What Are the Advantages & Disadvantages of Decentralization?

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A healthy business is like a living organism, with departments serving specific functions but working in tandem. Management coordinates these organs, or departments, but this orchestration can be a top-down affair, with decisions being made and implemented by authorized individuals, or it can be decentralized, drawing on the skills and knowledge of a broad array of players.

TL;DR (Too Long; Didn't Read)

Decentralization in management offers the advantage of multiple perspectives and shared responsibility. However, this approach presents challenges in balancing the roles of a diverse range of people empowered to make important decisions.

Advantages of Decentralization

  • Shared knowledge base. Your employees and department managers are immersed in the workings of your company, and they have deep and diverse perspectives on your products and operations. A decentralized management structure allows you to draw on their insights and experiences to raise your company's overall intelligence level. Rather than relying on the perspectives of a limited group of people who may not be involved in nuts and bolts, decentralization in management draws on a rich pool of workplace knowledge.

  • Employee engagement. Workers who feel like they have a say in company decisions are more engaged in their work. Their morale is higher, their positive attitude reflects well on your company and they're apt to stay with their jobs longer, saving you money on training and turnover.

  • Real-time decision making. When staff and lower-level managers must defer to upper-level management, your company may delay important decisions when no upper managers are available. Decentralized management allows your employees to make strategic judgement calls, avoiding work slowdowns and missed opportunities.

Disadvantages of Decentralization

  • Cumbersome processes. It can take time to make strategic decisions with a decentralized management structure because multiple voices may need to be heard. This range of perspectives may provide you with higher-quality information, but it may also make it more difficult to decide on the best course of action.

  • Lack of clarity. When more than one manager or staff member has the authority to make a decision, rank-and-file workers may not know who to follow. Different managers may provide different answers to the same questions, creating confusion and potential conflict.

  • Easy evasion. Decentralized management works well when your crew is engaged and motivated, but workers who are inclined to avoid responsibility and difficult tasks may have any easier time shirking their duties when they aren't accountable to a single, authorized boss. Having an experienced and well-trained crew increases your odds of success when practicing decentralization in management.

Leveraging Decentralization Strengths

The success of decentralization in management depends on creating a company culture where decision making can take place on multiple levels, and mistakes become opportunities for growth. Some strategies for effective decentralized management include:

  • Clear delegation of tasks. Just because management and decision making occur at multiple levels in an organization doesn't necessarily mean that conflict and overlap are inevitable. Delegate work clearly and strategically so different managers know the scope of their domains and respect the autonomy of other managers and decision makers. Provide clear information for employees about who to approach with which type of question.

  • Comprehensive training. When more workers and managers are empowered to make decisions, your training system should be robust enough to teach staff members what they need to do to effectively meet these raised expectations. Training should cover both the practical details of the work being performed and also management techniques for delegating work and motivating workers.

  • Effective communication. To minimize friction and overlap, develop systems and expectations for communicating within a decentralized management system. Establish protocols for how to convey urgent and less-urgent information, and also lay out channels for addressing conflict and misunderstandings.

References

About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.

Photo Credits

  • Thomas Northcut/Digital Vision/Getty Images