Although a flat structure has been promoted to decentralize decision$-$making, decentralization does not necessarily occur. The style of decision$-$making and the way information flows through an organization can be distinct from the type of structure used. Conversely, tall, hierarchical organizations can decide to decentralize decision$-$making without altering their structure.

HealthBest Inc. decided to eliminate two regions and one layer of management, predicting that these changes would reduce costs and speed decision$-$making. The Western Region was created, with $21$ hospital CEOs reporting directly to the regional VP$.$ All CEOs met with key regional and corporate managers shortly before the structural changes were to be announced. The corporate chief operating officer, Hud, explained the rationale, stressing the need for quicker decisions as the company faced more aggressive competition. He showed a slide that stated, $$A flatter structure for a more competitive environment.$$ All the CEOs seemed to be positive about the changes.

At the end of the meeting, a question$-$and$-$answer session was held. One CEO asked which decisions the CEOs were going to be able to make now that they could not before and wondered if they would change the six$-$month budget preparation process or alter their signatory authority. Currently, each CEO could approve costs of up to $$25,000,$ and the regional VPs up to $$100,000.$ Hud appeared embarrassed and finally replied that the regional VP would clearly decentralize the decision$-$making, but no changes in the budget process or signatory authority were contemplated. He explained that the decentralization would occur as the regional VP saw fit, but that this would be a very challenging year for the company, and everyone was going to have to perform at a much higher level.

Hud then went on to discuss the new incentive structure, which allowed CEOs and regional VPs to earn a bonus of up to $80$ percent of their base salary if they achieved certain objectives$$mostly financial. Hud felt certain that these could be achieved with the new, flat structure.

On returning to their hospitals, the CEOs did not see many differences in their relationship with their regional VP$,$ except that more data were required weekly. Reports on staffing hours, patient satisfaction, quality indicators, and projected monthly financial data were added to the CEOs$$ duties. In addition, the regional VP could be expected to call at any time$$sometimes several times a week$$to ask questions about the submitted data. On the other hand, if the CEOs needed an approval or had a situation that required the regional VP$$s input to resolve, it could take days to reach her.