Centralized Decision Making
An organization whose decision-making is concentrated at the top level is a centralized institution. In such firms, upper-level managers retain decision-making. However, the degree of centralization is determined by several factors, such as the management style, the quality of managers, and the organization’s size. In centralized decision-making, the senior managers make decisions, and the middle and lower managers have to follow these directions. The final decision is distributed to the lower managers through the chain of command.
However, the executive board can also make centralized decision-making. If problems arise at the lower levels, the lower managers must consult with the top-level management for their decision-making. This article discusses why companies should adopt a centralized decision-making system, according to pain management specialist Dr. Jordan Sudberg.
Dr. Jordan Sudberg emphasizes the importance of qualified decision-makers at the top managerial level. He argues that top managers are typically well-equipped to evaluate issues comprehensively before making crucial decisions for the organization. Dr. Sudberg further suggests that middle and lower-level managers, although skilled in functional areas, may benefit from additional training to enhance their decision-making capabilities. Investing in organizational training becomes imperative to ensure that managers at all levels are well-prepared to contribute effectively to the decision-making process.
Why do companies adopt a centralized decision-making structure?
1. To address issues with the decentralized structure
Sudberg says that a decentralized organizational structure usually has several problems due to a lack of harmony within the institution. He believes lower managers may make poor decisions because they may not consider many factors before developing their ideas. Sudberg says this can lead to more problems than solutions because conflict may arise. Thus, he believes that if top-level managers did decision-making, such problems would be non-existent.
2. The quality of the decision
Jordan Sudberg says top managers usually evaluate issues before establishing ways of dealing with them; hence they are qualified to make decisions for an organization. Sudberg believes middle and lower managers are qualified in functional areas, meaning they may not be good at solving significant crises for the firm. Jordan says these inexperienced decision-makers should do more training before they can be allowed to make decisions for an organization.
3. Poor decision
Dr. Jordan Sudberg believes centralized decision-making results in good decisions, unlike middle and lower-level managers who make poor decisions. Sudberg says if each department in an institution were making its own decisions, there would be no coordination, and the lower managers would make poor decisions at their discretion. He says the decisions will be random, inconsistent, and undirected.
Sudeberg explains centralized decision-making as the best way to overcome the above failures. He also says that if an organization adapts to centralization, the top-level managers will make independent decisions. There will be no obligation to consult what the managers below them think. Sudberg says if a company hires specialists and uses a centralized decision-making structure, the professionals will not be allowed to make their own decisions. Specialists have no role in establishing decisions for a company that uses a centralization structure.
Centralized decision-making is where the power to make decisions is concentrated on the organization’s senior management. The duties of the lower managers are to implement what has already been decided. Centralization is a good control system because all the company affairs are controlled from the top. It also reduces costs and allows for quick implementation of decisions.