this documents presents some of the differences between centralized and decentralized organization system.

1. Centralized and Decentralized Industries
Submitted By:
Awais Ahmed
Registration No:
2011-PID-33
Submitted To:
Ma’am Arooj Zaidi
Date:
14-03-2014
Department of Product& Industrial Design
University of Engineering & Technology, Lahore

2. Introduction to Management Framework:
An organizational structure is the outline of a company’s framework
and guidelines for managing business operations. Small business owners are usually responsible
for creating their companies' organizational structure, which is usually an extension of the
owner’s personality, management style and characteristics. Two types of organizational
structures are found in the business environment: centralized and decentralized. Each structure
offers advantages and disadvantages for business owners.
Introduction to Centralization:
Centralized organizational structures rely on one individual to make
decisions and provide direction for the company. Small businesses often use this structure since
the owner is responsible for the company’s business operations.
Advantages:
Centralized organizations can be extremely efficient regarding business decisions.
Business owners typically develop the company’s mission and vision, and set objectives for
managers and employees to follow when achieving these goals.
Disadvantages:
Centralized organizations can suffer from the negative effects of several layers of
bureaucracy. These businesses often have multiple management layers stretching from the owner
down to frontline operations. Business owners responsible for making every decision in the
company may require more time to accomplish these tasks, which can result in sluggish business
operations.
What is Decentralization:
Decentralized organizational structures often have several
individuals responsible for making business decisions and running the business. Decentralized
organizations rely on a team environment at different levels in the business. Individuals at each
level in the business may have some autonomy to make business decisions.
Advantages of Decentralization:
Decentralized organizations utilize individuals with a variety of expertise and
knowledge for running various business operations. A broad-based management team helps to
ensure the company has knowledgeable directors or managers to handle various types of
business situations.

3. Disadvantages of Decentralization:
Decentralized organizations can struggle with multiple individuals having
different opinions on a particular business decision. As such, these businesses can face
difficulties trying to get everyone on the same page when making decisions.
Considerations:
Business owners should carefully consider which type of organizational structure to use in their
company. Small organizations typically benefit from centralized organizational structures
because owners often remain at the forefront of business operations. Larger organizations usually
require a more decentralized structure since such companies can have several divisions or
departments. Business owners may need to consider changing the organizational structure
depending on the growth and expansion of business operations.
Centralized Organizations Examples:
These are some typical examples of centralized structure,
 Spiders: Spiders are just like us, chop off their heads and they’ll die.
 Dictatorship: Dictatorships are usually ruled by a single powerful figure, the easy-to-
spot sign of a centralized organization. If you can stop the leader, you can destroy the
entire group.
 Military: Traditionally, the military has been the classic example of top-down or
hierarchical management. The General orders the Captain who orders the Lieutenant who
orders the…
 Government: Governments are classic top-down structures lead by the President or
Prime Minister, followed by Senators or Ministers who each have a team below them.
Right at the bottom are the voters who get to have their say with a single vote every
couple of years.
 Television: TV shows are created by centralized organizations that decide what we
watch and when we watch it. And, if think literally about it, one message is sent down the
airwaves for us to watch at the other end.
 Typical Corporation: The typical corporation is structured like the military. At the
head is the CEO followed by other ‘Chiefs’, a string of middle managers and the workers
below.
 General Motors: General Motors is a classic centralized organization example.
 Microsoft: Microsoft is also a classic centralized organization example.
Decentralized Organizations Examples:
These are some typical examples of decentralized structure,
 Starfish: The starfish is the animal kingdom’s primary decentralized organization
example. Whilst they may look similar to spiders and they are structured very differently.
They don’t have a head. And, if you chopped off a single arm, it’s likely to grow back.

4.  The Internet: This is the classic decentralized organization example of our time. It was
deliberately created to overcome the limits of a centralized military command and the
threat of missile attack. This decentralized structure is built upon the humble hyperlink
that connects all the separate pages, websites and networks.
 Our Brain: If the internet is the classic decentralized organization example of our time,
our brain is our physical equivalent. Whilst our bodies are centrally controlled by our
brain, the structure of our brain is very different. It’s a network of neurons. Whilst the
loss of certain parts of the brain will cause function loss, it is possible that the brain can
rewire itself as it learns new things.
 Terrorist Cells: Terrorist cells represent the best military decentralized organization
example. And, this explains the difficulty the west has had in coming to terms with Al
Qaeda, finding Osama Bin Laden and the war in Afghanistan. It’s the centralized versus
the decentralized.
 Open Source Software: There are two decentralized organization examples in the
computing world. The first is Open Source Software. Think Linux. It’s freely available,
thousands of volunteers update it and nobody owns it.
 Peer to Peer Software: Peer to Peer software is uses bits of information contributed by
many people. For example, Bit Torrent downloads a part of the overall file from
numerous computers spread across the globe.
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