Question

List some advantages and disadvantages to decentralization of a firm's operations. Also, discuss your experience with a centralized or decentralized organization. How did this organization's structure affect duplication of activities and goal congruence?

Answer 1

Advantages of Decentralization are:

a. The top management may not be overburdened with regular decision making and can focus on expansions, diversifications, merger and amalgamations, tax planning etc. The implementation and day to day decision making can be left of Middle and Operational Management.

b. It may create responsible managers who may independently manage the operations thus proving advantageous for the purpose of growth.

c. It boosts creativity and activeness among the employees. They feel empowered and motivated.

Disadvantages of Decentralization are:

a. Decentralization may require additional focus on Coordination between different departments which if go worng may jeopardize operations.

b. Sometimes top management may loose focus of the operations. In case of incompetent Middle and Operational Management, it may create troubles.

c. It increases the administrative expenses for appointment of Expert Managers.

It may sometimes become impossible to expand business without decentralization. Top Management when overburdened with regular decision making,may not be able to deliver growth. Proper Authority responsibility structure shall be created within the organisation for decentralization.

One such example was with a Large Company audited earlier. it had completely decentralized operations and the employees were efficient to take their own decisions relating to day today functioning. Also the duplication of activities was reduced as the Internal policies which prescribed procedures was strongly followed. The goal congruence was achieved as employee say their success when they gave better results which benefited the company too.