Organizational Structures: Centralization, Decentralization, and More

Centralization: Advantages and Disadvantages

Advantages: Clear authority and responsibility. Direct reporting lines. Top-down decision-making. No overlapping functions.

Disadvantages: Limited creative input from lower levels. Bureaucratic processes. Potential for increased staffing.

Decentralization: Pros and Cons

Pros: Faster decision-making at the problem level. Develops leadership skills. Promotes individual criteria.

Cons: Potential for inconsistent actions. Complicated communication. Difficult long-term planning. Problems resolved by experience.

Organizational Structures

Simple Structure

Clear mission. Strong, often authoritarian leadership. Economical, used in startups or during downsizing.

Mechanical Bureaucracy

Applies classical management principles. Eliminates uncertainty through standardization. Focus on precision and speed.

Professional Bureaucracy

Coordination through standardized skills (e.g., universities, hospitals). Professionals are autonomous, controlled by professional associations.

Adhocracy

Creative, non-repetitive work. Mutual adjustment through informal communication. High autonomy and self-organization.

Business Costs

Costs are divided into: incurred (actual) and necessary (convenience and efficiency). Trend: incurred costs become necessary costs.

• Inventories: Cost on the balance sheet.
• Sale of finished goods: State outcome.

Decision Making

Decision = choosing among options (opportunity cost). Compare chosen option with alternatives.

Strategy and Outcome

Strategy: The path to achieve a result.

Outcome: The result of a chosen strategy under specific conditions.