Minimal Levels of Authority

Each additional level of managers in a firm results in extra expenses, extends the lines of communication, and may bring confusion. Therefore, the levels of authority should be limited to the fewest possible to accomplish the goals of a specific firm. Some firms require many management levels to achieve their objectives, while others operate with only a few levels of authority.
          A centralized organization is one in which most authority and responsibility belong to top management. In such a firm, managers delegate little authority or responsibility, because top executives believe they can produce the most efficient results by holding tight reins on the entire firm. This type of centralized firm has become known as a toll organization; it has many levels of management and very narrow spans of control.
          In a decentralized organization, much authority is delegated to officers, managers, and supervisors throughout the firm. Authority may be delegated in all areas of operations: operation, procurement, personnel, financing, and marketing. In such a firm, middle managers are authorized to make many of the decisions that only top managers can make in a centralized organization. This frees top managers from administrative details and allows them more time for other high-level duties. Decentralized organizations are also known as flat organizations; they have fewer levels of management and much wider spans of control.