Disadvantages Of Centralization And Decentralization

“The real trick in highly reliable systems is somehow to achieve simultaneous centralization and decentralization” (Karl E Weick). However, even if both models have been profitable for different types of companies, the vast majority of organizations choose to decentralize their structure to a considerable degree notably when they want to scale up or extend their business to other geographical locations. It is probably the most efficient way for a corporation to diversify its production and separate its operations to different regions or countries. In addition, decentralized corporations place the product or service specialized managers at the tops of its different entities Indeed, decentralization has three main advantages: It encourages motivation …show more content…
According to (…), centralization can reduce creativity of employees. Indeed, when the owner or the founder controls every decision in small businesses, the capacity of innovation is limited because of a less democratic organizational structure. Thus, employees are not authorised to suggest and share their ideas to improve processes. On the other hand, in decentralized organizations, top managements generally take into account individuals ideas and opinions when they take important business decisions. Therefore, a centralized administrative system can be conducive to inequity because of excessive norms and regulations (Bureaucratic issues) and can obstruct work. Sometimes it leads employees to a lack of motivation and adaptability. In addition, in small organizations where all the decisions are centralized, top management can be overburdened with all the different functions and issues caused with them. It may affect performances and growth of the company as managers are not able to identify real strengths and weaknesses (…). Indeed, top managers do not want to delegate authority and thus can misunderstand specific issues. Also, the quality of communication between the hierarchy and employees in small business is limited in centralized structure. For instance, employees will prefer to communicate directly with their managers instead of receiving email from top management. They will be more pleased using the chain of command by discussing ideas and strategies with their direct managers. Finally, centralization in large organizations notably multinational companies blocks operational efficiency. Indeed, markets are different among regions, thus if all decisions are taken by top management at the company headquarters, it can sometimes have a bad effect on subsidiaries from other regions. That is why decentralized structures are more suitable for large businesses