Management - Vikhanskiy OS

2.7. Centralization and decentralization

In a small organization, all decisions can be made by its manager. However, with the increase in the size of the organization, the scale and complexity of the work, a situation can arise where the manager will be overloaded with decision making, even if he is only engaged in this. In this situation, the question arises: should rights be concentrated at the top or distributed at the levels of the organization? In practice, this is the dilemma between centralization and decentralization, which is a big problem in the design of an organization.

Centralization is the concentration of decision-making rights, the concentration of power at the top level of the organization's leadership. Centralization is the reaction of an organized system aimed at preventing distortion of information when it is transmitted through an increasing number of levels of management.

Decentralization is the transfer or delegation of responsibility for a number of key decisions, and consequently the transfer of the corresponding rights to the lower levels of management of the organization. The concepts of "centralization" and "decentralization" do not exclude each other. They are only different ways to solve the problem of distorting information when moving it from level to level, ways of solving this problem through different degrees of distribution of rights and responsibilities along the "vertical" of management.

The problem of choosing between centralization and decentralization is the problem of choosing the optimal design of the organization. Therefore, decentralization can not be considered outside of centralization. It exists only in relation to centralization, and this is their dialectical unity. Thus, for example, the transfer of authority during centralization up to the levels of management simultaneously means the necessity, due to a certain limited human physiological capabilities, of decentralization in the management of the level that has received more rights.

The degree of centralization or decentralization in an organization or its subdivisions can be measured using the following variables:

• number of decisions made at each level of management;

• the importance of the solution for the organization as a whole;

• degree of control over the implementation of the decision.

Organizations are developing by making a permanent choice between centralization and decentralization. R. Ackoff explains the desire for centralization by the desire to coordinate the work of the lower levels and to use the potential synergy, as well as the desire to prevent serious errors at the lower levels of management, the consequences of actions for the organization as a whole are not always visible and predictable. The pressure towards decentralization, in his opinion, is due to the desire to facilitate the manifestation of rapid and effective initiatives and reactions to changes from the levels at which the needs, dangers and opportunities manifest themselves first and enrich the work of managers at lower levels of government by increasing their responsibilities.

When designing an organization, the following factors can influence the choice between centralization and decentralization:

Capital intensity of decisions made. In practice, the regulating documents of companies indicate even a specific amount within which the manager can take those or other decisions. Accordingly, if the organization allows a relatively large amount of this amount for the middle or lower levels of management, then it builds its activities on a decentralized basis.

Uniformity of politics. For example, the organization of banking or trade suggests that the same company in all its branches should equally qualitatively build its relations with consumers. This, in turn, forces her to use highly standardized procedures.

The size of the enterprise. Previously, the possible limits of an effectively managed organization were already mentioned. Since in any case there is a limit to which centralization gives an effect, then after exceeding this limit there arises the question of decentralization.

Organizational culture. Acquired by the organization since its inception, the value orientations, norms and patterns of behavior are, as a rule, stable and can not be ignored when choosing the projected system.

Philosophy of management. The subjective belief of top management in one of the management approaches can for some time keep the organization from a new choice. For example, Mr. Ford-senior is known for being proud of his lack of any managerial titles other than the president and general manager of the company, and personally took as many possible important decisions as possible. In contrast, A. Sloane - Chairman of the Board of Directors of "General Motors" - brought the company to a high level, when only 5% of decisions were made at the headquarters of the corporation.

The aspiration of the parts to independence. In social systems, which is organization, the separation of part from the whole is accompanied by the desire of this part to become a new whole, to become independent. The trend manifests itself the stronger, the greater the difference between the former whole and the separated part.

Availability of appropriate personnel. The lack of willingness on the part of managers to take on greater responsibility can not contribute to the development of decentralization processes, and sometimes can develop into a hidden resistance to this process.

Development of control techniques. The widespread introduction of electronic information systems in organizations dramatically reduces the distortion of information and allows for faster transition to decentralization.

Degree of division of labor. Highly diversified companies, as a rule, are built on a decentralized basis for the product, project, consumer, market, territory.

Type of business. Each business has its own dynamics, characterized by a different rate of change. It is known that a high rate of change is impossible in conditions of rigid centralization. Thus, computer manufacturers usually have a high degree of decentralization in their activities.

Changes in the external environment. State policy in the field of demonopolization, taxation, etc. Can contribute to the development of one of the processes under consideration.

It is noted that decentralization has several advantages. It increases speed and increases the objectivity of decision-making, makes the organization flexible and timely reacting to external changes, creates for the employees certain conveniences and reduces the cost of office work, develops managerial abilities and creative, trustful start in their activities. However, it is also noted that decentralization also has a negative side. It can lead away from the main goals of the organization, weaken control and unity of action and, finally, can lead to the fact that the decision will not be accepted at all.