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A decentralized organizational structure distributes responsibility for daily management among several departments or individuals, rather than depending upon decisions made by an authority figure. It places more power in the lower levels of an organization so that executives have the freedom to concentrate on the top issues facing the business. Companies that follow decentralized organizational structure are often less likely to adhere to rigid guidelines or policies.
One of the key benefits of decentralized organizational structure is that it enables an organization to grow more quickly. When decision-making is distributed among multiple employees, issues can be resolved quickly and with more frequency. It also enables executives to focus more attention on key issues, thus speeding the process of implementing major initiatives that can result in big changes in an organization.
Decentralized organizational structure can help to increase employee satisfaction and retention as well. Employees who hold more responsibility tend to have more pride in their work. They also often work more efficiently when they feel that the executive team trusts them and depends on their efforts.
The decentralization structure can also encourage greater creativity among employees. By giving workers the freedom to make decisions, executives can encourage them to experiment and think outside of the box. Without rigid policies to restrain innovation, there is more chance of employees using their ideas to help expand the company.
Decentralized organizational structure can also increase the practicality of new actions. When decisions are made in smaller groups, they are often more logical because their impact is more clearly understood. It is typically not as easy for an executive to make policy changes for an entire company, as it is not possible to have the same knowledge of the daily operations of each team or employee who would be affected.
In a decentralized organization, it can also be easier to manage the company because it is only necessary to manage a series of groups rather than each employee. By giving different teams the ability to manage themselves, oversight of employees is less complicated. The teams manage themselves and the executives only need to ensure that those teams are working well.
Centralized organizational structure is the more traditional opposite of decentralization. It is a system by which the executives are responsible for decision-making and the delegation of responsibilities. This system also typically depends upon the authority figure enforcing decisions with consistent, rigid policies.