Decentralized in Organizations

Decentralized in Organizations

Decentralization is a specialized organizational structure where daily operations and decision-making responsibilities are delegated to both middle and lower subordinates. This enables top managers to focus on major tasks and decisions because of time abundance. The essence of decentralization allows for efficiency during operations. The decentralization of organizations offers various advantages and disadvantages. Here are some of the benefits.

First, decision-making authority leads to job satisfaction. Diversification of activities reduces the work chief executives do, like making routine decisions. Since the subordinate staff is allowed to make decisions, daily schedules, and the target will be met. Job satisfaction assists in molding a cadre of satisfied managers. Second, top managers are permitted to concentrate on strategy. If the subordinate is making decisions on their own, then senior managers will be free to focus on small administrative units and directing other crucial processes like purchases and distribution roles (Chapter 11). Third, lower-level managers respond immediately to customers. Middle and lower subordinates understand customers’ needs more than top managers because they interact with customers daily. While making rapid and extensive decisions, smaller managers gain experience on how to handle managerial roles and solve conflicts once they arise.

The disadvantages of decentralization are also evident. First, there is a lack of coordination among autonomous managers. Different managers operate differently. Due to lack of experience, middle managers and lower subordinates may lack uniformity, especially in actions and policies because of competition. Second, lower-level managers may make decisions without seeing the big picture. In small firms, decentralization is discouraged because of high operation costs. Therefore, when making decisions, lower managers may fail to capture the scope of operation hence expensing the organization. There is a challenge of spreading innovative ideas in the organization. Decentralization may make departments self-centered, neglecting the broader objectives of other departments and that of the whole organization.

Response1

Good work on your decentralization. Decentralization is not an easy concept. It is commonly a misunderstood ideology. Most Managers would instead opt for a system that collects elements with several basic structures. This is common in internal markets because assigning an array of decisions to separate structures is not easy.  Decentralization needs a proper understanding of the set goal and specific situation. The benefits derived from decentralization cannot be avoided. First, it encourages creativity and motivation. Decentralization brings together different minds to work. In the process of working together, middle-level managers and low-level subordinates share ideas, which turns out to be crucial for the company. Decentralization fosters wise and quick decisions. Decision making is making authority. Those in power make a timely and decisive decision because they understand the prevailing conditions.  Decentralization promotes employee management. In smaller administrative units, it is easier to manage employees as compared to the entire organization.

Response2

Great discussion on decentralization. Is it possible to make decisions efficiently and rapidly when their no one in control? Maybe yes. It takes time to incorporate many people into a joint decision and address all pending conflicting desires. Fast and cheaper communication, via mail, for instance, can solve the problem. Even though the transmission of information is fast and free, it takes time to send and understand the message. Regardless of how well people in the same organization communicate, arriving at a decision is not easy. Decentralized units provide different ways to make decisions efficiently. In loose hierarchies, managers may force employees to accept some decisions even when there is an opposition.  In democracies, decisions are more efficient in two ways. Employees have the power to elect a manager to decide on their behalf. Or you can allow people to vote or use opinion polls in critical decisions. It is, however, different in markets because there are only two parties who are the seller and buyers.

Response3

I like your discussion. A market only works correctly when participants agree on the prevailing rules. In markets, there must be a legal framework that solves disputes between buyers and sellers. Disputes arising from members are common and are exacerbated by decentralization. This is because decentralization starts with the challenges of coordination between units. In some organizations, decentralization fails to work. External factors make this hard as the strikes of the company widens. Operating decentralized units is costly. Everything starts with units, and setting up these units and recruiting specialists to occupy the units will lead to high operating costs. Overreliance on the manager due to efficiency issues because those who are to take over the managing role may not be ready. Some middle-level managers cannot handle complex situations because of their wrong decision. This is a significant loss to the organization. There is no uniformity in decentralized organizations because everyone wants to show that he or she is a genius.

Differential Analysis: Decision making

Differential analysis decisions are varied alternative courses of action that decision-makers choose the best alternative from. Differential analysis help managers to decide if a particular product is suitable for the market or not. The most critical aspects of the deferential analysis are relevant costs and essential benefits. An appropriate price is a cost that is not uniform between alternatives. A significant benefit is that benefit which differs between options (Chapter 12: Differential Analysis). Material costs include avoidable costs. These are costs that can be removed as a portion or in whole by selecting a single alternative over another.

Many organizations have options in which services or products to offer, how to produce them, who to fire or hire. Through differential analysis, managers can make informed decisions. When managers must choose between two or more options, they encounter a cost known as incremental cost. Managers also need to account for all sunk costs. These are costs already incurred and cannot be reversed, regardless of the decision made. For instance, if an organization secured a permanent license to manufacture a product but later on, it calls off the production and shift to a different outcome. The costs that were incurred to obtain the first license are sunk costs. Another concept of deferential analysis is to avoid unnecessary costs. Irrelevant costs never change in the future; therefore, it is essential to prevent them in the early stages. The final decision requires organizations to monitor the opportunity cost closely. An opportunity cost is a possible benefit an organization issues when it chooses one alternative in exchange for another one. To make the right decision, potential benefits that were lost must be computed by business leaders when they are selecting an option over another. Managers must always consider relevant and dependable information, especially those that relate to applicable costs.

References

Chapter 11: Performance Measurement in Decentralized Organizations. (2020). Retrieved 25 March 2020, from http://lectures.mhhe.com/narrated_slides/007802563x/chapter11/presentation_html5.html

Chapter 12: Differential Analysis: The Key to Decision Making. (2020). Retrieved 25 March 2020, from http://lectures.mhhe.com/narrated_slides/007802563x/chapter12/presentation_html5.html

Response1

Nice report. Before making any decision, the manager must know the relevant costs. The related costs give direction in which the business is heading. For instance, a small business holder is contemplating whether to attend a regional trade show. At the trade show, she is expected to present the company’s product, network, and make sales. Before she leaves the country, several costs are present but are not relevant to her trip. The first choice is to fly, which will include an air ticket. Another option is to drive herself, and the costs will consist of wear and tear on the vehicle, parking fees, and tolls. The last option involves traveling by train or hire for a drive. At the conference, there are other unavoidable costs like lunch money, hotel expenses, and entry fees. So her trip, will not be free, any means she chooses, she must incur a charge which she cannot write off.

Response2

This report is well structured and presented. Differential analysis decisions involve choosing the right alternative.  This alternative depends on the state of mind because it consists in making a decision. But how many of us make the decision when our emotions settled are? Emotions are included in our daily decision making as they influence the way we make a decision. Each one of us has feelings, and they help us to live every day (Lerner et al., 2015). Emotions can be expressed either positively or negatively. Emotions are highly subjective, and being emotional sometimes can help in directing our actions, especially if you are about to choose alternatives. Knowing how to handle emotions plays a significant role in decision making. Situations in businesses usually differ, and one should set goals and principles that will guide you when to move on. This removes the emotions and improves the decision-making process even when your adrenaline is pumping.

Reference

Lerner, J. S., Li, Y., Valdesolo, P., & Kassam, K. S. (2015). Emotion and decision making. Annual Review of Psychology, 66

Response3

Good work. Sometimes in business, managers are required to make a crucial decision on whether to drop a business segment or add it. The decision to add or keep an old segment hinges primarily on the effect the decision will have on the company’s operating income. The best way to handle this situation is to take a deep breath that will calm your mind hence allowing you to make the disciplined and correct choice. You can be able to identify your emotions through the way you communicate. Sometimes we can express frustrations, disappointments, and annoyance in our daily activities (Lerner et al., 2015). The trick of making better decisions is to figure out how to manage our internal resources and knowledge of our limits. Leadership can be classified either good or bad depending on the choices that make. For example, if you choose a lousy alternative, you will be blamed for the consequences that might affect the operations of the company.

Reference

Lerner, J. S., Li, Y., Valdesolo, P., & Kassam, K. S. (2015). Emotion and decision making. Annual Review of Psychology, 66