A firm’s organizational structure entails the framework and guidelines that control different operations. A centralized organizational structure permits a systematic and consistent reservation of authority within the organization. There are few decision makers in this structure channeled only by the top management. In this kind of structure, there is improved coordination and standardization to improve efficiency (McCourt 1997). The drawbacks of the centralized structure include negative effects occasioned by bureaucracy. The business proprietor is solely in charge in the making of decisions this can reduce the speed in different operations in the business. A decentralized organizational structure employs democracy in the delegation of decisions. This structure allows delegation of authority to the lower management levels. The drawback of decentralization is that multiple people can offer different suggestion that can affect business continuity due to many decision makers.
Standardization is the process of following rules that include the Standard Operating Procedures (SOPs).Mutual adjustment is a concept that permits decision in the business other than rules to solve problems (George 2000). Standardization allows conventional actions while mutual adjustment allows flexibility and the response of creativity. Sops entail the use of written rules and procedures that are formal.
For the overall success of a business, managers must achieve a balance between centralization and decentralization. In this respect, centralization enables the company to maintain focus on the goals since they are involved in daily operations and lose focus on the strategic plan. Decentralization enables managers’ ability to take risks and this displays competence. This need controlling to ensure the daily company operation has coordination. Business consultants suggest that for firms to increase savings and increase efficiency there is need to reduce the number of local organization and centralize the business functions. A business can achieve optimal balance in the occasion the middle mangers make crucial decision about the daily operations. The top managers can make strategic decisions and can take risks. The business has to control the authority in the workers not to jeopardize the company’s operations.
Organization & Management Theory Conference Paper Abstracts. (2010). Academy of Management Annual Meeting Proceedings, 1-133
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