Page 203 - Introduction to Business

CHAPTER 5 Managing and Organizing Business 177

generally ultimately responsible or accountable for what’s going on in the organi-
zation. The CEO of a major Fortune 500 corporation delegates all kinds of authority
and responsibility, but if the corporation performs very poorly, the CEO knows that
it is he or she whom the board of directors will fire.
Despite all the fears over delegating authority and responsibility, managers and
business owners know that at the very least it is a necessary evil. Once he moved the
business out of his college apartment, there was just no way for Michael Dell to
keep running everything at Dell Computer Corporation. Even the hardest working
micromanagers (think of the former U.S. president Jimmy Carter, who personally
kept the schedule for use of the White House tennis courts) learn that it’s impossi-
ble to micromanage everything. Moreover, micromanaging/fear of delegation can
result in managers not focusing enough on the big picture issues before them (in
former president Carter’s case, things like the Iran hostage crisis). Long story short,
the key to delegation is trust. Managers and business owners need to recognize that
they can’t do everything themselves and that they need to hire subordinates they
trust to help them with their endeavors. Sometimes they are pleasantly surprised,
with subordinates doing the job even better than they could ever have done it. Cer-
tainly, Michael Dell wouldn’t be where he is today if he weren’t an excellent delega-
tor of authority and responsibility.

CENTRALIZATIONVERSUS DECENTRALIZATION. The degree of delegation by an organi-
zation’s top management determines whether the organization is centralized or
decentralized. A centralized organization is one where there is relatively little del- centralized organization An
egation of authority and authority is concentrated at the top. A decentralized organization where relatively little
delegation of authority occurs and
organization is one where a significant amount of delegation has taken place and
authority is concentrated at the top
a good deal of authority has been spread out throughout the organization. See
decentralized organization An
Exhibit 5.4. organization where a significant amount
To visualize the differences in these types of organization, let’s pretend you win of delegation of authority has occurred
some money in the lottery and decide to go on a three-day vacation at a fancy hotel. and authority is spread out
You make reservations for the hotel, but when you get there they tell you that they
have no record of your reservation and that they are completely booked. You start
complaining, but each person you complain to says she or he has no authority to
do anything about your problem. They tell you the only way to get anything done is
to contact the CEO of the company, since the CEO is the only person with any
authority to give you some sort of a refund or credit—or bed. This hotel has a cen-
tralized organization.

EXHIBIT 5.4
Centralized and Decentralized Organizations

(a) (b)
Centralized Organization Decentralized Organization
U.S. Government Foreign and Defense Policies, 1972 U.S. Government Foreign and Defense Policies, 2002
The White House The White House
President, Richard M. Nixon President, George W. Bush
and National Security Adviser and National Security Adviser
Henry Kissinger Condoleeza Rice

Secretary of State Secretary of Defense Secretary of State Secretary of Defense
William P. Rodgers Melvin R. Laird Colin L. Powell Donald H. Rumsfeld

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