The main idea behind decentralization is to share the responsibility and decision-making power across various levels in a company. This system is not like centralization, where the command comes from a single person who is employed to take all decision of the organization. Both systems have their own pros and cons which should be taken into consideration before making any types of organization.
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Pros of Decentralization
It may help the entire organization develop
Since the responsibilities and decision-making are given to various people holding different position in an organization, top management can work towards the growth and long-term vision of the company. Also this system engages more people to work in different areas such as expansion of the company, employee hiring process, development and raising capital. As a result, these processes speed up the growth of the company.
It motivates responsibility and transparency
This system motivates employees and local managers to take more responsibility of their work, since they are capable to handle their job. It also helps trace the areas where the problem lies and require improvement, so this system brings in more transparency. In addition to that, more people have opportunity to participate in decision-making process. Thus, it reduces the number of scapegoats when mistakes occur.
It improves more leaders
This system provides more opportunity to train leaders and develop the qualities and abilities of employees, so that they can lead the organization independently.
It increases innovation and flexibility
Due to less bureaucracy and checkpoints, employees can come up with their new ideas and innovation that can develop their organization. This system also encourages employees to show their abilities and talent that may be required to improve the company’s performance. Aside from that, there are many employees who have better knowledge of the requirement of their job and market, so they can give better suggestions to bring necessary changes in their market or field.
Image credit Pros and Cons of Decentralization
Cons of Decentralization
It may not ideal for Start-up Company
In case of new organization, decentralization may not bring in fruitful results, because this system distributes the responsibilities and decision-making to a number of staff who still need the necessary skills to run the company. And Start-up Company requires such employees who have strong knowledge of business and can provide right suggestions in order to establish the organization. So, in lack of proper knowledge, the organization could end up with huge losses.
It may raise conflict
Due to independent decision-making roles, employees from different departments of same rank may have clash between them. In this condition, more difficulties arise to resolve their disputes. Aside from that, employees of same level do not want co-operate or coordinate with each other due to competition.
It may increase duplicates work
Some decentralized organizations hire some other groups such as IT, HR etc. to support their various departments. Their actions, processes and conclusions could also be duplicated, which results in extra costs.
The execution of the consistent strategies of company becomes more challenging
Different leaders can provide different views regarding company rules and standards, so they can face difficulties in executing consistent and uniform strategies.
It needs to utilize a balance of the centralized and decentralized structures in order to successfully handle any kind of organization. So the distribution of decision-making should be such a way so that the leaders from different departments could not conflict with each other and their work should clearly be defined what the top management has to do and what decision local departments can take.
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