tutor2u | Decentralised structures

Study Notes

Decentralised structures

Level:
AS, A Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

In a decentralised organisational 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 can be summarised as follows:

Advantages Disadvantages
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
Should improve staff motivation

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