centralization and decentralization

2. Jul 2012
CENTRALIZATION
Systematic Reservation Of Authority At Central
Points Within The Organization
Retention Or Concentration Of Managerial Power
At Central Points In The Organization, Which Is
Nerve Center Of The Organization i.e. At The Top
Level

3. Jul 2012
Everything That Goes To Reduce The
Subordinate’s Role In Decision-making Is
Centralization
It Is A Matter Of General Prudence That Every
Manager Must Reserve Certain Authority For
Overall Planning, Organization, Command,
Motivation And Control

4. Jul 2012
BENEFITS OF CENTRALIZATION
© Top Management Can Take Vital Decisions
© Results in Quick Decisions
© Uniform Policy And Coordination Of All
Activities
© Effective And Intelligent Decisions

5. Jul 2012
BENEFITS OF CENTRALIZATION
© Crisis And Emergency Situations Effectively
Managed
© Successful Handling Of Emergencies
© Higher Specialization Can Be Secured
© Duplication Of Efforts Can Be Avoided
© Control And Communication Easier

6. Jul 2012
LIMITATIONS OF CENTRALIZATION
© Decisions not taken by people who face the
situation
© Lower and middle-level management will not
have interest and initiative in the job
© Top management unnecessarily wastes time
and energy on unimportant and routine
matters
© Hampers Effective Communication

7. Jul 2012
IMPORTANT TO NOTE HERE
Complete Centralization Is Impossible Without
Some Measure Of Delegation Of Authority
When An Organization Is Large And Complex,
Management Cannot Centrally Control All
Information Necessary For Decisions

8. Jul 2012
In Such A Case The Only Solution Is To Divide
The Organization Into Autonomous Decision
Making Units And Have Multiple Decision
Centres Spread Over In The Organization
Structure

9. Jul 2012
DECENTRALIZATION
“Decentralization Is The Systematic And Consistent
Delegation Of Authority To The Levels Where The
Work Is To Be Performed.”
—Louis Allen
It Refers To The Systematic Effort To Delegate To
The Lowest Level All Authority Except That Which
Can Only Be Exercised At Central Points

10. Jul 2012
“Everything that goes to increase the
importance of the subordinate’s role is
decentralization; everything that goes to reduce
it is centralization.” —Henry Fayol
In a decentralized organization, the decision-
making power will be widespread
It is a systematic effort to delegate authority to
the lowest levels

11. Jul 2012
BENEFITS OF DECENTRALIZATION
ḋ Relieves Top Management Of The Burden Of
Decision-making
ḋ Forces Lower Level Managers To Participate
Effectively
ḋ Eases The Burden Of Chief Executive
ḋ Encourages Decision-making And Assumption
Of Authority And Responsibility

12. Jul 2012
BENEFITS OF DECENTRALIZATION
ḋ Gives Managers More Freedom And
Independence In Decision-making
ḋ Aids In Adaptation To Fast Changing
Environment
ḋ Capable Managers Can Be Developed

13. Jul 2012
LIMITATIONS OF DECENTRALIZATION
ḋ A Handicap In Case Of Quick Emergency
Decision
ḋ Makes It Difficult To Have A Uniform Policy
ḋ Creates Problems Of Coordination
ḋ Results In Loss Of Control By Upper Level
Managers

14. Jul 2012
DISTINCTION BETWEEN DELEGATION AND
DECENTRALIZATION
DELEGATION
1. A Process
2. Takes Place Between A
Superior And
Subordinate
3. Superior Exercises
Supervision And
Control Over The
Delegate
DECENTRALIZATION
1. End Result Of A
Deliberate Policy
2. Companywide
Delegation As Between
Top-management And
Departments Or
Divisions
3. Top Management
Exercises Broad And
Minimum Control