Decentralization As A System Of Organization

Regardless of what a corporate hierarchy looks like internally, there are only four major systems of organization, according to Gulick & Urwick. These systems of organization are: Organization by Major Purpose, Organization by Major Process, Organization by Clientele or Material, and Organization by Place. They state: “Each of the four basic systems of organization is intimately related with the other three, because in any enterprise all four elements are present in the doing of the work and are embodied in every individual workman. Each member of the enterprise is working for some major purpose, uses some process, deals with some persons, and serves or works at some place. If an organization is erected about any one of these four characteristics of work, it becomes immediately necessary to recognize the other characteristics in constructing the secondary and tertiary divisions of the work.”

Gulick & Urwick further define three types of Organization by Place. These are: (1) no geographical subdivisions, (2) centralized geographical subdivisions, and (3) decentralized geographical subdivisions. Considering our Web3 studies, our interest lies primarily in decentralized coordination and organization.

According to Gulick & Urwick, decentralization of geographical divisions serves to: “reduce travel costs, short circuit adjustment problems, cut red tape, and speed up all joint activities and administrative decisions. It increases not only the awareness of the officials to local needs and to the interrelation of service and planning problems, but develops a new sensitivity to the process of democratic control through intimate association of the officials with the people served.”

In addition, decentralization of geographical divisions strengthens these tendencies:

• Greater ease of coordination of services rendered and controls exercised within a given areas
• Greater tendency to adapt the total program to the needs of the areas served, not alone because of the discretion resting within the divisions, but also because the news and differences of the areas will be more vigorously represented at headquarters in the general consideration of broad policy
• Greater ease with which co-operative relations may be established with subordinate governmental units, which are of necessity first of all geographically defined units.

See Gulick & Urwick’s three types of Organization by Place, or geographical divisions, in the image below. That Gulick & Urwick suggest that a decentralized system of organization should have “long arms and short fingers” makes sense, intuitively, even if oversimplified.

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