Advantage and Disadvantage of Centralizing Management Control

Centralized management control means that authority for decision-making in your business lies mostly in the hands of a small group of top managers. This is the opposite of decentralized control, where local managers are granted more authority over the management of their areas of responsibility. Centralizing your management control has pros and cons relative to decentralized authority.

One of the keys to building a strong brand is consistency across all business units. Centralized management control typically produces more uniform decisions, which increases the likelihood that your customers will have similar experiences in each market. This not only improves cross-market revenue, but it also helps you avoid alienating customers who have expectations dashed by inconsistent local leadership. When centralized leaders make key decisions and communicate them well to local leaders, consistent implementation is possible.

No matter how talented your local leaders are in a company, having one or a few top managers make decisions is the best way to concentrate authority with experts. A small group of human resource professionals, for instance, have more likelihood of building effective HR systems and procedures than local managers with less background and training in HR. If you were to maintain HR professionals in each local market, your cost structure would be higher.

A primary drawback of centralizing management control is less responsiveness to local market conditions. This is especially true in more vertically structured organizations where local units have little communication with top leaders. Local managers can more quickly react to changing customer demands for certain products and services. Centralized hiring procedures also limit the ability of local leaders to quickly hire and train new employees when they are short staffed.

A trait of decentralized management is empowerment of local managers. This is missing or less pervasive in a centralized management system. This means that local managers function more in task delegation as opposed to creating new ideas and leading in their own ways. This lack of authority over their local activities often leads to lower motivation. Managers may become burned out trying to implement procedures and systems developed entirely by others.