Decoding Decision-Making: Comparative Insights from Differently Structured Organizations

Abstract

The world is constantly changing and for organizations to stay competitive in a dynamic environment, they need to practice efficient decision-making. Previous research distinguishes decision-making as a continuum between centralized and decentralized, the former as common in hierarchical structures and the latter a characteristic of a flat structure. However, the traditional hierarchical organizational structure has been argued to become inefficient in today’s society due to its inability to adapt to the surrounding environment. Instead, organizations move towards a more flat structure with fewer managerial levels and a higher autonomy for the employees. Studies have shown that different organizational structures have an impact on decision-making and to investigate the level of impact, a comparative approach on two case organizations was conducted, one hierarchical and one flat. Data has been collected through 20 interviews with employees at several levels of the organizations. The study reveals large differences in how decision-making unfolds in practice and in line with previous research, the hierarchical organization exercises rather centralized decision-making, and the flat organization rather decentralized decision-making. However, the findings show that the decision-making structure depends on the character of the decision and that the appropriate structure for an organization depends on the environment in which the business operates. In addition, the findings illustrate that trust is an essential factor and that decision-making has an impact on employee involvement, which in turn has an impact on motivation.