Centralized and decentralized
Centralization and Decentralization
Introduction
Considerable debate has taken place over the years over the issue of ‘centralization’ that means that the authority for most decisions is concentrated at the top of the managerial hierarchy versus ‘decentralization’ that requires such authority to be dispersed by extension and delegation throughout all levels of management.
There are advantages as well as disadvantages of both types of structures. A pure form of centralization is not practical except in small companies and pure form of decentralization almost never exists. However, the type of organizational structure would determine the degree of centralization or the degree of decentralization.
As the organizations grow bigger by expansion, mergers or acquisitions, decentralization becomes both necessary and practical. For example, if an automobile company acquires a company that makes refrigerators, then decentralization would be the natural outcome since policies and decisions in these two distinctly different areas may not be similar. The important question is not whether there should be decentralization, but decentralization to what degree.
In addition to decentralization being logistically superior, it is also advocated by most behavioral scientists as being more democratic and hence highly morale boosting that positively affects productivity. Secondly, if all decisions are made at the top then the lower level organizational members end up only as workers and not as innovators or thinkers and that inhibits the growth and development of personnel.
Also, decentralization tends to create a climate, whereby taking additional responsibilities and challenges, the organizational members receive executive training for growth and development.
Whether centralization or decentralization would be more effective would depend upon the organizational structure and situational factors. Studies have isolated certain variables as being primary in determining the need
Introduction
Considerable debate has taken place over the years over the issue of ‘centralization’ that means that the authority for most decisions is concentrated at the top of the managerial hierarchy versus ‘decentralization’ that requires such authority to be dispersed by extension and delegation throughout all levels of management.
There are advantages as well as disadvantages of both types of structures. A pure form of centralization is not practical except in small companies and pure form of decentralization almost never exists. However, the type of organizational structure would determine the degree of centralization or the degree of decentralization.
As the organizations grow bigger by expansion, mergers or acquisitions, decentralization becomes both necessary and practical. For example, if an automobile company acquires a company that makes refrigerators, then decentralization would be the natural outcome since policies and decisions in these two distinctly different areas may not be similar. The important question is not whether there should be decentralization, but decentralization to what degree.
In addition to decentralization being logistically superior, it is also advocated by most behavioral scientists as being more democratic and hence highly morale boosting that positively affects productivity. Secondly, if all decisions are made at the top then the lower level organizational members end up only as workers and not as innovators or thinkers and that inhibits the growth and development of personnel.
Also, decentralization tends to create a climate, whereby taking additional responsibilities and challenges, the organizational members receive executive training for growth and development.
Whether centralization or decentralization would be more effective would depend upon the organizational structure and situational factors. Studies have isolated certain variables as being primary in determining the need
References: http://smallbusiness.chron.com/centralized-vs-decentralized-organizational-structure-2785.html http://www.12manage.com/methods_centralization_decentralization.html http://www.econlib.org/library/YPDBooks/Lalor/llCy200.html