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What functions does ‘decentralization’ play in firms/organizations? Essay


Almost every organization or firm is involved in some production not withstanding whether it is a product, service or some combination of some sort of the two. Any competent gig can extract from the basket of methodologies deployed in the production and produce a product or a service that would finally satisfy the customer and hence attract his or her loyalty to the brand produced.

As Merholz argues, “Contrary to all the books, articles, Web sites, and workshops that suggest otherwise, the biggest problem in user experience design today is not one of practice” but rather that of “poor organizational structure” (2004, Para 1).

The best organizational structure in the modern world of business dynamics is the one that fosters decentralization and shuns away from centralization approaches in management.

Decentralization here refers to “a organizational structure in which daily operations and decision-making responsibilities are delegated by top management to middle and lower-level managers within the organization, allowing top management to focus more on cardinal decisions” (Jones 1995, p.12).

The paper unveils, through consideration of various functions of decentralization in an organizations or firms that decentralization is the key to success of the modern organizations.

In the recent past, a large number of organizations would pass active voices of command and hence control the entire organizational structures. This way, the top management would successfully achieve the objective of the organization by massively pushing their decisions through the whole corporation in their centralized state.

As Carley and Lee (1998) reckon, while “desires of savvy executives were pushed through an entire corporation, AT&T could hire Henry Dreyfuss to evolve the telephone, Thomas Watson, Jr. could proclaim that “providential design is considerable business” and get IBM to work with such luminaries as Paul Rand, Charles and Ray Eames, and Eero Saarinen” (p.289).

However, in the modern day such companies with centralization spirit as a secret of success are perhaps extinct. The modern secrete of success lies in decentralization management approaches in firms or organizations.

This line of thought is perhaps amplified by the fact that decentralization functions to empower the employs, orient a firm in such a way that it becomes well prepared to cope with emergencies, facilitate efficiency in decision making and help to relieve some burdens from the top management staff among other functions.

One of the functions of decentralization is to relieve the top management some burdens. Some organizations would claim to embrace decentralization while on thorough scrutiny; they crown their CEOs as super heroes who are solely principally supposed to act as the saviors of their organization.

In other words, they are treated as symbols and tools for the organizations prosperity in the sense that they are believed to turn every organization’s resource available to their disposal and miraculously lead to corporate success.

According to Diverse Thoughts (2007), this perception is perplexing since there is “little evidence that a single individual can consistently make superior forecasts or strategic decisions in the face of a genuine uncertainty” (Para 3).

Consequently, perhaps if the organization were serious with the inevitable benefits of the functions of the decentralization, then they could waive a large portion of the CEO remunerations and rather place more emphasis on collective decision-making. This would make relieving burdens: as functional element of decentralization, make some impeccable contribution to the success of the organization in question.

In fact, “ the top management would be relieved of much day-to-day problem solving and is left free to concentrate on strategy, on a higher level decision making, and coordinating activities” (Joseph 2012, Para 5).

Additionally, the top management would set them free from involving itself with chore such as ordering supplies, and or responsibilities of recruiting new staff and rather deploy most of this time in strategic plans such as expansion or booking sittings with crucial clients and business partners.

Another significant function of decentralization is provision of mechanisms for employees’ empowerment. In the words of Joseph (2012), employees are 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” (Para 2).

In line with this view, the employees acquire the freedom to employ their knowledge coupled with their experience that they have acquired in the implementation of some idea they have brought forth. This way, they feel as being incorporated within the organization in which they operate.

In fact, this is necessary for their increased motivation and improvement of their self-image in relation to the company they claim to work for (Govindarajan 1986, p.847). Now, it is somewhat pertinent to pose a question: To what extent should people execute decentralization to leap maximally from its benefits? This question attracts differing responses historically in the management discipline.

The extent to which decentralization fosters employees’ empowerment is intriguing to many organizations. However, Wal-Mart gives a more plausible answer. The founder of the Wal-Mart: Sam Walton had immense value for continuous improvement.

However, as Collins and Porras informs, “he instituted concrete organizational mechanisms to stimulate change and improvement by deploying the concept called ‘ a store with a store’ in which he gave managers authority and freedom to run each department as if it were their own business” (1994, pp.36-37). This way he created a firm that would change by evolving itself.

His competitor leaders: Ames, on the other hand, detailed all the things that the managers were supposed to do precisely stepwise. He laid down these details in a book from which the managers could refer. This, according to Collins and Porras, “left no room for initiatives” (1994, p.37).

What were the repercussions of these two strategies? While Ames leaders thought they were maintaining tighter control of their stores, Wal-Mart blossomed much better than Ames into its current state today. The Wal-Mart case leads to the next function of decentralization: easing expansion.

Easing expansion as a function of decentralization is widely evidenced by Wal-Mart. It has stores outlets across the whole of America and even in overseas. Arguably, in case an organization is rapidly growing, decentralization has the ability to aid in the expansion process.

In this end, Chang and Harrington (2000) posits, “decentralization allows the new unit to operate as an independent entity, meaning it can react more easily to the specific needs of the area, such as deciding to sell products that appeal to the local market” (2000, p.1428).

By decentralizing, therefore, the motto of an organization management changes from ‘centralize and conquer’ to ‘decentralize to expand and leap maximum profitability’.

Organizations, which do not concern themselves with decentralization endeavors, are more often than not ill prepared to cope with emergencies. In this sense, the ability to handle emergencies is a function of decentralization. A situation may arise when the top management is not at a position to run the organization due to emergencies such illness.

As Grindle (2009) puts it, “a decentralized structure provides a better chance that the organization will maintain self-sufficiency because managers and employees are accustomed to working autonomously” (p.108). The survival of an organization is dependent on its ability to strike a middle ground between centralization and decentralization.

From the decentralization horizon, “A manager often can make a decision without having to wait for it to go up a chain of command, allowing the organization to react quickly to situations where fast action can mean the difference between gaining and losing a customer” (Galloway 2006, p.67). This way, efficiency in the process of making a decision is a function that enhances decentralization.

Conclusively, decentralization functions to foster ease and efficiency in decision-making, promoting expansion of an organization. It empowers employees and relieves the top management of certain burdens that impede availing them many opportunities to focus on management roles that bring a better good to the organization among other functions.

The paper defines decentralization as “a type of organizational structure in which daily operations and decision-making responsibilities are delegated by top management to middle and lower-level managers within the organization, allowing top management to focus more on chief decisions” (Jones 1995, p.12).

Even though decentralization has all the advocated for functions by the paper within an organization, the paper also recognizes the need to establish a sweet spot between centralization and decentralization so that an organization does not operate within just merits functions of decentralization while negating the demerit functions of decentralization.

References

Carley, K., & Lee, J., 1998. Dynamic Organizations: Organizational Adaptation in a Changing Environment. Strategic Management, 15(7), pp. 269-297.

Chang, M., & Harrington, J., 2000. Centralization Vs. Decentralization in Multi-Unit Organization: A Computational Model of Retail Chain as a Multi-Agent Adaptive System. Management Science, 46(11), pp. 1427-1440.

Collins, J., & Porras, J., 1994. Built to Last: Successful Habits of Visionary Companies. New York: Harper Business.

Diverse Thoughts., 2007. . Web.

Galloway, A., 2006. Protocol: How Control Exists After Decentralization. Cambridge: The MIT Press.

Govindarajan, V., 1986. Decentralization, Strategy, and Effectiveness of Strategic Business Units in Multi-Business Organizations. Management Review, 11(4) pp. 844- 856.

Grindle, M., 2009. Going Local: Decentralization, Democratization, and Promise of Good. New Jersey, NJ: Princeton University Press.

Jones, G., 1995. Organization Theory: Text and Cases. Boston, MA: Addison- Wesley.

Joseph, C., 2012. . Web.

Merholz, P., 2004. Organization In The Way: How Decentralization Hobbles The User Experience. Web.

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IvyPanda. (2019, July 23). What functions does ‘decentralization’ play in firms/organizations? Retrieved from https://ivypanda.com/essays/what-functions-does-decentralization-play-in-firms-organizations-essay/

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"What functions does ‘decentralization’ play in firms/organizations?" IvyPanda, 23 July 2019, ivypanda.com/essays/what-functions-does-decentralization-play-in-firms-organizations-essay/.

1. IvyPanda. "What functions does ‘decentralization’ play in firms/organizations?" July 23, 2019. https://ivypanda.com/essays/what-functions-does-decentralization-play-in-firms-organizations-essay/.


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IvyPanda. "What functions does ‘decentralization’ play in firms/organizations?" July 23, 2019. https://ivypanda.com/essays/what-functions-does-decentralization-play-in-firms-organizations-essay/.

References

IvyPanda. 2019. "What functions does ‘decentralization’ play in firms/organizations?" July 23, 2019. https://ivypanda.com/essays/what-functions-does-decentralization-play-in-firms-organizations-essay/.

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IvyPanda. (2019) 'What functions does ‘decentralization’ play in firms/organizations'. 23 July.

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