What do we understand by the term “Business”?
Business is a dynamic process that brings together technology, natural resources, and human initiative in a constantly changing global environment. To understand the framework in which a business operates, it is required to have a little bit of information on the management of the business process ad its interaction with the environment.
While talking about the structure of any kind of organization, it is very much natural to reflect upon the aspects which are involved in the functioning of any organization. For a business or organization to be effective and efficient at the same time, it is necessary to consider management as the topmost priority for “Management is universally necessary for all organizations. It is the force that holds everything in a business enterprise together and that sets everything in motion.
Through management come various other elements which are considered to be the part of operations of any organization. One of the main elements of any business or organization is “Organising”.
What is Organizing?
The organizing function of management is followed by the planning function, which is also a major step involved in the functioning of any organization or firm. Once the plans have been laid down and objectives specified therein, the organizing function determines what activities and resources are required. For this, the management has to coordinate human efforts and organize resources like money, materials, machines, and types of equipment. It is also required to develop and maintain cordial relationships among employees. While functioning every organization needs to keep two important factors in mind which are efficiency and effectiveness. Both these aspects help in achieving the goals of the organization and also make sure that the organization is benefitting from the tasks it performs.
Each member in the organization is assigned special tasks or duties to perform and is granted the corresponding authority to perform his duty to the fullest. Organizing in a way helps to allot the tasks to be performed to different people in order to be efficient and effective when the outcome is concerned.
Therefore, it is the duty of every business owner to create their company’s organizational structure which in a way or the other is a continuation of the owner’s ideas, management method, and features. There are two types of organizational structures which define the working of every business: centralized and decentralized organizational structure. As per results, each structure has its own advantages and disadvantages when applied to the management system of any organization.
What is a Centralized Organizational Structure?
Centralized structure refers to an organizational framework wherein all the rules and regulations are made by one single body who is usually at the top of the functioning chain and the rest of the people are dependent on that person in the business. This type of organizational structure is preferred by small retailing businesses which tend to control and employ all their employees. It amounts to retaining all the managerial authority to one level which is of the owner. Decision-making authority remains in the hand of the head of the business or concerned department.
Centralization is an optional policy decision and is done to manage each and every task single-handedly. Through centralization, the leader has all control over the employees and hence leading to less freedom to make their own decisions. In this type of organizational structure, there is improved quality of work. Because the authority lies in the hand of one person, thus there is less wastage of resources and more coordination unlike in a decentralized organizational structure.
Since the decisions are made by a few people in power and later passed down to the chain, there are fewer chances of the pending implementation of decisions and rules. It is in the hands of one person to regulate everything and to make sure that the rests follow. This would avoid lengthy discussions and complications and instead move towards the swift and speedy working of the organization.
Various suggestions and remarks lead to more and more options which eventually end up resulting in increased costs. In a centralized structure of an organization, the main decision-makers are aware of every angle from where the organization works and thus are able to provide solutions that would incur lesser costs and better output.
One person- one mission is what a centralized organizational structure is based on as it follows a straight pattern of communication of the organization’s views to the employees.
There is also a structuralized chain of command and all the orders or decisions are passed down the chain and are supposed to be followed by everyone.
Along with the advantages come the disadvantages of following a centralized structure.
Operating each and everything might sound a bit hectic and also deflects the head of the company from focusing on important policy decisions, for example, developing new strategies, coordination, control, etc. Providing o freedom at all might demotivate the employees’ spirit which is gradually reflected in their work. It also impedes self-reliance and confidence in them.
Though centralized structure leads to centralized control but at the same time, it creates an obstruction when it comes to the development of the employees. It doesn’t give them any chance to provide themselves as there are no opportunities made available to them
Frequently Asked Questions
- What is meant by centralization?
It means to bring together all the things and unite them under the control of one authority.
- What are the names of the companies which follow the concept of centralized organizational structure?
Companies like Subway, Apple, and Johnson & Johnson believe in the methodology of a centralized organizational structure
- What are the structural disadvantages of a centralized organization?
This kind of organizational structure definitely blocks the usage of creativity on the part of the company’s employees and often leads to problems arising out of lack of communication.
- What is the main purpose of centralized power?
This is implemented in order to maintain control over employees and ensure that they are consistent with the goals of the organization. It also helps in achieving uniformity in the actions of the organization at all levels.