Centralised and decentralised organisational structures
Businesses usually use two main forms of management, called and .
Centralised management structure
A centralised structure is where business decisions are made at the top of the business or in a head office and distributed down the . It is often used in retail chains. Usually, all branches will operate in the same way and store managers will have very little input into how their individual store is operated.
Businesses with a centralised management style can often be slow to respond to changes in the business environment or local changes near their branches.
Advantages of a centralised management structure include:
- consistency across the business
- the business has a clear direction
- operations and decisions are closely controlled and managed
- the chain of command and accountability are clear
Disadvantages of a centralised management structure include:
- it can demotivate employees
- a standardised approach may not work in all business locations
- it may lower productivity
Decentralised management structure
A decentralised approach is where a business allows decisions to be made by managers and further down the chain. This structure provides staff with more decision-making responsibilities. For example, individual stores or departments may make decisions on staffing levels, which products and services to offer for sale, and pricing.
Businesses with a decentralised management structure can often respond quickly to changes in the business environment and the local area.
Advantages of a decentralised management structure include:
- improved employee motivation
- allowing managers lower down the chain to make decisions to suit their local area and customers
- more responsibility for employees
Disadvantages of a decentralised management structure include:
- consistency is not achieved across the business
- managers can make ineffective decisions
- may negatively impact sales and overall business performance, eg because of ineffective decisions by managers lower down the chain
