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How to organize and lead an entrepreneurial venture - Centralized versus decentralized organizations

Module by: Global Text Project. E-mail the authorEdited By: Dr. Donald J. McCubbrey

Summary:

Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronic textbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible via paper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the many who cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us at drexel@uga.edu and dcwill@cnx.org.

Editor: John Maynard (The University of Georgia, USA)

Contributors: Suzanne Barnett, Lydia Jones, Carol McDonell, Bernie Meineke, Tammy Segura (Georgia Small Business Development Center, USA)

Reviewer: Dr Gideon Markman (The University of Georgia, USA)

Communication is essential to disseminate information throughout organizations and can take place at many levels. There are two communication models that are utilized—centralized and decentralized. Again, each style can be effective depending on the environment and each has its advantages and disadvantages, as are outlined below.

Centralized

Centralized organizations require communications flow through a central person or location. Single leaders are prominent and have a great deal of decision-making power. These persons have access to more information and can therefore exercise a great deal of influence over group members by controlling the flow of critical information.

One disadvantage to centralized communication is that as the organization grows, the amount of information can overwhelm the central hub (person or department) that processes this information. One advantage to the centralized approach is that it encourages standardized processes that typically result in cost savings and better quality control.

Decentralized

Decentralized organizations tend to utilize many channels of information flow, allowing for more open communication between group members. This model is more conducive to solving complex problems.

One of the major advantages to decentralized communication is that problems and processes can be solved and changed in a timely manner. Also, the needs of customers and employees are more easily and quickly met because fewer levels of management are involved.

A major disadvantage to a decentralized organization is that departments can easily lose sight of the organization's common mission. To ensure organizations stay on task, upper management should maintain open lines of communication with local management.

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Lenses

A lens is a custom view of the content in the repository. You can think of it as a fancy kind of list that will let you see content through the eyes of organizations and people you trust.

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