A. When decisions are short-term in duration
B. When decisions need specific local context
C. When there are significant economies of scale
D. When making frequent decisions
The correct answer is
C. When there are significant economies of scale
Centralized decision-making should be used when there are significant economies of scale.
Why this is correct
- Significant Economies of Scale: Centralized decision-making is beneficial when decisions have broad implications that can leverage economies of scale. This approach is effective for strategic decisions affecting the entire organization or for allocating resources in a manner that maximizes efficiency and cost-effectiveness across the company. Centralizing such decisions can ensure consistency, alignment with organizational goals, and optimization of resources on a large scale.
Why the others are not as correct
- When decisions are short-term in duration: The duration of the decision doesn’t inherently dictate whether a centralized or decentralized decision-making process is more appropriate. Short-term decisions can be effectively made at a local level, especially if they require quick responses that are specific to local conditions or contexts.
- When decisions need specific local context: Decisions that require specific local context are better suited to decentralized decision-making. Local teams or individuals, who are closer to the specific circumstances and possess a deeper understanding of the local context, can make more informed and appropriate decisions in these scenarios.
- When making frequent decisions: Frequent decisions, especially those requiring rapid response or adjustments, are often more effectively handled through decentralized decision-making. This approach allows those closest to the work or issue to make decisions quickly without the delay of escalating them through a centralized authority, thereby improving agility and responsiveness.
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