Not Too Much, Not Too Little: Centralization, Decentralization, and Organizational Change

Abstract

AbstractThe outcomes of centralized or decentralized decision making in public organizations have been a subject of intense debate in the literature for more than a century now. This study revisits this debate by examining whether the degree of centralization influences the implementation of four types of organizational changes: reorganization, service contracting, technology adoption, and performance information use. We conceive of organizational decision making as a ladder—at one end is a very centralized approach where the chief executive primarily makes all major decisions, and at the opposite end is a highly decentralized approach where lower-level employees participate in shaping strategic decisions. Using the results from a national survey of midsized and large city governments, the ordered probit regressions, and additional robustness tests, show that moderation matters more than the polar ends. Moreover, moderate centralization and decentralization have distinct influences on the implementation of different types of organizational change. The findings challenge the conventional thinking that the choice between centralization or decentralization is binary, where one structure is always better than the other. Consistent with contingency theory, public organizations demonstrate strategic behavior in the choice of decision-making structure to adapt to environmental and organizational contingencies.