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Compare centralised and delegated decisions in a case

Both styles sound reasonable in theory, but a case question wants a choice that fits this business and its evidence.

On this page
  1. What does each style give and cost?
  2. Worked example
  3. The mistake to watch for
  4. Check yourself
  5. Where this leads next

In a centralised business, important decisions are made by senior managers. In a business that delegates decisions, more are made lower down by managers or staff closer to customers. A case answer weighs both against the evidence and recommends one, with a condition.

This is the closing lesson of organisation and communication, and it uses ideas from reading an organisation chart, delegation and choosing a communication method.

What does each style give and cost?

CentralisedDelegated
SpeedSlower, because decisions travel upwardsFaster, because decisions are made where the problem is
Control and consistencyHighLower, because each manager may decide differently
Local knowledgeLimitedStrong
Motivation of staffMay be lowerMay be higher
Cost of mistakesFewer, but each one is made for the whole businessMore decisions, so more chances for small errors
Skills needed lower downLessMore training required

A table is only a starting point. The marks come from choosing the rows that matter in the case.

Worked example

Jaya Mart has 5 convenience stores in Penang. Currently all stock orders must be approved by the owner, Encik Tan, at head office.

Each store sends about 6 requests a week, so head office handles 5 × 6 = 30 requests a week. Approval takes about 2 days.

Last month, the stores ran out of fresh milk on 8 days in total, and each such day cost about RM600 in lost sales. Of the 30 weekly requests, 24 are orders under RM1,000.

Encik Tan is considering letting store managers approve orders up to RM1,000 and review all orders weekly. Large orders would still need his approval.

Step 1, count the benefit of speed. Lost sales from stock-outs: 8 × RM600 = RM4,800 a month. Waiting two days for approval is a clear cause in the case.

Step 2, see how many decisions move. 24 of 30 requests are under RM1,000: 24 ÷ 30 = 0.8 = 80%. Most requests would be decided by store managers.

Step 3, weigh the risk. A store manager could over-order perishable stock. A RM1,000 cap limits the cost of one mistake, and a weekly review catches patterns. Buying stock also spends cash before it is sold, so over-ordering ties up cash that the cash versus profit bridge helps you see.

Step 4, judge. Partial delegation suits Jaya Mart because most requests are small, delays are costing sales and the cap limits risk. This holds only if store managers are trained and head office reviews orders each week. If errors rise, Encik Tan could lower the cap.

The mistake to watch for

A common slip is to praise one style for general reasons.

Mistaken answer: “Delegation is better because it motivates staff and makes decisions faster, so Jaya Mart should delegate everything.”

The answer ignores the case. Large orders carry more risk, and “everything” would remove the control that protects the business.

Correction: “Jaya Mart should delegate orders under RM1,000, which is 80% of requests, because waiting 2 days has cost about RM4,800 in lost sales. Larger orders should stay with Encik Tan to limit risk.”

Check yourself

1. A fashion chain requires head office to approve every price change in all stores. Is this centralised or delegated? Give one benefit for the business.

Show answer

Centralised. One benefit is consistency: customers see the same prices in every store, and head office controls profit margins.

2. Give one benefit and one limit of letting store managers decide local promotions.

Show answer

Benefit: managers know local customers, so offers fit the area and can start quickly. Limit: different promotions in different stores may confuse customers or reduce profit if prices are set too low.

3. If delegation cut stock-outs at Jaya Mart from 8 days a month to 3 days, how much lost sales would be avoided at RM600 per day?

Show answer

Days avoided: 8 − 3 = 5. Sales saved: 5 × RM600 = RM3,000 a month. The case would still have to show that delegation is the cause.

Where this leads next

With this lesson done, test the whole module in the organisation and communication practice set. The business case-answer planner helps you lay out the evidence, the chain of reasoning and the condition before you write.

Some students weigh both styles carefully but then stop without a recommendation. That is the kind of pattern our teachers look for in online one-to-one Business tuition.

Questions people ask

What does centralised decision making mean?

In a centralised structure, important decisions are made by senior managers, and lower levels carry them out. It gives tight control and consistency. In a delegated or decentralised structure, more decisions are made lower down. Check the exact terms your syllabus version uses on the Cambridge subject page.

Is delegation the same as decentralisation?

They are closely linked. Delegation is a manager passing authority for a particular task, while decentralisation describes a business where many decisions are made lower down. A business that delegates widely becomes more decentralised. Use the wording the syllabus and the question use.

How do I reach a conclusion in this kind of question?

Weigh the evidence on both sides, then choose one option and state the condition that would change your mind. Look for facts about speed, cost of mistakes, employee skills and need for consistency. A partial answer, such as delegating small decisions with a limit, is often more convincing than all or nothing.

Updated:

Your next step

If your answers praise delegation or control in general terms, a one-to-one teacher can help you build a recommendation that rests on the facts and states the condition that would change it.

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