Author: Jim Riley Last updated: Sunday 23 September, 2012
People management - Decentralised organisational structures
In a decentralised structure, decision-making is spread out to include more junior managers in the hierarchy, as well as individual business units or trading locations.
Good examples of businesses which use a decentralised structure include the major supermarket chains like WM Morrison and Tesco. Each supermarket has a store manager who can make certain decisions concerning areas like staffing, sales promotions. The store manager is responsible to a regional or area manager. Hotel chains are particularly keen on using decentralised structures so that local hotel managers are empowered to make on-the-spot decisions to handle customer problems or complaints.
The main advantages and disadvantages of this approach are:
Decisions are made closer to the customer
Decision-making is not necessarily “strategic”
Better able to respond to local circumstances
More difficult to ensure consistent practices and policies (customers might prefer consistency from location to location)
Improved level of customer service
May be some diseconomies of scale – e.g. duplication of roles
Consistent with aiming for a flatter hierarchy
Who provides strong leadership when needed (e.g. in a crisis)?
Good way of training and developing junior management
Harder to achieve tight financial control – risk of cost-overruns