4.5. CENTRALIZATION AND DECENTRALIZATION

Another broad issue of job design is whether to use centralized or decentralized structures. According to Allen (1977), in a centralized project or project structure a majority of the people working on a particular activity report to one project manager, who makes the assignments. They receive management reviews from this particular individual and are also physically located near that person. On the other hand, if fewer than 50 percent of the personnel are reporting to this one person, then the project is considered decentralized.

Allen (1977) and Marquis as well as Straight (1965) suggest that both the decentralized and the centralized structures can be effective, but under different conditions. In decentralized structures all the information needed to do the job is available to most members. In centralized structures the information must be obtained from one or two specific individuals who have most of the relevant information. The decentralized structure is effective when the flow of knowledge has to be relatively fast and the projects are of long duration. On the other hand, the centralized structure is more effective when the projects are short-term and the flow of knowledge is not especially rapid. The decentralized structure is better when a lot of new information comes in and out of the project area, requiring a flexible system of organizing as well as a great deal of communication and cooperation among people participating in the project.

According to Peters and Waterman (1988), excellent companies combined centralized and decentralized structures. These companies have given autonomy to many aspects of the organization down to the lowest level. However, when it comes to the core values that are dear to the company, they are fanatics about being centralists. Peters and Waterman (1988) suggest that the hybrid alternative for organization structure responds to three crucial needs: a need for efficiency, a need for innovation, and a need to avoid rigidity.

Many other aspects of centralization and decentralization for large organizations are beyond the scope of this book. As organizations become larger, the hybrid (centralized and decentralized) approach is quite appropriate at the lower levels. There is still a need to provide some further division of the large workforce. Divisions based on product line, geographic location, or specific project are among the possibilities.