Decentralized decision making
Decentralized decision-making is a process where decisions are made by leaders closest to the affected areas within large organizations, contrasting with centralized decision-making, where a small group at the top makes all decisions. This approach facilitates quicker and more flexible responses, often leading to increased innovation. In decentralized frameworks, decisions are informed by the insights and experiences of a broader range of individuals, enhancing the overall quality of ideas and solutions.
Historically, the distribution of decision-making authority reflects power dynamics within organizations and governments. For example, centralized systems, like dictatorships, concentrate power at the top, while decentralized systems distribute it across various levels, promoting more inclusive participation. In the corporate sector, the rise of total quality management (TQM) has emphasized the importance of decentralizing decision-making, allowing employees to actively participate in improving processes and customer experiences. By empowering staff to make relevant decisions, organizations can boost motivation and engagement, ultimately benefiting overall performance.
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Decentralized decision making
Decentralized decision-making is a process used in large organizations in which certain types of decisions are made by leaders closest to the areas affected by the decision. It is the opposite of centralized decision-making, in which all decisions are made by a small core group from the organization’s top management. Each type of decision-making process has its advantages. The advantages of decentralized decision-making are that it generally allows faster, more flexible responses and encourages more innovation.
Background
Where decisions are made in an organization has historically reflected where the power is held in that organization. This is particularly true in governmental authorities. In some political governments, for instance, all the decision-making ability is held by just a few at the top of the power structure. Dictatorships such as Nazi Germany would be an example of this type of centralized power structure. Other governments distribute power—and the decision-making authority that comes with it—to levels of the political structure other than those at the highest level. Many contemporary Western countries, including the United States, operate in this manner.
In the corporate world, decentralized decision-making became increasingly important as companies implemented total quality management, or TQM, programs. These programs, in which companies continually strive to improve efficiency and the customer experience, began in the early 1900s. They continued to grow in popularity throughout the twentieth century. TQM focuses on improving a company’s internal processes so that they work better with less cost. One key factor in accomplishing this is decentralizing decision-making and empowering employees to make the changes necessary to improve the way the company does business.
Overview
Both centralized and decentralized decision-making have a place in any large organization. Some decisions are too broad or far-reaching to be made anywhere except at the highest levels of the company. Long-range strategic planning, mergers, and decisions involving overall goals and mission are generally best done, or at least finalized, in a centralized way at the top level of the organization.
Other decisions, however, can be made more efficiently and effectively when they are made closer to the area and the people who are affected. Decentralizing the decision-making process and designating the authority and responsibility for relevant decisions has a number of advantages for the organization. Centralized decision-making usually relies on the ideas and judgment of a few, while decentralized decision-making can involve many more members of an organization. This increases the pool of ideas. It also taps into the experience of the people who are actively involved in the process, creating a greater potential for innovation. Empowering members of an organization to make decisions relevant to their positions also increases motivation and tends to improve overall member interest and engagement in their tasks.
For example, the upper management of a company may decide on a goal of increasing sales by 10 percent in the next year. After this centralized decision is made, they allow their workers to decide how to achieve the goal. The research and development area may decide on design changes to make the product more desirable, the marketing area may focus on an innovative new sales campaign, and the customer service area may step up their efforts to convert inquiries into sales. In this type of decentralized decision-making, each area addresses the factors with which it is most familiar, which generally benefits everyone.
Bibliography
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