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. According to Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be :- 1.
Reservation of decision making power at top level.
Reservation of operating authority with the middle level managers. 3.
Reservation of operation at lower level at the directions of the top level. 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. For example, in a business concern, the father & son being the owners decide about the important matters and all the rest of functions like product, finance, marketing, personnel, are carried out by the department heads and they have to act as per instruction and orders of the two people. Therefore in this case, decision making power remain in the hands of father & son.
Centralization came with the invasion of the country by the Spaniards, the Americans, and the Japanese. A strong central government was needed to control numerous attempts to regain freedom. When independence was finally restored in 1946, reconstruction was directed by a strong government. But the innate desire for autonomy asserted itself through the years. A Local Autonomy Act was passed in 1959 (Republic Act 2264) to grant fiscal and regulatory powers to local governments. In 1967, a Decentralization Act (RA 5185) was enacted to increase the financial resources and powers of local governments. The 1973 Constitution of the Republic mandated that the state "shall guarantee and promote the autonomy of local governments to ensure their fullest development as self-reliant communities". These initiatives were stymied by the martial rule of the country for twenty years. Its end was brought about by the expressed action of the Filipinos against authoritarianism. Thus, the strengthening of democracy through people empowerment was on top of the agenda of the Aquino and Ramos governments. A Local Government Code was enacted in 1991 that institutionalized a systematic allocation of powers and responsibilities between the national and local governments. It would be fair to say that the political motive was a strong factor that influenced devolution. Decentralization was perceived to be an effective means of diffusing power from the center that would effectively prevent an authoritarian regime, such as the Marcos regime, from re-emerging in the future. In some organizations, top managers make all the decisions and lower-level managers and employees simply carry out their orders. At the other extreme are organizations in which decision making is pushed down to the managers who are closest to the action. Centralization describes the degree to which decision making is concentrated at the upper level of the organization. If top managers make the organization’s key decisions with little or no input from below, then the organization is centralized. Factor that Influence the Amount of Centralization
Environment is stable
Lower level managers are not as capable or experienced at making decisions as upper-level managers
Lower-level managers do not want to have a say in decisions
Decisions are relatively minor
Organization is facing a crisis or the risk of company failure
Company is large
Effective implementation of company strategies depends on managers retaining says over what happens. In tougher periods when markets were tight and income generation a problem, organizations centralized in order to gain greater control over expenditure, employment policies and so forth. However, the picture is complicated by the growth of organizations. Growth from the...
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