Centralization and Decentralization - Organizing, Contemporary Management | Contemporary Management - B Com PDF Download

Introduction

Centralization and Decentralization are two ways of making decisions in an organization. In centralization, one person or a group of people make all the decisions for the organization. And in decentralization, decision making is left for the lower level of organization. 

Centralization and Decentralization

• If an organization's decision-making authority is centralized (i.e. concentrated at the top of the management hierarchy), then it is working in a centralized manner. 
• Conversely, if decision-making power is decentralized (i.e. distributed among lower-level managers), then the organization is working in a decentralized manner. 

Advantages of Centralization

1. Having uniform procedures and policies can help an organization enforce them more strictly. 
2. This can lead to the elimination of overlapping or duplicate activities, and save costs. 
3. The organization also has a better chance of utilizing the potential of its outstanding employees. 
4. Implementing uniformity in operations and decision-making offers better control over the organization's activities. 

Advantages of Decentralization

1. Decisions are made faster and of better quality. 
2. The effectivity of managers is improved. 
3. Employees can have a say in their governance in a democratic environment. 
4. Mid and lower-level managers are given good exposure and a pool of promotable manpower with managerial skills is created. 
5. Managers are more driven and have improved morale as they can see the results of their own actions. 

Centralization vs Decentralization