Organizational Design Report: Decentralization vs. Formalization

This report delves into the significance of organizational design elements, particularly decentralization and formalization, in fostering entrepreneurship and opportunity discovery. The student's analysis, drawing on research by Foss, Lyngsie & Zahra (2015) and others, emphasizes the importance of decentralization for empowering managers, enabling resource allocation, and promoting innovation. The report contrasts decentralization with formalization, exploring how the latter can sometimes hinder the decision-making process within an organization. The author concludes that decentralization is more crucial for the successful discovery and realization of entrepreneurial opportunities. The report also outlines how an organization could be designed, based on decentralization, to encourage entrepreneurship, emphasizing the importance of resource allocation, authoritative decision-making, and the standardization of command. The analysis includes references to relevant academic research, providing a comprehensive overview of the topic.

Running head: ORGANIZATIONAL DESIGN
ORGANIZATIONAL DESIGN
Name of the Student
Name of the University
Author Note

1ORGANIZATIONAL DESIGN
Through an in-depth reading, it is observed that Decentralization is more important
for opportunity discovery and realization. Decentralization is identified as the authority that
makes resource allocation decisions relevant to the realization that is assigned to personnel at
lower levels as well as the managers of the hierarchal level of the organization (Foss, Lyngsie
& Zahra, 2015). Decentralization is associated with the combination of knowledge sourcing
that is centralized at the levels of economic aspects and are related to the communications
and high coordination between the layers of hierarchy. Furthermore, it gives the managers a
power of autonomy and discretion that is required in the realization and recognition of the
opportunities. Whereas, Formalization enables the authentic codification and authoritative
standardization of actions and processes (Foss, Lyngsie & Zahra, 2015). As per the designs of
organization, decentralization and autonomy are complementary to each other in case of
explorative activities such as in the forum of internal venturing of the corporate sectors that
might lead to the exploration of entrepreneurial opportunities. The approach of the
decentralization promotes the innovative activities of the organization and further it is
expected to promote the opportunity reaction as well (Foss, Lyngsie & Zahra, 2015). When
decentralization become high, the manager gains greater discretion and latitudes in the
customization of the mode, process, and timing of realization that ultimately develops a
favourable success factors. However, in the perspective entrepreneurial aspects, formalization
may undergo contradictory attitudes depending upon the circumstances. In certain cases, the
efforts of formalization may facilitate with clear understanding of cause and effect
relationship leading to successful realization and discovery (Foss, Lyngsie & Zahra, 2015). It
increases the aspects of internal predictability and supports the enforcements of internal
agreements among the departmental divisions. At times, the process of formalization speed
up the realization and discovery of the opportunities by facilitating the model of well-
coordinated investment, complementary assets and actions (Foss, Lyngsie & Zahra, 2015).

2ORGANIZATIONAL DESIGN
However, excess incorporation of formalization may induce the firmness in the
organizational structure and might oversee the coordinating activities that eventually leads to
slow down of the organization’s decision making process. Thereby, through an in-depth
analysis and observations, it is concluded that decentralization is more important than the
process of formalization in the discovery and realization of opportunities (Foss, Lyngsie &
Zahra, 2015).
On the basis of the article, if I encourage entrepreneurship in my organization, then
the organizational design would be based on the efficiency of the differential access to
resources, knowledge provide with capabilities as it would help the organization to gain the
opportunity discovery and realization (Foss, Lyngsie & Zahra, 2015). The design would
follow the process of decentralization. Through the process of decentralization, the
organizational structure would reflect the quality expertise through allocating resources and
making authoritative decisions about the opportunities in order to pursue the best. Our focus
is to deliver entrepreneurial performance to embrace the innovative methods. This ensures the
clear and firm standardization of command and accountability and makes the controlling
factor and monitoring easier.

3ORGANIZATIONAL DESIGN
References:
Burton, R. M., & Obel, B. (Eds.). (2012). Design models for hierarchical organizations:
computation, information, and decentralization. Springer Science & Business Media.
Colombo, M. G., Rossi-Lamastra, C., & Matassini, B. (2016). The organizational design of
high-tech entrepreneurial ventures. Foundations and Trends® in
Entrepreneurship, 11(6), 427-523.
Foss, N. J., Lyngsie, J., & Zahra, S. A. (2015). Organizational design correlates of
entrepreneurship: The roles of decentralization and formalization for opportunity
discovery and realization. Strategic Organization, 13(1), 32-60.
Rangus, K., & Slavec, A. (2017). The interplay of decentralization, employee involvement
and absorptive capacity on firms' innovation and business
performance. Technological Forecasting and Social Change, 120, 195-203.