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CHAPTER 6 • Organizational Structure and Design 193
• Physical proximity of employees (closer proximity, larger span)
• Amount and type of standardized procedures (more A Question of Ethics
standardized, larger span)
• Sophistication of the organization’s management information How would you like to know all the closely held company
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system (more sophisticated, larger span) secrets of your employer? A small but growing number of
• Strength of the organization’s value system (stronger the private-sector businesses are revealing to employees details
value system, larger span) about everything from company financials to staff perfor-
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• Preferred managing style of the manager (personal mance reviews to individual pay. Advocates of this approach
preference of more or fewer employees to manage)
say it’s a good way to build trust among employees and a
good way to make employees aware of how their individual
(5) How Do Centralization contributions are affecting the overall company as a whole.
and Decentralization Differ? And it can make them more motivated in how they work.
However, critics say that such open management can be
TradiTional View. One of the questions that needs to be expensive and time consuming. For instance, employees may
answered when organizing is “At what level are decisions made?” need to be “taught” how to read financial statements. And
Centralization is the degree to which decision making takes place employees who have access to all the details may want to
at upper levels of the organization. Decentralization is the degree
to which lower-level managers provide input or actually make deci- weigh in on all the decisions, slowing down the decision-
sions. Centralization-decentralization is not an either-or concept. making process. As work becomes collaborative and as
Rather, it’s a matter of degree. What we mean is that no organiza- office workers become accustomed to sharing details of
tion is completely centralized or completely decentralized. Few, if each other’s lives, maybe the move toward greater workplace
any, organizations could effectively function if all their decisions openness is inevitable.
were made by a select few people (centralization) or if all decisions If your professor has assigned this, go to the Assignments
were pushed down to the level closest to the problems (decentral-
ization). Let’s look, then, at how the early management writers section of mymanagementlab.com to complete these
viewed centralization as well as at how it exists today. discussion questions.
Early management writers proposed that centralization in an Talk About It 1: What ethical issues might arise in an
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organization depended on the situation. Their goal was the opti- “open” company?
mum and efficient use of employees. Traditional organizations were
structured in a pyramid, with power and authority concentrated near Talk About It 2: What are the implications for (a)
the top of the organization. Given this structure, historically central- managers and (b) employees?
ized decisions were the most prominent, but organizations today have
become more complex and responsive to dynamic changes in their
environments. As such, many managers believe that decisions need to be made by those indi-
viduals closest to the problems, regardless of their organizational level. In fact, the trend over
the past several decades—at least in U.S. and Canadian organizations—has been a movement
toward more decentralization in organizations. 15

Today’s View. Today, managers often choose the amount of centralization or decentraliza-
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tion that will allow them to best implement their decisions and achieve organizational goals.
What works in one organization, however, won’t necessarily work in another, so managers must
determine the amount of decentralization for each organization and work units within it. When
managers empower employees and delegate to them the authority to make decisions on those
things that affect their work and to change the way that they think about work, that’s decentral-
ization. Notice, however, that it doesn’t imply that top-level managers no longer make decisions.

(6) What Is Formalization? centralization
The degree to which decision making takes place at
TradiTional View. Formalization refers to how standardized an organization’s jobs upper levels of the organization
are and the extent to which employee behavior is guided by rules and procedures. Highly decentralization
formalized organizations have explicit job descriptions, numerous organizational rules, The degree to which lower-level managers provide
and clearly defined procedures covering work processes. Employees have little discretion input or actually make decisions
over what’s done, when it’s done, and how it’s done. However, where formalization is low, formalization
employees have more discretion in how they do their work. Early management writers How standardized an organization’s jobs are and
expected organizations to be fairly formalized, as formalization went hand-in-hand with the extent to which employee behavior is guided by
bureaucratic-style organizations. (Today’s View is on p. 197.) rules and procedures