Centralization and Decentralization of Authority in Organizations | Organizational Design | MeanThat

find all our courses admin dead calm it is quite important to understand when you think about any kind of organizations it's quite important to understand the notion of alt or ET and why is it so because you will have in any kind of organizations you will have any notions of centralization and decentralization of this alternative and that is exactly going to be the point of this video so at first we will talk about the authority in general and then about two ways how we can handle this out Dority we can either try to centralize it or decentralize it so let's see the out Dority gives one person the power to hold other people accountable for directions and the right to make decisions about the use of organizational resources I think all of you have a have a quite intuitive idea about what author it is but let's give it to practice so let's say that that I have some territory so I have some territory and now my organization is operating within this territory it can be maybe it can be one country now I'm going to here on the left side draw my organizational hierarchy or authority of hierarchy of authority so at first of course there is going to be a CEO so at first we of course have our CEO and how do we draw a responsibility of a CEO well he is on the top of the organization so the CEO is responsible for the world territories so this is the responsibility of our CEO now below the CEO there are going to be let's say there are going to be three three regional managers so we will have we will have one regional manager then we'll have another regional manager and then the third regional manager these are our regional regional managers managers how would we draw the responsibility of regional managers well we can say we can say that this area this area is under the responsibility of one regional manager then this area is under the responsibility of another regional manager and this is the area of third regional manager so here we have them now under the regional managers there is going to be a workforce right so let's draw workforce so here is one person and let me copy paste this because it's going to be a lot of them so another one then we have another one then we have one more and one more and couple more so here we go here we go and let's say this is the last one so these guys are under the responsibility of the regional manager so this regional manager has free of them this regional manager has two of them and this regional manager has three of them so this is what we call we can call them let's say our workforce our workforce now how would we draw them so we know that under the responsibility of one regional manger are free three persons so one two three and now you see of course I can finish the drawing now you see the varying responsibilities over the resources now let's get back to our definition of authority Authority gives one person power to hold other people accountable so now you see it the CEO holds the regional managers accountable and then the regional managers are holding the workforce accountable now you see the first part of the definition then they have the right to make decisions about the use of organizational resources so you can also imagine the territory as a sort of as a sort of organizational resource that that really the CEO is deciding about all of the organization resources the regional managers are deciding about some part of the organizational resources and then the workforce just about the tiny part of organizational resources now when it comes to the authority we can either try to centralize it or decentralize it these are the two extremes so really imagine it as as a sort of the sort of bipolar axis by power axis because in reality you are never going to see an organization with purely centralized or purely decentralized Authority organisations are going to position themselves somewhere on this bipolar axis so one is going to lean more toward centralized maybe Westover centralized one is going to lean over decentralized or going to lean almost to be purely decentralized so now what does it mean to say when authority is centralized organizational setup in which the authority to make important decisions is retained is retained by managers at the top of the hierarchy well how should we imagine that so let's say let's say that let's say that the centralized I'm going to use this pink color so let's say that the problem arises so in this particular area some problem arose so this this employee this person of a workforce stumbled upon a problem so let's say it's this guy over here so a problem came now this person is unsure if how should he treat the problem how should he solve the problem because the problem the problem the solution to the problem requires the use of organizational resources and now you see it this person doesn't have an authority to decide about the organizational resources that would solve the problem so this person is going to ask his regional manager so you will ask hey how should I solve this problem can I do this or can I do that one regional manager which is which is in this case this particular one is unsure again how the problem should be treated so he is going to ask the CEO and now the CEO is the top one so he has to make a decision now the decision will be made and the decision will be then transferred down to the regional manager and then down to a person who is who is solving the problem so this is basically the centralized decision-making because the authority as you see centralized and and the dist important decisions are made by the managers at the top of the hierarchy now what is the plus of such decision-making well the plus is clearly a goal focus on say a focus on goals focus on goals because if a lot of the decisions are going to pay it by a CEO then the CEO really knows what the goals are and the decisions will be made appropriately according to the organizational goals on the other hand there is a clear disadvantage and that is that the top managers can become overwhelmed by work overwhelmed overwhelmed by work by work because if you imagine if all of these guys which are at the bottom of the hierarchy are going to pass the problems up the hierarchy then the CEO is going to have a really full table now let's go to the other extreme which is a decentralized decision-making and decentralized Authority this is an organizational setup in which the authority to make important decisions about organizational resources and to initiate new projects is delegated to managers at all levels of hierarchy well so then instead of instead of doing all the decisions at the top of the hierarchy now according to decentralized decision-making now managers at all level of hierarchy can solve the problem so it would be the example so let's imagine let's imagine I will use this this little bit blue color so let's imagine that a problem came to a person on this one so a problem came problem arose and now this guy over here is not sure how he should treat this problem again as previously so he will ask his regional manager and now the regional manager has the authority to make the decision because we are operating under the decentralized decision making so he can make a decision immediately and pass the decision down back to the employee I think you can quite clearly grasp the difference now what is the plus of such decision-making well clearly the flexibility flexibility because the decision-making is quite faster now the disadvantage definitely is the opposite of the of the centralized so we are not maybe sometimes focused enough on goals so maybe not focused focused enough enough on goals on goals now if we think further about what the problems and the benefits of these two can be well think about the information itself when the information of a problem in in centralized decision-making is passed through so many people up and then down the information can get distorted so even though the information was perfect over here then the regional manager is going to maybe distort it a little bit and then the CEO will misunderstand maybe the information and the decision will be actually made wrong now on the other hand what can be the deep loss of these centralized decision-making well a motivation a motivation because now if you give managers let's say these regional managers and authority to make decisions they have a possibility to show off they can show that there are really good ones and they will try to make really good decision and will put in a lot of work so that is basically the essence of centralized and decentralized of organizations and their hierarchies and when it comes to the authority

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Length: 11min 1sec (661 seconds)

Published: Fri Jun 12 2015