Assignment # 1

Why Should Decisions Be Made?

SUBMITTED TO:

Sir. Imtiaz Ahmad Mohar

SUBMITTED BY:

Mehnaz Begum

01-120092-027

Subject:

ORGANIZATIONAL DESIGNANDANALYSIS

1

Brief of Case

In 1995, decision-making process in Procter & Gamble was made decentralized i.e. P&G gave authority to the managers in each country to make their own decisions. This encouraged the management to make decisions well in time and also encouraged them to coordinate with each other. P&G made different regions and made certain divisions area wise North America, Europe, the Middle East, and Asia; each area was assigned a global executive vice president. They all were authorized to made the decisions without prior consultation with any other person.

Facts of the Case

Procter & Gamble was working as centralized in the sense that the decisions were made by the Global president until 1995, the problem with this was that P&G was expanding and the decision making process was slow and burden was building on the Global president. In 1995 decentralized took place; managers got the authority to make the decisions at the country level in order to speed up the processes. The managers became motivated and also mutual cooperation started to grow among the managers of different regions. The areas globe was divided into different regions and each region was assigned a global executive vice president.

Explanation of Different Terms

Decentralization:

The term "decentralization" embraces a variety of concepts which must be carefully analyzed in any particular country before determining if projects or programs should support reorganization of financial, administrative, or service delivery systems. Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi-independent government organizations and/or the private sector—is a complex multifaceted concept. Different types of decentralization should be distinguished because they have different characteristics,

policy implications, and conditions for success.

2

Centralization:

Centralization is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. According to Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be :-

1. Reservation of decision making power at top level.2. Reservation of operating authority with the middle level managers.3. Reservation of operation at lower level at the directions of the top level.

Under centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level. For example, in a business concern, the father & son being the owners decide about the important matters and all the rest of functionslike product, finance, marketing, personnel, are carried out by the department heads and they have to act as per instruction and orders of the two people. Therefore in this case, decision making power remain in the hands of father & son.

Q1. Why did Procter & Gamble move to centralize control?

There was over work load on the company’s global president. To reduce the cost top managers believed that decentralization will save the time and by this they will save the money. Also to penetrate more quickly into the markets of Europe. By decentralizing P&G earned record operating profits on record global sales.

Q2. When would managers realize that they had gone too far and “centralized” control too much?

When P&G’s global president and vice president will start making decisions, ignoring the cultural issues and the changing global business environment by this they will not be able to not respond to customers as quickly as competitors.

3