Centralised Structure in business is a type of organizational structure where the decision making and control power rests at the top level of the pyramid; on very few key leaders.
In centralised organizational structures, the authority and power concentrates in a particular position, mostly with the CEO, General Manager or Managing Director. Centralised organizations most often station their primary decision makers together in central headquarters for meeting and discussion purposes.
Decision Making and Controlling Power Rests on One
Such organizations do not or cannot have a hierarchical structure. Truth be told, corporates that plan to set a milestone in their respective industries should not consider centralising their structure as there are chances of it collapsing sooner. Although centralisation promotes slower business growth as all decisions are usually taken only by the top level management or one individual and there will be no alternative authority in participation, it does have many advantages.
Most fast-food businesses primarily depend on Centralised Organizational Structure so as to ensure control predominantly rests at one place over their thousands of outlets. It also promotes consistency in food quality and customer satisfaction at every location.
Pizza Hut, McDonald’s and Burger King are few food service orgs that follow a Centralised Structure in Business.
Centralisation can be done geographically or department wise. The choice is not an either or option. Today most of the large businesses inadvertently involve a degree of decentralisation when they start to operate in multiple levels, multiple locations or add or extend their business units and markets.
Therefore, small sized businesses can easily adopt a centralised structure.
Advantages of a Centralised Organizational Structure
1. Consistency and Focus in Vision
Having a centralised structure means leadership lies on one individual or level. This concentrated leadership helps all other levels to stay focused on one vision or purpose established by the top level. A company President or CEO will create and communicate his vision or strategy to his employees and keep them moving in the same direction.
2. Company Policies Are Easier To Implement
Employees can easily adhere to company policies and regulations in centralised structure as they flow right from the top without any miscommunication. Such adherence also eliminates other parts of the business from becoming too independent or disruptive.
When top level management has the charge to take or reject decisions, they gain more control over company development and culture. Additionally, no one would question on the accountability of company policies and decisions.
3. Easier to Coordinate and Smoother Execution
When there are less people engaged in discussing and deciding strategies, plans, actions and purposes, centralised organizations would be benefited tremendously. This is because leaders or top level management can easily gather information and effectively analyse the pros and cons of a decision, product or services and come to a constructive solution. Here the communication is effective as there are limited numbers of people in the process.
Once the strategy is formed, it is informed to lower levels for implementation or execution.
4. Top Management Involvement Reduce Conflicts
Since the decisions making power rests on the top level management or on one individual, centralised organizations experience lesser conflicts among middle level management or employees. If too many levels of managers get involved in decision making processes and addressing crisis, more potential clashes may arise that may result in difference in opinion, leadership and implementation.
When top level managers take the responsibility for making critical decision, be it of a service, product, resource, staff or existing crisis, the burden of risky and unfavourable decisions are taken off of other level managers and leaders.
This builds great rapport and relationship between middle and lower level employees.
5. Better Use of Specialisation
Skills and talents are used in a more productive and comprehensive way in centralised organizations. Use of specialisation rests on the top level management, so they would decide when, how and where it should be deployed, without the intervening of other levels of managers.
For example, if a CEO finds a staff’s particular talent noteworthy, it would be his decision to use the talent in business development. This will reduce potential conflicts, doubts and biased judgements between other employees and levels of managers.