Question 1
An analysis of Home Depot’s case offer an individual the opportunity to examine the benefits that centralization and decentralization of authority can bring to a business. From the case, it is important that managers know the structure of authority that is appropriate in the different developmental stages of their organizations. As portrayed by the case, putting in place the wrong type of structural authority deters the growth of an organization and may even lead to its collapse.
The decentralized structure adapted by Home Depot enabled all managers to participate in the decision-making processes. They are free to decide what to buy and stock without seeking consultation from the top management (Jones & Jones, 127). This makes the decision making process very effective in the numerous stores and also enabled the stores to stock the goods that are needed by the surrounding community. It enabled the different managers to meet its customers’ expectation thus boosting its sales revenues.
Additionally, decentralization requires that the top management delegates the authority to make decisions to the lower level managers in the organization. The hierarchy, therefore, appears to be flat. This structure cultivates the spirit of personal responsibility and every manager feels that they are included in running the organization. This boosts their morale and productivity increases immensely. Moreover, decentralization allows information to flow from bottom to top hence the top managers are in a position of making better informed decisions.
On the other hand, centralization gives the top management the exclusive authority to make all decisions. It enhances uniformity of operation between the different stores (Jones & Jones, 137). It also reduces the cost of operation since procurement and pricing decisions are made from the headquarters and implemented in all the stores. Customers benefit from reduced operational costs since they will have to pay less to acquire the products. This helps in strengthening the customer base while meeting their tastes, needs and preferences. Jobs and decisions are executed quickly thereby enhancing efficiency in an organization (Jones & Jones, 97). Additionally, it allows the top management to compare the performance of its stores and decide on the best competitive strategy. It also allows the creation of a bonus system to reward employees for their unequivocal performance, and encourage them to improve even more.
Question 2
In a competitive environment, factors such as level of competition need for invention and innovation and the top management’s will to let power go. Lowe was posing a threat of overtaking Home Depot in delivering services and products in the building supply industry. Home Depot, therefore, had to change its organizational structure to ensure that it does not match that of its close competitor. This enabled Home Depot to regain its prevalence.
The kind of structural authority to be implemented depends on the needs of the marketplace. Home Depot realized that innovation and invention were not valued as much as low prices. It therefore adopted a structure that allows the organization to charge low prices that can be afforded by many customers thus building a strong customer base (Jones & Jones, 187). Other industries might place more value on the need to change quickly, innovation or creativity.
Additionally, the top management’s will to let power go is of utter importance in deciding structural authority to implement (Jones & Jones, 98). Arthur Blank and Bernie Marcus, the founders of Home Depot, we willing to allow Bob Nardelli to restructure the organization and use his management skills to help transform the organization and make it more competitive. These factors determine the structural authorities to be implemented from time to time.
Reference
Jones, G. R., & Jones, G. R. (2004). Organizational theory, design, and change: Text and cases. Upper Saddle River, NJ: Pearson Prentice Hall.
