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Centralisation Vs Decentralisation Print

Centralization is the process where the authority and power of an organization is in the hands of only a few.  This power includes activities such as planning, decision-making and delegating authority. The top management takes all the important decisions if an organization is centralized. These decisions are then enforced on the lower tiers of the organization.

This kind of a trend is usually followed in company where the Head of the organization has a particular future for the organization in mind, and wants to control it as much as possible to reach those goals. However, these days a centralized distribution of power is rare.

As organizations grow bigger these days, the power is distributed at different levels to be able run the organization more efficiently. This is called decentralization. Thus, decentralization can be defined as the delegation of authority at all levels of an organization. In a decentralized organization, a lot of the decision-making is delegated to the lower levels of the organizational structure. Due to the shared decision-making, the chances of being able to make improvements increases. A decentralized structure follows a bottom-to-top approach. Thus, if the lowest tier faces an issue, they are in a better position to suggest improvements and, with a few approvals, can apply changes. This allows the application of changes and improvement with minimal delay. It is obvious that the top management will not have all the required information and firsthand experience to deal with the issues that crop up on the field. Such issues are better solved by those directly dealing with the issue rather than waiting for decisions from top management.

Advantages of Decentralization over Centralization

Decentralization is favoured over centralization for many reasons. Some of these are given below.

  1. Relieves the top management from dealing with mundane issues, so that they can concentrate on the daunting tasks that are faced by an organization.
  2. Since many of the decisions have to be made by lower level managers, this not only gives them a chance to display their decision-making skills, but also gives them the experience they would have missed in a centralized organization.
  3. The increased responsibilities of the lower level managers, increases their enthusiasm for work and acts as a motivator.
  4. Decentralization has more scope for diversification.
  5. Makes an organization flexible to minor changes.
  6. Decision-making at lower levels for certain problems is better, as the lower level managers have a more in-depth knowledge of the situation, and can hence handle it better.

Advantages of Centralization over Decentralization

Even though centralization is not preferred anymore, it did have a few advantages.

  1. Singular point of control, which helps make bigger decisions easier, as the top level managers have a better picture of the organization as a whole and are better equipped to make important decisions as compared to a lower level manager.
  2. The implementation of an idea, process or policies is easier in a company that has a strong central direction as compared to a decentralized organization.
  3. Due to a single vision of the head of the company, the organization can work towards a single goal, which would not be possible in a decentralized organization due to individual manager goals.
  4. Centralization allows corporate decision makers respond better and faster in urgent situations which require quick decisions.

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