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Which condition makes decentralization desirable?
AThe firm is small and operates from one site
BManagers prefer to keep authority to themselves
CThe environment is stable and rarely changes
DThe environment is dynamic and needs local decisions
Answer & Solution
Correct answer: D. The environment is dynamic and needs local decisions
1. Decentralization is usually desirable when the organization is very large.
2. It also suits a firm in a dynamic environment where quick, local decisions must be made.
3. Managers must be willing to share power with subordinates, and employees must be willing and able to take more responsibility.
4. Geographic spread is a further condition in favour of it.
5. A small single-site firm and managers unwilling to give up authority both point the other way.
6. A stable environment removes the pressure for quick local decisions that decentralization exists to serve.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 7 "Designing Organizational Structures", section 7.5 Degree of Centralization_
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