Decentralized Organizational Structure free essay sample

British Petroleum utilizes individuals with a variety of technical expertise and industry knowledge for running its wide array of business operations. A broad-based management team helps to ensure the organization has knowledgeable directors or managers to handle various types of business situations. One challenge that BP has faced is that it being a global organization, it meant having national managers in different parts of the world that sometimes operate under a different management paradigm. One area where BP believes it must excel in to continue its growth is in drilling operation. As drilling around the globe relies on ever changing technology, it must find ways to not only recruit, but retain and expertly train these employees of the future. To gain the most value from technology, it becomes imperative for BP to move highly trained drilling professionals to areas of high activity so it can apply the latest technology. To do this successfully, drilling professionals must be highly skilled and willingly mobile. They must also be capable of dealing with cultures different than their own. Another thing that BP has done to decentralize its organization is remove some of the layers of management between entry level employees and the management team. As recent as 10 years ago, an employee could very easily find 5 or 6 layers between them making it very frustrating for certain divisions to address issues and make key decisions. Improved telecommunications, faster and cheaper transportation, and low-cost nformation technologies mean that several layers of management are no longer needed to communicate the organizations vision, coordinate group activities, or to check manual technical computations. As BP aims to bring a better customer experience, they have shifted from vertical organization to a horizontal one that is able to communicate better with the end user, the customer. The drawback to this is that is has lessened the opportunities of advancement since a large number of management positions were slashed in order to accommodate this overall change in the company’s vision. While companies with decentralized structures have many benefits, decentralized organizations such as BP can struggle with multiple individuals having different opinions on a particular business decision. As such, these businesses can face difficulties trying to get everyone on the same page when making decisions. A company with a centralized business structure is McDonalds. McDonalds uses a predominantly centralized structure in order to ensure that control is maintained over their many thousands of outlets. The need to ensure consistency of customer experience and quality at every location is the main reason. There are many advantages why this national icon of a company has chosen a centralized organizational structure. One is that it prevents each McDonalds restaurant from becoming too independent and hurting it’s overall branding which it has spent hundreds of millions of dollars on. Without this sometimes rigid structure, it is conceivable that independent franchise owners could sell what they wish and deviate totally from the national menu. Another advantage of this structure for McDonalds is that it makes it easier to streamline its purchasing power and training of employees. With it’s vast amount of restaurants around the world, McDonalds is able to buy it’s supplies from centrally selected vendors and get extremely low prices due to the quantity of products purchased. This would not be possible if each individual restaurant went out and bought products on their own not to mention that the taste would be unique to each location. In regards to training, this centralized organization formed Hamburger University. This training institution was formed in 1961 by Fred Turner, who was McDonald’s founder, Ray Kroc’s first grillman. All mid-managers and owner operators have graduated from this facility meaning that all key personnel have come to know and learn a predetermined way of thinking and of doing things at this organization. While this type of structure has been very successful for McDonalds it has its disadvantages. The customer usually suffers in these structures because of its lack of flexibility and speed in local decision-making. Big decisions are made at corporate headquarters in Illinois with little regard to geographic and socioeconomic impact on individual restaurants. Another disadvantage is that its lack of lower level management authority tends to reduce manager motivation. Vision is a key trait of effective leadership and having a more centralized structure keeps all levels of an organization focused on one vision or purpose. A company president or executive team can establish and communicate its vision or strategy to employees and keep all levels moving in the same direction. This prevents potential inconsistency in vision and helps companies deliver a common message to customers and communities. With fewer people involved in discussing and deciding on strategy and action, centralized organizations typically react more quickly to a dynamic marketplace. Leaders can gather information and efficiently discuss pros and cons of decisions in a small group. This makes the communication and decision making process much more efficient than in decentralized structures in which many local managers must participate in the process. Once decisions are made, top managers send out directives to lower levels for implementation as directed. When centralized leaders are in charge of all major decisions they retain more control over operation of the company and development of its culture. Additionally, little question exists over who is accountable for the results of those decisions. If the company gets a bad price in a supplier negotiation, top managers know to turn to the head buyer to get a sense of what went wrong. This accountability causes top managers to drive each other to peak performance. Business owners should carefully consider which type of organizational structure to use in their company. Small organizations typically benefit from centralized organizational structures because owners often remain at the forefront of business operations. Larger organizations usually require a more decentralized structure since such companies can have several divisions or departments. Business owners may need to consider changing the organizational structure depending on the growth and expansion of business operations. Organizational structures do not always require significant amounts of planning time. Many businesses have organizational structures that simply evolve during the business’s lifetime. Business owners often set the tone based on how they manage employees. Employees will perceive how the owner handles different business situations and simply adjust their work style accordingly. This will create an organizational structure by default, with no serious planning involved. In a centralized organizational structure, decision-making authority is concentrated at the top, and only a few people are responsible for making decisions and creating the organizations policies. In a decentralized organization, authority is delegated to all levels of management and throughout the organization. An organizations degree of centralization or decentralization depends on the extent of decision-making power that is distributed throughout all levels. Both structure have their advantages as well as their disadvantages. An organizations structure and its degree of centralization or decentralization depends on a number of factors, including the size of the organization and its geographic dispersion. In a very large and diversified organization, it is unlikely that a handful of people will possess all the resources to achieve all goals and objectives of the enterprise. As a result, it becomes impractical to concentrate power and decision-making authority at the top. Similarly in a geographically-dispersed organization, a centralized approach will not be the most efficient, as the people with the most authority will be unable to directly supervise operations on a day-to-day basis.