Decentralization

The literal meaning of decentralization is to get rid of centralizations. This term is primarily familiar to governments and other organizations. It means that powers become less centralized. An example is splitting one large company into separate parts. Henry Mintzberg, in his book "Organizational Structures," gives three benefits of decentralization:

• It is virtually impossible for one person to foresee all the decisions in a large organization. By dividing the decisions by part of the company, each part can be looked at more closely
• This allows the organization to respond more quickly to new developments
• People are more motivated by some degree of autonomy (The feeling of freedom and the ability to make choices independently)

There are also a number of convenient advantages of decentralization:

• There is better internal communication so there is clear accountability within each department. One cannot hide behind the big picture if one part is not successful
• Division of governance can lead to a more informal and democratic atmosphere that reduces conflicts
• More knowledge is disseminated to employees

The disadvantages of decentralization 

Implementing decentralized governance can make for a better-functioning organization. But this is especially useful in larger companies where different departments need leadership. Within a B2C company, there are often departments such as logistics, web shop, finance, marketing, human resources and customer service, for example. Putting a manager in each department or departmental group makes it easy to move back and forth in decisions. But that doesn't mean there aren't disadvantages to decentralization:

• There is a greater need for executives which creates additional costs
• More control must be exercised because power lies with several people in an organization. When only one person makes the decisions there is less need for consultation
• Wrong decisions can be made more quickly that can be detrimental to the organization
• Focus can be less on long-term planning and more on immediate results in decentralization