In a centralised organisation head office(or a few senior managers) will retain the major responsibilities and powers.

Conversely decentralised organisations will spread responsibility for specific decisions across various outlets and lower level managers, including branches or units located away from head office/head quarters. An example of a decentralised structure is Tesco the supermarket chain. Each store of Tesco has a store manager who can make certain decisions concerning their store. The store manager is responsible to a regional manager . Organisations may also decide that a combination of centralisation and decentralisation is more effective. For example functions such as accounting and purchasing may be centralised to save costs. Whilst tasks such as recruitment may be decentralised as units away from head office may have staffing needs specific only to them. Certain organisations implement vertical decentralisation which means that they have handed the power to make certain decisions, down the hierarchy of their organisation. Vertical decentralisation increases the input, people at the bottom of the organisation chart have in decision making. Horizontal decentralisation spreads responsibility across the organisation. A good example of this is the implementation of new technology across the whole business. This implementation will be the sole responsibility of technology specialists

Advantages of Centralised Structure For Organisations y Senior managers enjoy greater control over the organisation.

Advantages of Decentralised Structure For Organisations Senior managers have time to concentrate on the most important decisions (as the other decisions can be undertaken by other people down the organisation structure. Decision making is a form of empowerment. Empowerment can increase motivation and therefore mean that staff output increases. People lower down the chain have a greater understanding of

The use of standardised procedures can results in cost savings.

Decisions can be made to benefit the organisations as a whole.

Whereas a decision made by a department manager may benefit their department, but disadvantage other departments.

the environment they work in and the people (customers and colleagues) that they interact with. This knowledge skills and experience may enable them to make more effective decisions than senior managers.
y

The organisation can benefit from the decision making of experienced senior managers.

Empowerment will enable departments and their employees to respond faster to changes and new challenges. Whereas it may take senior managers longer to appreciate that business needs have changed. Empowerment makes it easier for people to accept and make a success of more responsibility.

In uncertain times the organisation will need strong leadership and pull in the same direction. It is believed that strong leadership is often best given from above.

Study Notes: People Management

Organisational structure - Centralisation v Decentralisation One of the issues that a business needs to address is where decision-making power resides in the organisational structure. Decision-making is about authority. A key question is whether authority should rest with senior management at the centre of a business (centralised), or whether it should be delegated further down the hierarchy, away from the centre (decentralised) The choice between centralised or decentralised is not an either/or choice. Most large businesses necessarily involve a degree of decentralisation

when it starts to operate from several locations or it adds new business units and markets. The issue is really how much independence do business units or groups within a business have when it comes to the key decisions? Centralised structures Businesses that have a centralised structure keep decision-making firmly at the top of the hierarchy (amongst the most senior management). Fast-food businesses like Burger King, Pizza Hut and McDonalds use a predominantly centralised structure to ensure that control is maintained over their many thousands of outlets. The need to ensure consistency of customer experience and quality at every location is the main reason. The main advantages and disadvantages of centralisation are: Advantages Disadvantages

Easier to implement common policies More bureaucratic often extra layers and practices for the business as a in the hierarchy whole Prevents other parts of the business Local or junior managers are likely to from becoming too independent much closer to customer needs Easier to co-ordinate and control from Lack of authority down the hierarchy the centre e.g. with budgets may reduce manager motivation Economies of scale and overhead Customer service does not benefit from savings easier to achieve flexibility and speed in local decisionmaking Greater use of specialisation Quicker decision-making (usually) easier to show strong leadership Decentralisation In a decentralised structure, decision-making is spread out to include more junior managers in the hierarchy, as well as individual business units or trading locations. Good examples of businesses which use a decentralised structure include the major supermarket chains like WM Morrison and Tesco. Each supermarket has a

store manager who can make certain decisions concerning areas like staffing, sales promotions. The store manager is responsible to a regional or area manager. Hotel chains are particularly keen on using decentralised structures so that local hotel managers are empowered to make on-the-spot decisions to handle customer problems or complaints. The main advantages and disadvantages of this approach are: Advantages Disadvantages is not necessarily

Decisions are made closer to the Decision-making customer strategic

Better able to respond to local More difficult to ensure consistent circumstances practices and policies (customers might prefer consistency from location to location) Improved level of customer service May be some diseconomies of scale e.g. duplication of roles

Consistent with aiming for a flatter Who provides strong leadership when hierarchy needed (e.g. in a crisis)? Good way of training and developing Harder to achieve tight financial junior management control risk of cost-overruns Should improve staff motivation