Organisational structures - centralized and decentralized

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  • Organisational structures
    • Centralized
      • Rely on an individual to make decisions
        • Small businesses often use this structure since the owner is responsible for the company's business operations
      • Advantages
        • senior management has more control
        • procedures can be standardized through the organisation - economies of scale and lower costs
        • senior management can make decisions from the point of view of the business as a whole
          • subordinates would focus on their department only
        • senior managers are more experienced and tend to make better decisions
        • in times of crisis  businesses might need strong leadership
        • communication may improve if there are fewer decision makers
      • Business owners may require more time to complete tasks and  the work completed may be of poor quality
      • mostly smaller businesses / flat structure organisations
    • Decentralized
      • Several individuals responsible for making decisions and running the business
        • team environment
      • Advantages
        • Empowers and motivated workers
        • reduces stress of senior management and frees time to focus on important tasks
        • provides subordinates with greater job satisfaction - Theory Y
        • subordinates may have better knowledge of the 'local' conditions affecting their area of work
          • they should  make more informed and well-judges decisions
        • greater flexibility and quicker response since subordinated can make decisions
        • gives experience to middle and junior levels of the management
      • individuals having different opinions might create conflict
      • mostly larger businesses / tall structure businesses

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