Centralisation & Decentralisation (Cambridge (CIE) A Level Business): Revision Note

The impact of centralisation and decentralisation

Centralised structures

• In a centralised structure, decision-making authority is concentrated at the top of the organisation

  • Senior managers make most of the decisions at head office rather than staff in local branches or departments

Impacts of centralisation

• Consistency

  • Decisions are made by a small group of managers, ensuring a consistent approach in all areas of the business

• Stronger control

  • Senior leaders can closely monitor performance and ensure everyone follows the same policies

• Quicker decisions in emergencies

  • In urgent situations, central leadership can act fast without waiting for input from others

• Lower risk of mistakes by inexperienced staff

  • Decisions are made by experienced managers, reducing the chance of poor judgement at lower levels

• Slow decision-making in day-to-day situations

  • Local managers must wait for approval, which delays responses to problems or customer needs

• Less input from employees

  • Staff may feel demotivated if they are not trusted to make decisions or give ideas

• Less flexibility

  • The business may struggle to respond to local conditions or market changes quickly

• Higher pressure on senior managers

  • A small group of people must make many decisions, which can lead to overload or errors

Decentralised structures

• Decentralisation is when decision-making is spread out across different levels of the business

• Lower-level managers or local branches have the authority to make decisions without always needing approval from head office

Impacts of decentralisation