If I had to choose one I would go with decentralized structure as it empowers employees and frees up the boss/owner to focus on the big picture.

Decentralization:-
The pushing down of decision-making authority to the lowest levels of an organization.

In your opinion, which of the above (Centralization vs. Decentralization) is a more successful method of management and why?

What you think about it,

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Actually decentralizing the system may make for some efficiency gains. For instance, allowing patrons to return books to any branch. In general though, I’d imagine that each branch will need librarians on hand but that one main web-site could be set up to show the inventory at each branch. You can also consolidate donations and purchasing departments and have on managing department that oversees all four branches. I’d need more information on the current situation and the goals of a centralizing effort but in general using the internet to connect all four branches and consolidating decision making in one branch should make for a relatively easy centralizing effort.

By the same token though, decentralizing the branches even further and giving individual librarians control over what books to buy and other policies could eliminate the need for a large managerial department and thus cut costs. It all depends on the specifics really. Anything is possible though!

In your company’s situation, it would seem most of these departments are best suited to decentralization. The company is large enough (especially if considered as part of its parent corporation), where individual employees should be empowered to make decisions at their workstations. Doing so will increase each employees’ efficiency and satisfaction, including middle and upper level managers as they will have less mundane tasks to approve and disprove and can focus on the bigger picture.

Your company’s implementation of either structure will ultimately be a greater indicator of success than the structure. If decentralized employees are given total free reign, chaos may ensure whereas completely centralized employees will lose their creative & analytical human traits as they are forced to seek managerial approval for everything.

Certain functions do lend themselves to centralization though. For instance, purchasing would be a good choice for centralization to ensure the company as a whole receives the best bulk rates and doesn’t waste material. However, a completely centralized purchasing department would delay supply orders and thus reduce manufacturing effectiveness. In other words, it’s really a unique decision and can change company to company.

Honestly, I’d need to know some more information about your company before giving you a complete answer. Feel free to send me an e-mail if you wish to chat in private.

Your articles and responses are very insightful. Thank you.

Our manufacturing company (1200 employees - and a subsidiary of a major global organization) is considering centralization of certain divisions. In your postings, you mainly focus on centralization vs. decentralization. Can you provide some additional insights into what divisions or functions, (for example, IT, purchasing, administration, engineering, strategy, maintenance, etc.), are best suited for centralization? In addition, if you have any guidance as to what materials, papers, etc. are available on the internet to assist me in this evaluation, I would much appreciate it.

Thanks.

I once worked for a certain Fortune 300 company where the CEO would constantly promote flex time as a great way to save the company money and keep employees happy. At nearly every quarterly town hall he had with employees he’d tout the benefits of flex time and remind managers to fit flex time into the workspace if employees wanted it. This company had over 20,000 employees and simply put the CEO’s message was not received by every manager in the company. Towards the end of my time there the CEO kept receiving questions about flex time and at a town hall announced that he was done taking questions about flex time and that the employees should figure it out because he already gave flex time his blessing numerous times.

The trouble this CEO encountered was that the company was very hierarchal. My boss did not receive word from her boss to institute flex time so as far as our department was concerned no one was to get flex time. My point here is that the CEO simply did not see the company the same way the employees did. There was a lack of true communication and action between the two groups because the company was simply too big for one person to manage everyone.

Other warning signs are a lack of employee engagement in the company, disregard of formal rules (due to a disconnect between the top of the company and everyone else), and a lack of guidance for employees. There are certainly more warning signs but they all have a commonality that communication between the top and the rest of the company is not functioning smoothly.

Your second question is a bit tricky Enrico, as top management could be very resistant to decentralization. In a centralized structure, the top management holds a lot of power and feels they are a big reason behind the company’s success (hence exorbitant executive salaries). As such top management could see decentralization as disastrous to the company and their leadership positions. Good leaders will be able to delegate and will institute decentralized structures on their own in order to keep the company functioning. The best time to alert top management about decentralization would be before they ever become managers!

Unfortunately that is not always realistic so the best time would be as soon as you start seeing problems from a centralized structure placing limits on a company’s growth and success. If this is in relation to a real personal situation, be careful how you word this suggestion so as to not upset the top executives. Phrase it as empowering employees to have more control over their task as those employees know the tasks better than anyone else, not as a lack of good communication or leadership.

If you’d like any advice on such a situation, feel free to send me an e-mail.

When is the best time to alert top management that decentralization could be a solution for the above?