Centralization versus Decentralization in an Organization

Centralization versus Decentralization in an Organization

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Centralization versus Decentralization in an Organization

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Given the increasing span of control, empowerment has become an industry norm. As managers delegate more authority and responsibility, associates have become empowered to do whatever it takes to delight the guest. Front-line associates are in a better position to know guests’ wants and needs than management, so it makes sense to empower them to take care of delighting guests. In the old days, associates had to check with management before making a decision to ensure guest delight. Let’s look at an example. A husband and wife check into a hotel that advertises a room rate that includes a buffet breakfast. Unfortunately, the wife catches a nasty virus and is not well enough to go down to enjoy the buffet breakfast. Her husband says that he will call her to let her know what’s offered at the buffet, so she can choose something and he can bring it up for her. He goes down to the restaurant and dutifully calls her to tell her what’s available. She tells him what she wants: scrambled eggs and bacon. When the husband explains to a server that his wife is sick and not able to come down for the buffet and requests a tray to carry up her breakfast, the server listens and goes to consult a more senior server, but not the manager. The husband then explains all over again and once more asks for a tray. This time he is told that food cannot be taken upstairs. The husband then says, “My wife is sick and needs something to

eat and drink. We’ve already paid for it Get the manager here now!” The

server later comes over to say that the duty manager says the husband can choose anything from the cold section of the buffet but not the hot part. That does it. The guest demands that the general manager, not the duty manager, be summoned. You get the picture. All of this could have been avoided if only the associates had been empowered to use a little discretion.

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Centralization and Decentralization

Some organizations make most of the decisions at the corporate office and inform unit managers of them. This process is called centralization. If the top managers make the organization’s key decisions with little or no input from subordinates, then the organization is centralized. Other organizations make most of the decisions at the unit level or with input from associates. This is decentralization. In reality, organizations are never completely centralized or decentralized because they could not function if all decisions were made by the CEO, nor could they function properly if all decisions were made at the lowest level. Figure 16-4 illustrates the difference between a centralized and a decentralized organization.

Many companies have become more centralized in an effort to save costs and improve service to associates. Because of rapid changes in the hospitality business, organizations are becoming more flexible and responsive. This means the organizations are becoming more decentralized. A good example is Choice Hotels’ restructuring of its franchise services. It has centralized franchising services under one umbrella and created one brand management position that oversees the company’s eight brands. As a result, the company closed five market offices. In large companies especially, lower-level managers who are “closer to the action” and typically have more detailed knowledge about problems and how best to solve them are empowered to delight the guest.

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Figure 16-4 Centralization versus Decentralization in an Organization.

► Check Your Knowledge

1. How are the chain of command and span of control used in organizing?
2. Describe the factors that influence greater centralization and the factors that influence greater decentralization.

Organizational Design Decisions

Organizations are structured in different ways, depending on which structure best suits their needs. A company with 20 associates will look very different from one with 10,000 associates. But even organizations of comparable size don’t necessarily have similar structures. What works for one organization may not work for another. How do managers decide which is the best structure for them? That decision depends on certain contingency factors that we are about to discuss.

Coordination of Activities

When there are only a few associates in an operation, everyone can catch up quickly, but as the business expands, problems can and do occur unless there is good coordination of activities. The hospitality business is fast paced— guests want something now or even sooner! Departments need to communicate quickly and often to keep up with guest requests. You may have experienced an occasion when something did not go as planned—perhaps a checkout delay at your hotel or charges on your bin tbat -were not -yours—but now you’re in a rush to get to the airport. You get the picture—someone made a mistake!

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Centralization versus Decentralization in an Organization

Centralization versus Decentralization in an Organization

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