Centralization vs. Decentralization

Managers often need to change the degree of centralization or decentralization in their organization. Begin this exercise by reflecting on two very different scenarios.

Scenario A: Assume you are the top manager in a large organization. The organization has a long and well-known history of being very centralized. For valid reasons beyond the scope of this exercise, assume that you have made the decision to make the firm much more decentralized.

Scenario B: Assume the exact opposite situation. That is, you are the top manager of a firm that has always used decentralization but has now decided to become much more centralized.

Exercise Task

With the background information above as context, do the following:

1. Make a list of the major barriers related to employees and managers you see to implementing decentralization in Scenario A. Consider communication, job structure, capabilities of employees etc.

2. Make a list of the major barriers related to employees and managers you see to implementing centralization in Scenario B. Consider communication, job structure, capabilities of employees etc.

3. Which scenario do you think would be easier to actually implement? That is, is it likely to be easier to move from centralization to decentralization or from decentralization to centralization? Why?

4. Given a choice of starting your own career in a firm that is either highly centralized or highly decentralized, which do you think you would prefer? Why?