Centralized management: system, structure and functions. Principles of the management model, pros and cons of the system

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Which management model is better - centralized or decentralized? If someone in response points to one of them, he is poorly versed in management. Because there are no bad and good models in management. It all depends on the context and its competent analysis, which allows you to choose the best way to manage the company here and now. Centralized management is a great example of this. We understand when this model works well, and when it is unacceptable.

Concepts, powers, tasks

It's all about the division of labor and decisions: how to distribute tasks for each structural unit and at what level key decisions will be made. The distribution of labor and decision-making on a vertical basis will lead to the formation of a centralized management system. The hierarchy of subordination in such a company is rigid, and the powers of employees are minimal and are painted in the most careful way.

Companies in which the authority to make key decisions belong to the first manager and his immediate circle are called centralized. Opposite in the way of management companies are called decentralized. In them, powers are distributed among departments and employees of different levels, even lower levels can make decisions on a fairly wide range of business issues.

Signs of centralized control principle

They are few:

• There are more administrative departments than needed.
• Their functions are more important than the production ones.
• Research structures are located in the central office of the holding's leading company.
• Product production, distribution, marketing projects and all other functional units are controlled through the central administrative departments of the head office.

Centralization is different

In real life, pure centralized management models do not exist (as well as decentralized ones). The difference between companies lies only in the degree of independence of decisions at different levels, that is, in the degree of delegation of authority and rights. If you look at it, then any organization can be classified as centralized or decentralized, when compared with other enterprises.

The criteria for assessing the degree of "centralization" are as follows:

1. The relative share of decisions that are made and implemented on average andgrassroots levels. If this share is a smaller part of the overall decisions, the organization gravitates towards a centralized model.
2. Now about the quality of decisions at the middle and grassroots levels: if decisions about changes in the direction of work or, for example, the allocation of significant resources can only be made by top management, you have a centralized management model.
3. Breadth of mid-range and grass-roots solutions: if they cover only one function, you have a centralized company.
4. With centralized management, top management constantly controls the daily work and in particular the decisions of subordinates. You can, of course, think that no company, in principle, can do without monitoring the work of subordinates. But in decentralized firms, they prefer to evaluate the work of employees according to general criteria: profitability, for example.

These criteria are very relative. But you also need to evaluate companies with their help only in comparison with others.

Model advantages

It is extremely important to get rid of the unnecessary stereotype that has developed in connection with this concept. Very often it is associated with the "Soviet" style, which includes all administrative and command elements. In fact, the centralized management model has a different nature and serious advantages:

• Minimize duplication of functions or activities.
• The ability to quickly and clearly standardize operations and processes across the company.
• The relative simplicity of effective control of the operation of systems and employees in general and inparticular.
• The ability to optimize the use of resources in the form of personnel, space, equipment, etc.

These are excellent opportunities to quickly mobilize the team. In a strict hierarchical system, the decisions of top management are binding on all units below. Therefore, such companies are able to mobilize all human resources to solve urgent and complex tasks, i.e., where coordinated hard work of all structures is needed. The most striking and popular example is the reflection of external aggression. There is a lot of historical evidence for this, because countries with a centralized system of government coped best with external attacks: quickly and together.

The ability to effectively implement new lines of business or structural changes to improve operational efficiency. Tough, sometimes unpopular, but necessary decisions are easier to make centrally.

Crisis management also involves quick and comprehensive solutions that must be implemented not only unquestioningly, but also in a short time. Almost any critical situation in business is most effectively solved by a centralized method of management. Crisis managers understand this well.

When centralized control is useful and necessary

The advantages of this model allows its wide application. We must not forget that the centralized principle of control can be used temporarily - for a certain period of time to perform completelyspecific tasks.

• When organizing and developing a new company in which different departments grow at different speeds and success. In such a situation, centralized control is needed with direct directives that do not allow one to grow at the expense of others.
• With managerial staff shortages occurring more frequently than we would like. To cover this shortfall, it will take time for two tasks: hiring suitable managers from outside and training in-house candidates for leadership positions. During this period, it will be useful for the first manager to take everything into his own hands so that the lack of professionals in the field does not affect the work.

Examples go on. The main thing is to have a good understanding of the current situation in the company and the tasks that you want to implement.

Can the centralized model be used permanently? Yes, you certainly may. Taking into account the size of the company, the qualifications of its staff, the region of the company, the personal qualities of the first manager, etc.

Steve Jobs and his autocracy

Steve Jobs is a typical example of a real crisis manager. There are many stereotypes associated with it. The classic explanation for his success lies in just one argument: "because he passionately believed." There is no doubt that faith in success and the correctness of actions is an important factor. But faith alone will not take you far. It is necessary to make sure that subordinates not only believe, but also rush to do everything that they will be entrusted with.

Autocrats act like monarchs with full power to achievetheir goals. This requires tremendous willpower and, of course, faith. All this was fully present in Steve Jobs: "This is my way, this is the best way." Employees called Jobs "His Majesty." He was not just an autocrat, he was an extreme autocrat.

McDonald's hybrid management model

The most interesting example is the famous McDonald's. It all depends on the nature and type of solutions. Middle managers (some tenants and restaurant managers) have enormous powers up to complete autonomy in making decisions about human resources, locating new restaurants or purchasing products. There is a decentralized approach to governance.

As far as pricing decisions or new product releases are concerned, they are made within the framework of centralized management functions: top management without any discussion with the units below. A great example of a clever combination of different management approaches.

Flaws: paper mountains and more

Not a single management system can do without flaws. The disadvantages of the centralized model are as follows:

• Decision delay at the top. Don't let this point surprise you. It was mentioned above about the quick execution of the decisions of the authorities, but not about their quick adoption.
• Sometimes there is a low quality of decisions at the top, because one person cannot know everything at once and about everything. Lack of information and ignorance of the real situation on the ground is affecting.
• Paper mountains, number growthdocuments, unjustified bureaucracy in the form of unnecessary cumbersome procedures.

When you understand the benefits of centralized governance structures, you can apply this model in the most effective way. This can be both a temporary method and a partial one for individual functions. The main thing is to believe in yourself and in your path. Like Steve Jobs.