Vertical Structure: Centralized vs. decentralized authority

Question 1

Types of Authority

Answer 1

centralized and decentralized

Question 2

Centralization

Answer 2

• Is the concentration of authority for most decisions at the top level of an organization.
• Common in organizations where markets and competitive relationships are relatively stable

Question 3

Decentralization

Answer 3

• Dispersion of authority to make decisions throughout all organization levels.
• Allows organizations to react quickly to new competitors and changes in the marketplace.

Question 4

Centralized- Span of Control

Answer 4

Many levels of management with a narrow span of control creates tall organizational structures where the authority rests with higher management levels

Question 5

Decentralized- Span of Control

Answer 5

Few levels of management with a wide span of control creates flat organizational structures where the authority is dispersed down to lower management levels

Question 6

Organizations with centralized and decentralized authority

Answer 6

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Question 7

4 factors in determining the degree of decentralized authority in an organization

Answer 7

• The business environment
• Size and rate of growth.
• Types of decisions that top management allow lower level managers to make.
• Organizations can be centralized in some areas and decentralized in other areas.
  e.g. Head office – centralized
  Sales Managers – decentralized; managers have a lot of authority to make decisions based on sales results.