The optimal span of control is determined by the following five factors: Show
The final component in building an effective organizational structure is deciding at what level in the organization decisions should be made. Centralization is the degree to which formal authority is concentrated in one area or level of the organization. In a highly centralized structure, top management makes most of the key decisions in the organization, with very little input from lower-level employees. Centralization lets top managers develop a broad view of operations and exercise tight financial controls. It can also help to reduce costs by eliminating redundancy in the organization. But centralization may also mean that lower-level personnel don’t get a chance to develop their decision-making and leadership skills and that the organization is less able to respond quickly to customer demands. Decentralization is the process of pushing decision-making authority down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions. Benefits of decentralization can include quicker decision-making, increased levels of innovation and creativity, greater organizational flexibility, faster development of lower-level managers, and increased levels of job satisfaction and employee commitment. But decentralization can also be risky. If lower-level personnel don’t have the necessary skills and training to perform effectively, they may make costly mistakes. Additionally, decentralization may increase the likelihood of inefficient lines of communication, competing objectives, and duplication of effort. Several factors must be considered when deciding how much decision-making authority to delegate throughout the organization. These factors include the size of the organization, the speed of change in its environment, managers’ willingness to give up authority, employees’ willingness to accept more authority, and the organization’s geographic dispersion. Decentralization is usually desirable when the following conditions are met:
As organizations grow and change, they continually reevaluate their structure to determine whether it is helping the company to achieve its goals. concept check
Summary of Learning Outcomes
In a highly centralized structure, top management makes most of the key decisions in the organization, with very little input from lower-level employees. Centralization lets top managers develop a broad view of operations and exercise tight financial controls. In a highly decentralized organization, decision-making authority is pushed down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions. Decentralization can result in faster decision-making and increased innovation and responsiveness to customer preferences. GlossarycentralizationThe degree to which formal authority is concentrated in one area or level of an organization. Top management makes most of the decisions.decentralizationThe process of pushing decision-making authority down the organizational hierarchy.What is the degree to which decision making is concentrated at the top of the organization's hierarchy with the senior management team?a high degree of centralization
Centralization refers to the degree to which decision making is concentrated at a single point in the organization. In centralized organizations, top managers make all the decisions, and lower-level managers merely carry out their directives.
What is the term for decision making is concentrated at the top of the organization?Centralization. An element of organizational structure that refers to the degree to which decision making is concentrated at the top of the organization.
Is the degree to which power and decision making authority are concentrated at higher levels of the organization rather than distributed?Centralization is the degree to which decision making authority is concentrated at higher levels in an organization.
What is the degree of centralization?The degree to which formal authority is concentrated in one area or level of an organization.
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