Although scalar chain theory pertains to general interest and analysis, it is important to understand the implications of centralization. That is, at what point does one realize that there is a problem with centralization? When, after all, are the goals of the organization no longer served by just one plan? In other words, when everything else has failed to achieve the goals that originally made it an important goal to begin with?
The principles of management to discuss the issue of organization failure at several points. A key tenet is that value is determined by a combination of desires, needs, capabilities and opportunities. The core value proposition is that a company must serve its customers before it begins to produce a profit. Although these principles obviously resonate with a large number of people and their attempts to optimize their company through the development of value, it is interesting to note that the principles of management are almost entirely about market entry.
Centralization and decentralized management are directly opposed and at odds with each other. The centralization of the principles of management is reflected in the business planning principle: “The company should be organized to take the greatest possible advantage of the resources it possesses.” However, when discussing the failure of centralized planning in business, one must first take into account the fact that the resources in question are often highly specialized and in order for any business to compete, it must have a fairly extensive technical knowledge base. Centralization does not only limit itself to a staff of managers; it can also involve the acquisition of highly specialized information technology systems, complex accounting and financial systems and a multitude of other complex and valuable resources. Centralization therefore occurs when the business organization moves away from specialization and toward specialization coupled with globalization.
Decent principles of management also recognize that a successful organization relies on talented employees who have individually reached their full potential. These employees possess the ability to analyze problems, come up with solutions and implement them. However, when the organization lacks creativity, the knowledge base, technical knowledge and other important talents, then those employees who possess these capabilities will be brought into the service department instead of being made into managers. In many cases this results in the loss of competitive advantage.
The principles of management also recognize that changes must occur both inside and outside the organization in order to keep it viable. The most important change takes place when the public view the company and the senior management as a whole do not align with the vision and mission of the company. A prime example is the fact that many board members and other key personnel choose to spend their time counseling other rather than leading the organization. Only by reconnecting with and effectively utilizing the people in and around the organization can the principles of management to be implemented and sustained over time.
Although some think that principles of management are based primarily on the idea of centralization, it should be noted that there are many different ways to centralize or disperse responsibilities and functions. For instance, the principle of centralization implies that tasks should be performed through a chain of command beginning at the top of the organization and proceeding down the middle. Another method of centralization is through compartmentalization, which is the separation of various functional tasks into smaller units. Distributed management is the process of spreading responsibilities across the enterprise and relies on technology to accomplish this goal. Finally, horizontal centralization means that various tasks are performed through various locations within the enterprise rather than centralized locations.
These principles of management are not easy to define because they have multiple characteristics. In order to develop a complete description, however, it is necessary to examine all of the important components of the management structure and then draw a basic framework from those components. With that framework, the principles of management can more precisely be formulated as principles of management action plans. The principles of management action plans will allow managers to address a broad array of problems in an effective and efficient manner. Once these principles of management action plans are clearly defined and understood, managers can begin to use these principles to address the various problems that they face.