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Centralization & Decentralization

Centralization is characterized by decision making being undertaken at the top


levels, while actual work is carried out at the lower levels.
Decentralization refers to the systematic devolution (transference of power) of
responsibility and authority within the structure of an organization.

By centralization or decentralization it does not mean the division of organization into


departments or sections.
It is where decisions are made that determines the degree of centralization, and it is quite
possible for an organisation to have many divisions, all of which are strictly controlled
from a single central source of authority.

Organisations cannot be totally centralized or decentralized.

Usually with complete centralization no-one other than a small group of senior managers
could make any decisions the results would be that the organization would be paralyzed
and unable to function.
What are the Advantages of Centralization?
1. Central authority ensures corporate integrity to the organization and preventing
excessive departmentalism.
2. Senior management needs to be seen as providing leadership for the organization
as a whole, ensuring that the various parts perform as a team within corporate
objectives.
3. In the event of disputes between departments or division, or between departments
and the corporate whole, central authority takes on the role of referee in the
resolution of conflict.
4. Centralized authority is necessary for the making of corporate policy and
determining strategic plans across the whole organization.
5. It also fulfills other functions such as standardizing procedure and approaches
which are defining and promoting a unity and style and purpose in respect of issue
and practices across the organization such as equal responsibilities practice.
6. It also fulfills the purposes of crisis management which is the determination of
action which can be effective across the whole organization in response in serious
emergencies.
What are the Advantages of decentralization?
1. Decentralization aims to place the authority to make decisions at points as near as
possible to where there are relevant activities take place.
2. It utilizes local and immediate knowledge of situations in order to make the
timely and effective decisions within the defined spare of action.
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3. This is in contrast to centralized decision making which is remote from the point
of impact.
4. There is, therefore a clear potential gain in the quality of decision making, but it
must be confined to those situations which do not have wider impact that the area
of responsibility of the decision maker.
5. It encourages initiative, stimulates job satisfaction and includes moral by
providing individuals with more control over their work and involvement with the
objectives of the organization.
6. It fosters the development of managerial ability at lower levels.
What are the disadvantages of decentralization?
1.
2.
3.
4.
5.

The principal problem is one of the autonomy of decentralized units, where


independence from the centre can lead to working against corporate policy.
Centralized authority can lose touch with the details of operations in
decentralized parts of the organization, and the decentralized unit can lose touch
with its role as parts of the whole.
It is a disadvantage because of the possibility that decision making is very close
to an often involves the affected parties, it can actually turn out to be relatively
slow and represent a compromise based on the need for acceptance.
Decentralization depends on effective management at the lower levels, and this
is likely to require extensive training which will be costly to the organization.
Decentralized operations may lead to the duplication of work which will be
again a cost.

Why effective decentralization?


Decentralization will be needed when the organization is in the process of growing in the
size, as well as when it wants to increase the need for flexibility and responsiveness in its
operations.

According to Handy Peters, not only the degree of decentralization that is


important, but also the way in which it is implemented.
Decentralization is not merely the delegation of authority, but the means of
breaking with the traditional hierarchical forms.

What Delegation?
Delegation is the passing of responsibility of one level of management to a lower level.
Why do managers refrain from delegating or why it is not practiced often?

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1. It takes more time to explain what to do than to do the work oneself.


2. Subordinates lack the knowledge, skills and experience necessary if you want
something done properly the only way is to do it yourself attitude.
3. Lack of trust in subordinates the potential consequence of mistakes being made
is too great or costly (or may reflect badly on the manager)
4. Subordinates do not want additional responsibility, especially without additional
pay or reward.
5. Sometimes managers are scared to delegate because they are afraid to lose their
job of their subordinates performs better than them.
What is the process of delegation?

Planning
The identification of tasks and functions which could usefully be delegated.
The selection of a suitable subordinate or group of subordinates considered
capable of assuming the responsibility.

Specification of the terms of the delegation.


Determination of the objectives and scope of the responsibility to be delegated
and communication or explanation of the terms to the subordinates.

Monitoring and review


Checking progress and results in suitable intervals.

When a manager delegates responsibility to another, he still is accountable to another


senior manager regarding the delegated matter.
When a manager delegates he should be prepared to live with the problems and
consequences which will arise out of the delegated work.
Subordinates performance should be judged against the objectives and standards
associated with the responsibility, not against how the manager would do it.
What is Participation?
Participation is all about involving people in their work in a more meaningful way
usually through taking part in the decision making process usually reserved for
management alone.
What are the main things to be concerned in participation?

Capacity & willingness of the management, and the capacity and willingness of
the subordinates.
Time, communication and cost also should be considered.

What is Empowerment?

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Empowerment is a development from delegation. When delegation is integrated into the


work organization as permanent feature of the operating principles and practices,
employees are given increased responsibility for their own work and are allowed to work
with more independence, they become empowered and relieved of detailed instructions
and controls.
Empowerment is a process to increase efficiency and make greater use of each
individuals contribution. It implies synergy the total is greater than the sum of the parts
added.

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