In the earlier blog, we learnt about the importance of centralization and decentralization in the context of an organization. In today's blog, we would discuss the relation between the three dimensions of organization structure - centralization, complexity and formalization.
Centralization and Complexity: When decisions are decentralized, there would be a lot of overhead in terms of coordination to ensure that the organization is in the intended direction towards achieving the goal. This also has an implication in terms of the professional training that needs to be imparted to the employees - this is visible highly in a small shop where the owner of the shop would make most of the decisions while the support staff would have very little decisions to make!
Centralization and Formalization: To begin with it would definitely help to understand that if we simply look only at the relation between these 2 terms it would be really hard to find a relation between centralization and formalization. It would become clear if we look at the kind of employees the organization has.
When the employee is rather unskilled it would be mandatory to have lot of procedures, rules and regulation if in such a scenario, if there is a centralized decision making or decentralized decision making it would only depend on the scenario in question.
If the employee is a professional, it would mandate that the decision making being delegated to the employee would act as a motivator. It also means that the employee would need to enjoy a lower formalization to really act on his work!
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