Advantages of a centralized structure include a focused vision, fast execution and efficient decision-making. Management has clear control of operations, easy coordination and limited conflicts, since few people are responsible for making decisions.
Centralized structures are efficient in business operations. Generally, business owners establish the company’s vision and define objectives that managers and employees follow in order to realize their goals. The company director communicates the vision or strategies to employees and keeps all departments moving on the same wavelength. When a small team is involved in management, the decision-making process is quick and efficient. There is easier communication in a centralized structure since the structure plainly defines who reports to whom. In addition, there is better performance because of a focused vision. A centralized structure has minimal conflicts because decisions are made by the small top team and dissented across the mid- and lower-level employees. Finally, this form of structure eliminates confusion regarding who is accountable for the outcome of certain decisions.
An organizational structure is the outlay of an institution’s framework and procedures for managing a company’s operations. A company may either have a centralized or decentralized structure. A centralized structure is an arrangement in which one individual or a few key leaders are responsible for critical decisions and provide direction for the organization. This is a popular structure among small businesses since the owners are responsible for the company’s business activities.