Posted on by Judy

Do you believe it is possible to have effective overall management in a decentralized company? What are the advantages and disadvantages of decentralization? Does a company getting so large that it has to decentralize play a part in the gap between financial goals and actual ones? Please give personal opinion, experience and cite information gathered through research of existing companies’ experiences.

First let us understand the meaning of decentralized company. When decisions in a company are not taken centrally and power is allocated to the middle management and lower management as well. This benefits the top managers to focus on other business activities
Yes it is possible to have a good management is decentralized company. In fact the burden of the good decisions is removed from the top management and they can focus on other important business activities. The top management can analyze the decisions taken by the middle and lower management.
For an example let us suppose there is a retail company with 200 stores in a country. It needs FMCG stock in twice a month at store level. So company releases the purchase order fortnightly. Now in centralized company purchase order is released from its head office. The retail store can forward that purchase order to the vendors/distributors. The purchase order is released on the behalf of system quantity of each particular store. For an example product A is showing 2 pieces only then its purchase order will be released.
In decentralized company the retail stores can generate purchase orders on their own as per their need. Suppose there is any festival in a city then the store located in that city can arrange the needed stock as per their need.
So by this example you can understand the advantages and disadvantages of the decentralized company.
By this way the head office of the company will get the burden of releasing purchase order will be down and they will focus to get other important work like getting offer from companies, smoothen the supply chain of a company, getting problem resolved of supply of a company etc
Here are some more advantages of decentralized company-
The employees are empowered in centralized company. They have power to take decisions
They feel that the ay included in the company overall operations.
As I discussed the burden from top management is removed
When any CEO or any top manager is sill then it will not impact the company decisions
Disadvantages of decentralized company-
Sometimes it happens that many cooks spoil the food. When too many decision makers are there then the decision making process gets compacted.
It sets the responsibility of a top management. He is blamed for wrong decisions.
Sometimes team loses its spirit when the power is given to them.
Decentralization doesn’t part a gap between financial goals and actual ones the company should review the departmental profit timely. There are many companies who follow decentralized decision making structure like Johnson & Johnson
 
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