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Due to power being consolidated at the top of the organization, risk is great if the top of the organization becomes incapable of leading the organization (death, illness, or massive organizational size causing a weak span of control).
The title says a lot for tonight’s post, which is pulled from the Principles of Management class I took at Umass-Amherst during the winter 2007 semester.
The advantages and disadvantages of centralized versus decentralized organizational structures lies greatly in the inherent qualities and effects of the structures themselves.
Robbins and Coulter describe this very well, "If top managers make the organization’s key decisions with little or no input from below, then the organization is centralized." Companies which wish to consolidate power and decision-making abilities at the top of the organizational chart, tend to be centralized organizations.
If the CEO of a corporation has a particular vision and wishes for it to remain pure to his/her perspective, he/she will centralize the organization so that he/she is able to control as much of the company as possible.
As the textbook states, this is helpful for companies who need to be stable or are facing a crisis and need one source of decision-making to lead them.
These sort of organizations are becoming more rare, as employees become smarter and organizations become larger, however a few do still exist.Consider the Oakland Raiders, a team which is widely acknowledged as being run completely (but poorly) by its owner, Al Davis or a monarchy such as Saudi Arabia, or an absolute theocracy, such as the Vatican City.Centralized structures are becoming rare because of their many disadvantages.It also empowers employees and allows them to improve their performance by being able to act to improve deficient or inefficient areas immediately without approval from the top of the organization.Another advantage of decentralization is allowing for the managers of business areas to actually use their first hand knowledge and experience to improve their areas.Consider the Dallas Cowboys of the early 90’s, where Jerry Jones the owner had final say over all personnel decisions to the New England Patriots of today, where numerous individuals throughout the organization have an input on personnel decisions.