Page 34 - F1 - AB Integrated Workbook STUDENT 2018-19

Chapter 2

3.3 Centralisation and decentralisation

Another method of analysing structures is by reference to the level at which decisions
are made.

 In a centralised structure, the upper levels of an organisation’s hierarchy
retain the authority and make decisions

 In a decentralised structure, the authority to take decisions is passed down to
units and people at lower levels

The factors that will affect the amount of decentralisation are:

 management style

 ability of management/employees

 geographic spread

 size of the organisation/scale of activities

Advantages of Disadvantages of
decentralisation decentralisation

 Senior management free to  Loss of control by senior
concentrate on strategy management

 Better local decisions due to local  Dysfunctional decisions due to a
expertise lack of goal congruence

 Better motivation due to increased  Poor decisions made by
training and career path inexperienced managers

 Quicker responses/flexibility, due  Training costs
to smaller chain of command
 Duplication of roles within the
organisation

 Extra costs in obtaining
information

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