Advantages and disadvantage when an organization utilize a decentralized structure instead of a centralized structure

There are both advantages and disadvantage when an organization utilize a decentralized structure instead of a centralized structure. Per Garrison, Noreen, & Brewer (2014), “As noted above, of necessity all large organization are decentralized to some extent.” Decentralized organizational structure helps empower the employees as they can help solve day to day operation problem without the approval of top-level management. It helps the top-level management focus on other issues effecting the company. Placing key decision in the lower-level managements team helps the manager take pride in their company, helping with the performance of the company objectives. It helps all key members of the company understand the company and the vision of the company. A disadvantage of decentralized of a company occurs when the lower-level management make their own interpretation of the company vision, making decisions that isn’t constant with the company vision.

Due to the recent mishaps at Watlow Electric Manufacturing company has caused a review of its’ current organizational structure. Based on the size of the company, it will be hard for the top manager team to make swift decisions when it is needed. Watlow Electric Manufacturing company should create a balance of using both decentralized and centralized structure. In a centralized organization, top-level management teams can create policies to help employees’ decision in situations that arises that are beyond the control of the employees. While revising the current decentralized organizational structure, Watlow Electric Manufacturing company needs to create a responsibility center and a cost center. Per Garrison, Noreen, & Brewer, “Decentralized organizations need responsibility accounting systems that links lower-level managers’ decision-making authority with accountability for the outcome of those decisions.” There need to be key managers that are fulfill the position in the responsibility center. They will make key decision in regards of marketing decision and help guide the manager in the cost center with manufacturing processes. They can ensure that the mission of the company are being met by the employees while giving the lower-level managers the key to make day to day operations decisions.

Garrison, R., Noreen, E., & Brewer, P. (2014). Managerial accounting (15th ed.). Columbus, OH:

McGraw-Hill Education.



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