What are the main factors that help influence whether decision making will be centralized or decentralized?


Factors to Adopt Decision-making Structure

Decision-making structure plays an important role in infusing efficiency and effectiveness in the company’s market performance. The centralization or decentralization of the decision-making structure is strongly affected by different important factors such as size, IT infrastructure, nature of production, IP protection, and diversification (Richard Hodgetts, 2006). The small (large) size of the company encourages centralized (decentralized) decision-making system. The wide-scale production of homogenous (customized) products, at low (high) costs, set centralized decision-making system. An advanced and well-established IT infrastructure raises the degree of centralization. If a company has threats to its competitive intellectual property, it is more likely to adopt the centralized decision-making system. High level of diversification encourages decentralized decision-making system.