Organisational Change: Delayering, Centralisation and Decentralisation
Centralisation is when decision-making authority stays with senior managers or head office, while decentralisation is when that authority is passed down to lower levels or local branches, each affecting how consistent and how fast a business's decisions are.
Before you start
Make sure you're comfortable with these topics first:
Method
- Identify which type of change the case describes: delayering, a level of management removed, centralisation, decisions kept at the top or head office, or decentralisation, decisions passed down or to branches.
- Learn delayering's effects: wider spans of control for remaining managers and lower management wage costs, but a heavier workload for those managers and possible redundancies.
- Learn centralisation's effects: consistent decisions and strong control from the top, but slower decision-making the further down the chain of command an issue must travel, and less delegated responsibility for junior staff.
- Learn decentralisation's effects: faster decisions closer to the customer or local market, more delegation which can motivate staff, but a risk of inconsistent standards or decisions across branches.
- For explain questions, give one point about the specific change plus a linked consequence for cost, speed of decisions, or staff motivation.
- For evaluate questions on whether a business should make a given change, weigh the cost or control benefits against the workload, consistency or motivation risks, referencing the case's specific circumstances, such as its size, number of branches, or the urgency of local decisions.
Worked example
A chain of 30 gyms currently requires every branch manager to get head office approval before running any local promotion, which can take up to two weeks. Explain one reason why decentralising this decision to branch managers might benefit the business.
- Identify the current approach: centralised, decisions on local promotions are made at head office.
- Identify the problem this causes: approval can take up to two weeks, which is slow.
- Identify what decentralising would change: branch managers could decide on local promotions themselves without waiting for head office.
- Link this to the benefit: branch managers, who know their local customers best, could react faster to local conditions, such as a competitor's offer or a quiet week, rather than losing the opportunity while waiting two weeks.
- Write the explained answer, combining the current delay with the speed benefit of decentralising this decision.
Practice questions
Try each question, then tap to reveal the answer.
Q1State what delayering means.Show answer
Answer: Removing one or more levels of hierarchy from an organisational structure.
Q2Identify one likely effect of delayering on remaining managers' span of control.Show answer
Answer: It widens, since fewer levels mean each manager supervises more people directly.
Q3Give one advantage of centralisation.Show answer
Answer: Decisions are consistent across the whole business and senior managers keep strong control.
Q4State one disadvantage of centralisation.Show answer
Answer: Decision-making can be slow, since decisions have to travel up the chain of command to senior managers and back down again.
Q5Explain one advantage of decentralisation.Show answer
Answer: Local managers, who understand their own branch or market best, can make faster, better-informed decisions without waiting for head office approval.
Q6Identify one risk of decentralisation.Show answer
Answer: Inconsistent decisions or standards between different branches or departments.
Q7State one reason a business might delayer its structure.Show answer
Answer: To reduce management wage costs by removing a level of management.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain one advantage and one disadvantage of a business decentralising its decision-making.
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A national estate agency chain has always operated with a centralised structure, where all pricing and marketing decisions for every property are approved by head office. Local branch managers say this slows down getting properties on the market in a competitive local housing market where rival agencies list similar properties within a day. Head office is worried that decentralising pricing decisions to branch managers could lead to inconsistent, poorly judged valuations. Evaluate whether the estate agency chain should decentralise pricing and marketing decisions to its branch managers.
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See real GCSE Business past-paper questions, with official mark schemes →
Free printable worksheet
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