Decision-Making: Centralised vs Decentralised
Centralised decision-making means all major choices happen at head office and filter down. Think McDonald's - every restaurant follows the same procedures, menu, and pricing decided by corporate headquarters. This ensures consistency but can make individual stores slow to respond to local customer needs.
Decentralised businesses push decision-making power down to local managers. Individual store managers might choose their own staffing levels, select which products to stock, or set local pricing. This creates faster responses to local conditions but risks inconsistent customer experiences.
The functional areas - marketing, human resources, operations, and finance - work differently depending on whether decisions are centralised or decentralised. In centralised systems, these departments operate from head office. In decentralised systems, each location might have its own mini-versions of these departments.
Understanding authority (the right to make decisions) versus responsibility (the duty to complete tasks) helps explain why some employees feel empowered whilst others feel micromanaged.
Pro Tip: Most successful businesses use a hybrid approach - centralising some decisions (like brand standards) whilst decentralising others (like local staffing).