Why is decentralization of decision-making, becoming more common in contemporary organizations?
Introduction
The advent of information technology (IT) according to (Farhanghi, et al., 2013) has affected our lives and by extension the organizational structure and the administration of contemporary enterprises. This is why managers have to critically reinvent the way decision-making is implemented so that it would apply to the current requirements and business needs of the company. Decentralization of decision-making is a very good approach that fits perfectly to the operations of modern companies. The current report will focus on why this technique is gaining popularity and becoming more common among companies along with constructive criticism over the current phenomenon.
Analyzing the Phenomenon
Depending on the size of the organization managers can use centralized and decentralized techniques to manage, direct and make decisions in the company they work for. We will analyze the case of a large organization in order to better support the decentralization decision-making trend. Ιn large companies and organizations, it is very common to operate in more than one country or have subsidiaries, which increases the control and management difficulty. Top management in the head quarters of the organization needs to be focused on strategic and financial planning, differentiating their organization by producing innovation among their competitors and forecasting the economic growth for the group for the years to come.
Decentralizing the decision-making, helps top management to delegate tasks to low level managers, make them part of the business process and of the solution needed, by engaging and motivating them to succeed as being part of the project. On the other hand this decision must be implemented correctly otherwise there will be operational problems across the organization (Sobotkiewicz, 2014).
Decentralization flattens the organizational hierarchy structure helping decisions to pass across the organization and complete faster than the tall hierarchy model (La Rooy, 2012), which is necessary in modern business operations for fast decision-making.
This argument is utmost enhanced by (Van De Ven et al. 1974) research, which showed that the more complex and interdependent a project is, the less vertical the chain of command will be, increasing to the best the interpersonal relationships on local level, offloading top decision-makers in the organization.
Conclusion
This article showed why decentralization decision-making is trending in contemporary companies and why it is efficient in complex organizations. Decentralization ultimately as a business and management decision practice, must be chosen wisely, especially when there are liquidity problems in the company and in the economy (Zábojník, 2002). Empirically can be easily understood that when a task requires accuracy and hard work, centralization is the best choice. Nevertheless, when accuracy and hard work are complimentary to the project decentralization is more often used as it involves the delegator as part of the project success.
References
Farhanghi, A. A., Abbaspour, A. & Ghassemi, R. A., 2013. The Effect of Information Technology on Organizational Structure and Firm Performance: An Analysis of Consultant Engineers Firms (CEF) in Iran. Procedia — Social and Behavioral Sciences, 81(1877–0428), pp. 644–649.
La Rooy, G 2012, ‘executive management in a flat organization’, Human Resources Magazine, 17, 1, pp. 18–19, Business Source Complete, EBSCOhost, viewed 5 November 2016.
Sobotkiewicz, D 2014, ‘Contemporary trends in the management of multiple economic entities’, Management (1429–9321), 18, 1, pp. 184–198, Business Source Complete, EBSCOhost, viewed 5 November 2016.
Van De Ven, A, Emmett, D, & Hoffman, D 1974, ‘Decentralization of Decision-Making Within Organizations’, Academy Of Management Proceedings (00650668), p. 45, Business Source Complete, EBSCOhost, viewed 5 November 2016.
Zábojník, J 2002, ‘Centralized and Decentralized Decision Making in Organizations’, Journal Of Labor Economics, 20, 1, p. 1, Business Source Complete, EBSCOhost, viewed 5 November 2016.
