What Is Important When Decentralizing Business?

When we talk about centralized and decentralized businesses, we mean the extent to which authority has been passed down - delegated - to lower levels or divisions of an organization. If an organization is decentralized, a greater degree of authority is given to staff and divisions. So, let's take a good look of what is worth considering when decentralizing business.

The first significant point is authority. In a decentralized company, the divisions will have wider responsibilities. Divisional manager will, for example, purchase expensive equipment and authorize substantial salary increases. To add to this, final decisions must be made at lower levels. So, there are fewer controls from Head Office. Two things stand in the way of this working. One is that the people who now have the authority may not let go of it. The other is that the people at lower levels may not want to accept it. And, at the beginning, some of them are not strong enough to handle it. However, the process is not as difficult as it may sound.

Moving on, a decentralized organization shows wider span of control. The greater the degree of decentralization, the more effective becomes the span of control. It leads to effective supervision as the managers at the lower levels have complete authority to make changes in work assignment, to change production schedules, to recommend promotions and to take disciplinary actions.

Thirdly, it can be said that decentralization helps to develop people because staff get more responsibilities, make more decisions, and so gain experience for later managerial positions. All these things increase job satisfaction, make the job more interesting and provide greater incentives for people to put out their best efforts. On the contrary, if an organization is too centralized, people become robots - which is demotivating.

To sum up, decentralizing companies have a lot of advantages. The strongest argument is that, in competitive conditions, it will be more flexible, better able to make quick decisions and to adapt to change. Moreover, employees can be empowered by having more autonomy to make their own decisions, giving them a sense of importance and making them feel as if they have more input in the direction of the organization.