See Also:
Organizational Structure
Advantages of Centralization
Advantages of Decentralization
There are several advantages and disadvantages of decentralizing an organization. Decentralizing is optimal when subunit managers and employees have specialized knowledge regarding their particular subunit. Giving subunit managers authority is a good way to train them for future positions in senior management. Empowering employees and managers at lower subunit levels gives the employees greater satisfaction in their work. And finally, decentralized authority and decision rights can free up senior management to focus on more big picture issues as opposed to fussing over details at the subunit level.
On the other hand, decentralization has costs as well. Subunit level managers in a decentralized organizational structure may develop functional myopia, or a narrow focus on their own subunit organization while ignoring broader consequences and implications of business activities. Decentralizing an organization can also result in the duplication of various administrative or service functions at the subunit level that could be performed more efficiently in a centralized manner.
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