Listen to part of a lecture in a business class.
Large companies are organized in different ways. In some large companies that have more than one branch or location, responsibility and authority are spread throughout the entire company. So instead of managers at the central headquarters making all the decisions, managers at local branches can make decisions about how to run their branches. This is known as decentralization. Decentralization can sometimes be effective for companies with multiple locations, but it also has impossible disadvantages. One disadvantage of decentralization is that decisions made by local managers can sometimes harm the overall company. When local managers make decisions, they only consider what’s best for their particular location. They don’t have to think about what’s good for the company in general. So a good decision for a local branch can sometimes be a bad decision for the company as a whole. For example, take a major clothing company with multiple stores, say there’s one store that’s not doing well. The manager may decide to spend a lot of the company’s money on advertising to attract more customers to the store. But if the central office were in control, it would probably choose to close the struggling store to save money and invest in its more successful branches. Another disadvantage of decentralization is that company policies might be carried out differently in different locations. If local managers are allowed to make decisions about policies, then policies may vary from location to location. And if the policies aren’t what customers are expecting, they may be unhappy. So back to the clothing company, say customers want to return clothing and get their money back, because it didn’t fit right or something. And most stores allow customers to do this, but one store decides not to accept returns. Customers at that store may get upset if they can’t return clothes and get their money back.