Centralized Organizations

Centralization is a business structure in which one individual makes the important decisions (such as resource
allocation) and provides the primary strategic direction for the company.
 Most small businesses are centralized in that the owner makes all decisions regarding products, services,
strategic direction, and most other significant areas.
 However, a business does not have to be small to be centralized.
 Many businesses in rapidly changing technological environments have a centralized form of management
structure.
 The decisions made by the lower level management are limited in a centralized environment.
- Magiging effective lang daw ang centralized decision making if need agad ng immediate decision then
ang aasahan na decision is yung sa main decision maker.
• Apple is an example of a business with a centralized management structure.
• Within Apple, much of the decision-making responsibility lies with the Chief Executive Officer (CEO)
Tim Cook, who assumed the leadership role within Apple following the death of Steve Jobs.
• Apple has long been viewed as an organization that maintains a high level of centralized control over the
company's strategic initiatives such as:
o new product development
o markets to operate in, and
o company acquisitions.
The advantages of centralized organizations include:
• clarity in decision-making – kung ano yung sinabi ng main decision maker, then that’s it.
• streamlined implementation of policies and initiatives
• control over the strategic direction of the organization.
The primary disadvantages of centralized organizations can include:
• limited opportunities for employees to provide feedback
• a higher risk of inflexibility.
Decentralized Organizations
Decentralization is a business structure in which the decision-making is made at various levels of the
organization. Typically, decentralized businesses are divided into smaller segments or groups in order to make
it easier to measure the performance of the company and the individuals within each of the sub-groups.
• In order to be successful, a company must work hard to develop strategic competitive advantages that
distinguish the company from its peers.
• The organizational structure must allow the organization to quickly adapt and take advantage of
opportunities.
• Many organizations adopt a decentralized management structure in order to maintain a competitive
advantage.
Examples of Organizations that tried Decentralized Org:
• Johnson & Johnson was founded in 1886.
• The first factory had 14 employees: eight women and six men.
• Today, Johnson & Johnson, employs over 125,000 associates and operates in over 60 countries.
• You may recognize some of Johnson & Johnson's products, which include Johnson's Baby Shampoo,
Neutrogena, Band-Aid, Tylenol, Listerine, and Neosporin.
• William Weldon was Chief Executive Officer (CEO) of Johnson & Johnson from 2002 to 2012. Under
Weldon's leadership, Johnson & Johnson operated under a decentralized structure.
• In an interview on him about successfully operating a decentralized organization, it is clear that the key to
success is the people within the organization itself.
• Weldon notes that to be successful, a decentralized organization must empower employees to innovate,
develop expertise, and collaborate to achieve organizational goals.
ADVANTAGES:
• Quick decision and response times - it is important for decisions to be made and implemented in a timely
manner. In order to remain competitive, it is important for organizations to take advantage of opportunities
that fit within the organization's strategy.
• Better ability to expand company - it is important for organizations to constantly explore new
opportunities to provide goods and services to its customers.
• Skilled and/or specialized management - organizations must invest in developing highly skilled
employees who are able to make sound decisions that help the organization achieve its goals.
• Increased morale of employees — the success of an organization depends on its ability to obtain,
develop, and retain highly motivated employees. Empowering employees to make decisions is one way to
help increase employee morale.
Link between compensation and responsibility - promotional opportunities are often linked with a
corresponding increase in compensation. In a decentralized organization, a compensation increase often
corresponds to a commensurate