At the last Management meeting of Cool Hearts Ltd, which is a fast moving consumer product firm with outlets throughout the country, it came out that sales and other targets were being missed as a result of the failure of top managers to involve subordinates in decision making.
You have just joined the company as an Organizational Analyst and have decided to submit a proposed solution to the problem to your Board at its next meeting to be held in two weeks’ time.
Required:
Explain the following:
i) Centralization (2 marks)
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Centralization refers to the situation where the mandate to make decisions in an organization is retained at top management level. Managers at the lower levels of the organization are not allowed to participate in the decision making process.
ii) Decentralization (2 marks)
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Decentralization describes the situation where the authority to make specific decisions in an organization is not retained at the top management level but diffused down to the lower levels in the hierarchy of the organization.
iii) THREE (3) advantages Cool Hearts Ltd would gain from decentralizing its operations. (6 marks)
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- Decentralization serves as a form of training for lower level managers and thus prepares them well enough for taking up higher positions.
- Decentralization results in better decisions as some technical decisions can better be made by managers who, although at the lower level, are the experts in those fields.
- When lower level managers are permitted to make routine decisions, top managers are then released to concentrate on making strategic decisions, leading to efficiency.
- When lower level managers are involved in decision making, they feel belonged, get motivated and are thus more likely to perform to the best of the capacities.
- Labour turnover tends to be lower when junior managers are involved in decision making within the organization as their morale increases, thus leading to savings in recruitment costs, etc.
- Decentralization serves as a form of training for lower level managers and thus prepares them well enough for taking up higher positions.
- Decentralization results in better decisions as some technical decisions can better be made by managers who, although at the lower level, are the experts in those fields.
- When lower level managers are permitted to make routine decisions, top managers are then released to concentrate on making strategic decisions, leading to efficiency.
- When lower level managers are involved in decision making, they feel belonged, get motivated and are thus more likely to perform to the best of the capacities.
- Labour turnover tends to be lower when junior managers are involved in decision making within the organization as their morale increases, thus leading to savings in recruitment costs, etc.