Which management model is better - centralized or decentralized? If someone in response points to one of them - he is poorly versed in management. Because there are no bad and good models in management. It all depends on the context and its competent analysis, which allows you to choose the best way to manage the company here and now. Centralized management is a great example. We understand when this model works well, and when it is unacceptable.
Concepts, powers, tasks
It is all about the division of labor and decisions: how to distribute tasks for each structural unit and at what level key decisions will be made. The distribution of labor and decision-making on the vertical principle will lead to the formation of a centralized management system. The hierarchy of subordination in such a company is tough, and the powers of employees are minimal and laid out in the most thorough manner.
A company in which the authority to make key decisions belongs to the first leader and his immediate environment are called centralized. Opposing companies by the way they manage are called decentralized. In them, powers are distributed among departments and employees at various levels, even the lower levels can make decisions on a fairly wide range of business issues.
Signs of a centralized management principle
There are few of them:
- There are more administrative departments than necessary.
- Their functions are more important than production ones.
- Research structures are located in the central office of the leading holding company.
- Control over the production of products, their marketing, marketing projects and all other functional units is carried out through the central administrative departments of the head office.
Centralization is different
In real life, there are no pure centralized management models (nor decentralized ones). The difference between the companies is only in the degree of independence of decisions at different levels, that is, in the degree of delegation of authority and rights. If you look, then any organization can be attributed to centralized or decentralized, if you compare it with other enterprises.
The criteria by which to assess the degree of "centralization" are as follows:
- The relative share of decisions that are made and implemented at the middle and grassroots levels. If this share is a smaller part of the overall decisions, the organization gravitates toward a centralized model.
- Now about the quality of decisions at the middle and lower levels: if decisions regarding changes in the areas of work or, for example, the allocation of significant resources can only be made by senior management, here is a model of centralized management.
- The breadth of middle and lower level decisions: if they cover only one function, you have a centralized company.
- With centralized management, top management constantly monitors day-to-day work, and especially the decisions of subordinates. Of course, one might think that not a single company can do without monitoring the work of subordinates. But in decentralized firms, they prefer to evaluate the work of employees according to general criteria: profitability, for example.
These criteria are very relative. But to evaluate companies with their help is necessary only in comparison with others.
Model benefits
It is extremely important to get rid of the unnecessary stereotype that has developed in connection with this concept. Very often it is associated with the "Soviet" style, which includes all the administrative command elements. In fact, the centralized management model has a different nature and serious advantages:
- Minimize duplication of functions or activities.
- The ability to quickly and clearly standardize company operations and processes.
- The relative simplicity of effective control of the systems and employees in general and in particular.
- The ability to optimize the use of resources in the form of personnel, space, equipment, etc.
These are great opportunities to quickly mobilize a team. In a strict hierarchical system, senior management decisions are mandatory for all departments below. Therefore, such companies are able to mobilize all human resources to solve urgent and complex tasks, that is, where coordinated hard work of all structures is needed. The most striking and popular example is the reflection of external aggression. There is a lot of historical evidence for this, because countries with a centralized management system have coped best with external attacks: quickly and together.
The ability to effectively implement new business lines or structural changes to improve operational efficiency. Tough, sometimes unpopular, but necessary decisions are easier to carry out centrally.
Crisis management also involves quick and comprehensive solutions that need to be implemented not only implicitly, but also in a short time. Almost any critical situation in business is most effectively solved by a centralized management method. Crisis managers understand this well.
When centralized management is useful and necessary
The advantages of this model allows its wide application. Do not forget that the centralized management principle can be used temporarily - for a certain period of time to perform very specific tasks.
- When organizing and developing a new company in which different divisions grow at different speeds and success. In such a situation, centralized control is necessary with directive directives that do not allow one to grow at the expense of others.
- With a managerial deficit that is more common than we would like. To cover this deficit, it will take time for two tasks: hiring suitable external managers and training their own candidates for leadership positions. During this period, it will be useful for the first leader to take control of everything so that the lack of local management professionals does not affect work.
Examples can go on. The main thing is to understand well the current situation in the company and the tasks that you want to implement.
Is it possible to use a centralized model constantly? Sure you may. Given the size of the company, the qualifications of its personnel, the region of the company, the personal qualities of the first leader, etc.
Steve Jobs and his autocracy
Steve Jobs is a typical example of a real crisis manager. A lot of stereotypes are associated with it. The classic explanation for his success is only one argument: "because he passionately believed." No doubt, belief in success and correctness of action is an important factor. But you cannot go far on faith alone. It is necessary to make sure that subordinates not only believe, but also rush to fulfill everything that they will be entrusted with.
Autocrats act as monarchs with full power to achieve their goals. This requires tremendous willpower and, of course, faith. All this was fully present at Steve Jobs: "This is my way, this is the best way." Employees called Jobs "His Majesty." He was not just an autocrat, he was an extreme autocrat.
Hybrid Management Model at McDonald's
An interesting example is shown by the famous McDonald's. It all depends on the nature and type of decisions. The middle managers (some tenants and restaurant managers) have enormous powers up to complete independence in deciding on human resources, placing new restaurants or purchasing food. There is a decentralized approach to management.
As for decisions on pricing policies or the release of new products, they are made within the framework of centralized management functions: top management without any discussion with the departments below. A great example of a smart combination of different management approaches.
Disadvantages: paper mountains and more
Not a single management system can do without flaws. The disadvantages of a centralized model are as follows:
- Delayed decision making upstairs. This item does not surprise you. It was mentioned above about the quick execution of decisions of the authorities, but not about their quick adoption.
- Sometimes there is a low quality of decisions at the top, because one person cannot know everything at once and about everything. The lack of information and ignorance of the real situation on the ground are affected.
- Paper mountains, an increase in the number of documents, unjustified bureaucracy in the form of unnecessary cumbersome procedures.
Having understood what the advantages of centralized management structures are, one can apply this model in the most efficient way. This can be a temporary method, or partial for individual functions. The main thing is to believe in yourself and in your path. Like Steve Jobs.