The Advantages of a Decentralized Organizational Structure

by Chris Joseph; Updated June 30, 2018

The Advantages of a Decentralized Organizational Structure

Decentralization is a type of organizational structure in which daily operations and decision-making

responsibilities are delegated by top management to middle and lower-level mangers within the
organization, allowing top management to focus more on major decisions. For a small business, growth
may create the need to decentralize to continue efficient operations. Decentralization offers several
advantages, though relinquishing control may be difficult for a business owner accustomed to making all
the decisions.

Empowering Employees

Employees can be empowered by having more autonomy to make their own decisions, giving them a
sense of importance and making them feel as if they have more input in the direction of the
organization. It also allows them to make better use of the knowledge and experience they have gained
and implement some of their own ideas. Empowered employees can cut the "red tape" of an
organization by taking the initiative to get the job done with a minimum of managerial approvals.

Relieving the Burden

Decentralizing takes some of the burden of daily business operations off the business owner. When the
owner allows others to perform such tasks as hiring new employees or ordering supplies, this frees her
up to spend more time on big-picture items, such as planning for expansion or meeting with important
clients. Though it can be hard for some owners to allow this type of flexibility, the rewards can be
substantial for both employees and business owners.

Preparing for Emergencies

A situation may arise where the business owner must be away from the business for an extended period
time because of illness or another type of emergency. A decentralized structure provides a better
chance that the organization will maintain self-sufficiency because managers and employees are
accustomed to working autonomously. Give the process a test run by leaving the business for a week or
two -- a vacation, perhaps -- and evaluating the results when you return.
More Efficient Decision-Making

A decentralized organization is able to make decisions more quickly than one with a centralized
structure. A manager often can make a decision without having to wait for it to go up a chain of
command, allowing the organization to react quickly to situations where fast action can mean the
difference between gaining and losing a customer.

Ease of Expansion

For a growing business, decentralization can facilitate the process of expansion. For example, if
expansion results in opening a new business unit in a different geographic area, decentralization allows
the new unit to operate as an independent entity, meaning it can react more easily to the specific needs
of the area, such as deciding to sell products that appeal to the local market.