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CENTRALIZED ORGANIZATIONAL STRUCTURE Centralization is the process of transferring and assigning decision-making authority to higher levels of an organizational hierarchy. Centralized organizational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company’s business operations. It is a setup in which most power and critical decision making responsibilities are concentrated with a few key leaders and it often houses its primary decision makers or executives in a central headquarters with offices and meeting areas for leaders to discuss business. In centralized organization, the decision-making has been moved to higher levels or tiers of the organization, such as head office or corporate center. Knowledge, information and ideas are concentrated at the top and decisions are cascaded down the organization. Some functions like finances, accounting, data processing of statistics and purchase of capital equipment are likely to be centralized. Advantages of Centralization: Focused Vision o Vision is a key trait of effective leadership and having a more centralized structure keeps all levels of an organization focused on one vision or purpose. This prevents potential inconsistency in vision and helps companies deliver a common message to customers and communities. Fast Execution o With fewer people involved in discussing and deciding on strategy and action, centralized organizations typically react more quickly to a dynamic marketplace. Once decisions are made, top managers send out directives to lower levels for implementation as directed.
DECENTRALIZED ORGANIZATIONAL STRUCTURE Decentralization is the process of transferring and assigning decision-making authority to lower levels of an organizational hierarchy. . strategy Decision-making: strong. coordinated. they insulate other managers and leaders from the burden of making risky or unfavourable decisions. charismatic Organizational change: shaped by top. able to respond quickly to major issues and changes Uniformity: low risk of dissent or conflict between parts of the organization Disadvantages of Centralization: It can suffer the negative effects of bureaucracy Business owners may require more time to accomplish tasks. Characteristics of Centralization: Philosophy/ emphasis on: top-down control. In this structure. which can result in sluggish business operations. they retain more control over operation of the company and development of its culture. visionary. authoritarian. Decentralized organizational structures often have several individuals responsible for making business decisions and running the business. fast. individuals at each level in the business may have some autonomy to make business decisions. leadership. Control and Accountability o When centralized leaders are in charge of all major decisions. vision of leader Execution: decisive. Reduced Conflict o With top managers taking the responsibility of making and implementing critical decisions. vision.
Advantages of Decentralization: It increases morale and promotes interpersonal relationships. flexible to adapt to minor issues and changes Participation. participative. Flexibility is increased and reaction time is decreased.Decentralization is a type of organizational structure in which daily operations and decision-making responsibilities are delegated by top management to middle and lower-level managers within the organization. emergent. Characteristics of Decentralization: Philosophy/ emphasis on: bottom-up. o Thus decisions may be more effective. detailed Organizational dynamics Execution: evolutionary. communications are swift and effective. This provides a feeling of individuality and freedom. It fosters informality and democracy in management and brings decision making closer to action. political. It helps determine accountability. organizational . Fewer people have to exchange information. allowing top management to focus more on major decisions. they feel more important and are more willing to contribute. Knowledge. accountability change: emerging from interactions. cultural and learning dynamics Decision-making: democratic. information and ideas are flowing from the bottom to the top of the organization. because the people who know the situation and have to implement the decisions are the ones who make them. o When people have a voice in governance.
In functional organization. the functional supervisor which is in charge with overseeing employees in a functional area such as marketing or engineering and the project supervisor which is in charge in managing a specific and often impermanent project. The project manager uses people assigned to functional areas to complete the project while they are still assigned to the functional area. An increased awareness of division consciousness and a decrease in company consciousness may develop. In matrix structure. Functions are likely to be duplicated between divisions and headquarters. select personnel. The matrix organizational structure has a formal vertical and horizontal chain of command. Advantages of Matrix System: Resource Coordination o The matrix structure allows supervisors to focus on their areas of expertise. Decentralized organization can struggle with multiple individuals having different opinions on a particular business decision. It involves increased costs. each employee answers two immediate supervisors. make personnel assignments and evaluate personnel and the project. Functional supervisors focus on hiring. determine pay and promotions. Division managers may not inform top management of their problems.Disadvantages of Decentralization: Top administrators may feel that it would decrease their status. the functional manager has the authority to determine and rate goals. MATRIX SYSTEM A matrix system/ organization structure is designed to focus on both project and function. Function is described as all the tasks required to produce the product and the product is the end result of the function. training and .
Specialization o Placing employees in functional areas allows them to specialize in a particular field. Breath of Skill o In a matrix structure.managing employees in their field. Flexibility o The matrix structure allows for human resources to be shared flexibly across different projects or products. Disadvantages of Matrix System: Decision making can be slow Some personnel may get frustrated and feel insecure Stress . Communication o The matrix structure allows for information and resources to travel more fluidly between those functional areas. employees have the opportunity to develop a wider set of skills than they would in a purely functional structure. specialized employees can excel at tasks in their field of focus. Through the project team. Instead of being good at a variety of tasks. Functional areas maintain a stock of talented employees to meet projects' requirements. employees have constant contact with members of other functional areas via their membership in project teams. while project supervisors can focus on achieving the goals of their specific projects or products. The collaboration between functional areas allows a project team to better handle complex challenges and objectives.
the higher the status. formation of primary and secondary groups. Does not indicate degree of authority Equating status with authority frequently causes confusion. Informal structures is important because they provide workers with a feeling of belongingness. and the identification of group leaders without formal authority. Informal structure – employees’ interpersonal relationships. Possibility exists of confusing authority with status Although it defines authority. it does not define responsibility and accountability Authority – the official power to act. 3. Distances from the top of the organizational hierarchy usually determine the degree of status: the closer to the top. the organization is still functioning under an old structure because employees have not yet accepted new lines of authority. Specialists with several bosses Project managers requiring several specialists or shared specialists Functional managers providing shared specialists Sacrifice of territorial incentive LIMITATIONS OF ORGANIZATIONAL CHART 1. facilitate or sabotage planned change in organization. May show things as they are supposed to be or used to be rather than as they are Organizational chart becomes obsolete very quickly because organizations are dynamic environment. Also known as grapevine. 4. People frequently have status with little accompanying authority. Shows only formal relationships Does not show the informal structure of the organization. Depicts how things are supposed to be. . when in reality. Power given by the organization to direct the work of others. or informal structure’s communication channel. and evolves social activities that developed outside the work environment 2.
Accountability – similar to responsibility but internalized. Implementation of a job. Being accountable means that individuals agree to be morally responsible for the consequences of their action. Responsibility – Duty or an assignment. .
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