardization of skills. What type of decentralization in fives is described above?

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