Centralization

CENTRALIZATION

 

 

Centralization is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. Under centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level.

On the other hand, Decentralization is a systematic delegation of authority at all levels of management and in all of the organization. In a decentralization concern, authority in retained by the top management for taking major decisions and framing policies concerning the whole concern. Rest of the authority may be delegated to the middle level and lower level of management.

According to Fayol there should be centralization in small units and proper decentralization in big organization. Further, Fayol does not favor centralization or decentralization of authorities but suggests that these should be proper and effective adjustment between centralization and decentralization in order to achieve maximum objectives of the business. The choice between centralization and decentralization be made after taking into consideration the nature of work and the efficiency, experience and decision-making capacity of the executives.

Positive Effect

•   Decrease in the workload of superiors
•   Better and quick decisions
•   Increase in the encouragement to the subordinates

 

Violating Effect

• Unnecessary increase in the workload of the superiors in case of centralization and of the subordinates in case of decentralization
• Impatient and wrong decisions by the superiors in case of complete centralization and weak decisions by the subordinates in case of complete decentralization
• Decline in the encouragement to subordinates in case of complete centralization