24 Organizational Structure: Should Municipalities Use a Centralized or Decentralized Structure? – Matthew Irsay

In this term paper, the author addresses the intricacies of an organization that is recovering from a recent restructuring. The history, problems, causes, and recommendations are discussed in detail. In local government, especially in municipalities with a small workforce, the idea of a centralized form of government or decentralized form of government is often under review. With a limited size, upper-level management is often seen making decisions that would be delegated to subordinates in larger markets. Within the organizational structure, work specialization is a major factor in how different departments operate and how the chain of command is established. Span of control within each department is further considered beyond work specialization. This paper generates simple solutions to an issue that, at its core, causes strife in the lower levels of an organization due to micro-management of competent employees.

Organization Background

The Village of East Dundee is a small suburb around 40 miles outside the City of Chicago. It has a population of around 3000 people. Incorporated in 1837, the Village was known for the company Haeger Pottery which produced the bricks used to rebuild the City of Chicago after the Great Chicago Fire of 1871 (Village of East Dundee, 2021). The Village provides many services to its residents including drinking water, sanitary sewer and treatment, snow and ice control, garbage pickup, street sweeping, and many other services (Village of East Dundee, 2021). The Village is structured as a President-Trustee style of government, commonplace in most Illinois communities. The organizational structure includes a director for each individual department followed by a deputy or superintendent below them.

Over the years, the Village has been trying to expand and bring in more business to create additional sources of tax revenue. While the efforts were generally welcomed by most residents, restructuring within the administration and operations levels was occurring. Thus, many positions that were historically in place were eliminated due to budget cuts or were never replaced due to attrition. Specifically, the public works department staffing was more robust and fully staffed. The chain of command (Colquitt, LePine, & Wesson, 2021) in place included a public works director and superintendent or crew leader for each of the divisions (water, sewer, and streets), followed by maintenance workers below that. In 2017, restructuring began to take place that eliminated two superintendent positions and multiple maintenance worker positions. Workload for the remaining employees was high; thus, increasing employee complaints of stress, burn-out, and illness. While the administration recognized pleas for help down the chain, filling of vacant positions has never occurred.

While I believe that the administration is now comfortable in how their organization is run, a basic history of how this organizational structure was developed needs to be mentioned. In the past, there had been some issues with previous administrators and massive budget deficits. Furthermore, new government bonds were issued to help spur economic development and revitalize the struggling downtown East Dundee Area. New Tax Increment Financing (TIF) districts were established around the Village to direct revenues to struggling parts of town. While the revitalization idea was well-received, the underlying issue of loan repayment was looming. Bills were not getting paid, and the Village began to fall further into debt, unbeknownst to residents. Finally, all the finances were uncovered, a new administrator was installed, and subsequently, new department heads were installed. The new structure was formed, and changes were being made.

The case presented will reflect further on the details of organizational structure presented in chapter 15 (Colquitt, LePine, & Wesson, 2021).

Major Problems in the Organization

A multitude of issues exist in this organization that all stem from administrators needing to keep tight control of the annual budget. In municipal government, while being the executives of the organization, administrators report to a Village president, board of trustees, and the other residents that reside in the communities in which they manage. The board of trustees is comparable to a board of directors in a corporation and the residents are comparable with corporate shareholders. Essentially, the administrators are only as good as the budgets they create and administer. This leads to problem one, lack of revenue. East Dundee is a small community of 3,000 people, which limits the revenue received from property tax. Additional sales tax is applied to all sales which helps bolster revenue. However, there are certain departments that have enterprise funds, which includes sewer and water, that support those departments directly. This creates another problem of trying to maintain a severely autocratic and centralized structure. Whoever controls the money, controls the power. In turn, there are many specialized departments and positions that are not accommodated for their staffing and spending needs. This trickles down into the third issue of employee morale and subsequent burnout. Burnout is especially prevalent in public works during the winter months due to winter storm events. Some of these events last for over 24 hours which causes employees to become fatigued while working in unsafe conditions. In this organization, problems that start at the top quickly resonate down the chain of command. Employee retention is difficult, and the work environment can seem volatile at times. Structuring within the organization is strict, and centralized, which makes capital spending and operational decisions time-consuming and overly complicated. The Village Administrator has the authority to approve purchases up to $25,000 before needing approval from the Village board. Department Directors can approve up to $10,000 before needing Village administrator approval. Any purchase over $2,000 needs an approved purchase order request. Finally, anyone under a director will need to ask permission for any purchases. Although these controls are in place to protect the budget, progress is often stifled because a decision cannot be made in a timely manner.

Causes of the Problems

According to Colquitt, a restructuring period within an organization has a weak negative effect on job performance and a moderately negative effect on organizational commitment (Colquitt, LePine, & Wesson, 2021). The Village of East Dundee went through a massive restructuring in 2017. After the new administrator was installed, the dynamic of the organization started to change to ensure that overall control was retained at the top to protect the Village’s funds and bring them out of crisis. Departmental budgets were cut, personnel were laid off, and new transitory directors were installed to guarantee a fresh outlook on the situation. Power was retained at the top, leaving a centralized structure where all financial decisions, no matter the size, were to be decided at the top. However, operational decisions were left to their respective departments. To get through difficult times, this form of structuring worked well while trying to pay off debts (Vitez, 2019). As interim directors were eventually sworn in as full-time directors, control at the top was relaxed, relatively. The organizational structure of East Dundee began to decentralize and allow more financial decisions to be made without Village administrator approval. Generally, the directors run their departments how they see fit.

Specifically in public works, the director administers the budget and handles more general issues such as capital improvement projects and engineering. Operational decisions are left up to superintendents and crew leaders, as they are the ones on the ground. In the East Dundee public works department, the public works director retains as much control as possible. All decisions are finalized by the director, no matter the size. This extreme operational control over the department stifles efficiencies and increases the amount of time it takes to accomplish simple tasks. Furthermore, employee turnover and attrition has caused a shortage in the workforce that has led to employee burnout. As workers have left, they have left positions empty to reduce spending in the budget.

Within the Village of East Dundee organization, leaders have legitimate and coercive power (Colquitt, LePine, & Wesson, 2021). The extent of their power lies in the fact that their title establishes that they have power, and their title gives them the power to punish anyone that disobeys them or breaks the rules. Additionally, I do not believe that employees are lead in this organization, they are only managed. The chain of command within the organization is well-known but decisions are made as high as possible, because lower-level leaders are afraid of making decisions based on a history of being overruled. This leaves lower-level employees with the assumption that they cannot decide anything for themselves, for fear of retaliatory punishment against them for insubordination.

Recommendations

When focusing on public works operations, there is a great amount of work specialization that occurs when the department is further broken into divisions (Colquitt, LePine, & Wesson, 2021). Divisions in public works include streets division, sewer division, and water division. The sewer division in East Dundee also includes a wastewater treatment plant, which is highly specialized work. Centralization is high in an environment that would benefit from more decentralization and autonomy. On the spot decisions can be made, thus increasing overall efficiency within divisions due to the shear amount of time saved from not having to wait (Penpoin, 2021). My first recommendation for the Village of East Dundee is to further decentralize operational control of lower-level operations to the superintendent and street division crew leader to ensure that more general issues are resolved. Delegation of power is necessary to alleviate the decision-making burden on the director. Additionally, the director should be confident that their subordinates can make the right decision.

My second recommendation is to increase the amount of personnel within public works to previous levels to alleviate burnout. The wastewater treatment plant is severely understaffed and has been reduced to one and a half people handling the duties that had historically been handled by a superintendent and three other people. The street department has a crew leader but would benefit from at least one additional full-time employee, increasing the number of maintenance workers to four. The superintendent of operations and water operator would benefit from one additional employee in the water department. The sewer and water department can then be cross trained in water and wastewater operations. Creation of a water and sewer crew leader would be beneficial for managing the day-to-day tasks. Thus, the new division will have five operators and a crew leader and the span of control for each division is reduced, allowing managers to interact more closely with staff (Colquitt, LePine, & Wesson, 2021).

Conclusion

Since the organizational structure within the Village of East Dundee is not an exact science, it appears that there needs to be some sort of intermediary structure within the Village of East Dundee (Siggelkow & Levinthal, 2003). Work specialization is an essential aspect to consider in this situation due to the vast nature of different positions involved in a functioning local government. A hybrid structure can alleviate the struggle an administrator faces when making organizational decisions but also satiates the desire to retain control. Reporting and upwards delegation will always be important as more serious organization-wide decisions need to be made. However, implementing a decentralized system for decision making in the lower tiers of the organizational structure is imperative for employee organizational commitment and task performance (Colquitt, LePine, & Wesson, 2021). Furthermore, operational level employees struggle with fatigue and burnout if pushed too far. Creating additional low-level positions and assigning more duties to crew leaders can decrease the span of control for mid-level managers such as superintendents, allowing them to concentrate on overall divisional duties. Low-level employees are more akin to identifying their equals as leaders as they share similar experiences (Colquitt, LePine, & Wesson, 2021).

Overall, I have learned that organizational behavior of an organization is fluid in nature and varies by organization. Different organizations hire different people, that manage individual personalities, that give an organization its culture. Leaders emerge in organizations that can either make the organization an enjoyable place to work or have inverse effects. When individuals have the freedom and autonomy to do their jobs and accomplish tasks, task performance and organizational commitment increase. Additionally, some employees do need to be constantly supervised if they are deemed to be unproductive. Keeping employees engaged and happy creates a good culture and fosters a productive environment.

References

Colquitt, J., LePine, J. A., & Wesson, M. J. (2021). Organizational behavior: Improving performance and commitment in the workplace (7th ed.). New York: McGraw-Hill.

Moisiu, A. (2014). Science Direct. Retrieved from Decentralization and the increased autonomy in local governments: https://pdf.sciencedirectassets.com/277811/1-s2.0-S1877042814X00030/1-s2.0-S1877042813051227/main.pdf?X-Amz-Security-Token=IQoJb3JpZ2luX2VjEBgaCXVzLWVhc3QtMSJHMEUCIBzOJDSGRjWoWELujriFX3ZfsOSdh4LuCo0fceRxaxrZAiEAuJbTt1Orw5ovMTM7SEW5mw40sQY6Q8RGaAnPvkvykUEq

Penpoin. (2021, September 15th). Penpoin. Retrieved from Decentralization: types, advantages, and disadvantages: https://penpoin.com/decentralization/

Siggelkow, N., & Levinthal, D. A. (2003). Temporarily divide to conquer: Centralized, decentralized, and reintegrated organizational approaches to exploration and adaptation. Organization Science, 650-669.

Village of East Dundee. (2021). Village of East Dundee. Retrieved from https://www. eastdundee.net/

Vitez, O. (2019, February 12th). Chron. Retrieved from Centralized vs. decentralized organizational structure: https://smallbusiness.chron.com/centralized-vs-decentralized-organizational-structure-2785.html