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On the other hand, Decentralization refers to the dissemination of powers by the top management to the middle or low-level management. It is the delegation of authority, at all the levels of management. To determine whether an organization is centralized or decentralized greatly depends on the location of decision-making authority and the degree of decision-making power at lower levels. There is a never ending debate between these two terms to prove which one is better. In this article, significant differences between Centralization and Decentralization, in an organization is explained.
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Definition of CentralizationA pivot location or group of managerial personnel for the planning and decision-making or taking activities of the organization is known as Centralization. In this type of organization, all the important rights and powers are in the hands of the top level management. In earlier times, centralization policy was the most commonly practiced in every organization to retain all the powers in the central location. They have full control over the activities of the middle or low-level management. Apart from that personal leadership and coordination can also be seen as well as work can also be distributed easily among workers. However, due to the concentration of authority and responsibility, the subordinate employee’s role in the organization is diminished because of all the right vests with the head office. Therefore, the junior staff is only to follow the commands of the top managers and function accordingly; they are not allowed to take an active part in the decision-making purposes. Sometimes hotchpotch is created due to excess workload, which results in hasty decisions. Bureaucracy and Red-tapism are also one of the disadvantages of centralization. Definition of DecentralizationThe assignment of authorities and responsibilities by the top level management to the middle or low-level management is known as Decentralization. It is the perfect opposite of centralization, in which the decision-making powers are delegated to the departmental, divisional, unit or center level managers, organization-wide. Decentralization can also be said as an addition to Delegation of authority. At present, due to the increase in competition, managers take the decision regarding for the delegation of authority to the subordinates. Due to which the functional level managers get a chance to perform better, as well as freedom of work, is also there. Moreover, they share the responsibility of the high-level managers which results in quick decision making and saving of time. It is a very effective process for the expansion of the business organization, like for mergers and acquisitions. Although, decentralization lacks leadership and coordination, which leads to inefficient control over the organization. For an effective decentralization process, open and free communication in the organization must be there. Key Differences Between Centralization and DecentralizationThe points given below are noteworthy, so far as the difference between centralization and decentralization is concerned:
ConclusionThe difference between centralization and decentralization is one of the hot topics these days. Some people think that centralization is better while others are in favor of decentralization. In ancient times, people used to run their organization in a centralized manner, but now the scenario has been changed completely due to rise in the competition where quick decision making is required and therefore many organizations opted for decentralization. At present, most of the organisation are equipped wth both the features, as absolute centralization or decentralization is not possible. Complete centralization in an organisation not practicable because it represents that each and every single decision of the organisation is taken by the top echelon. On the other hand, full fledge decentralization is an indicator of no control over the activities of subordinates. So, a balance between these two should be maintained. What is centralization and example?Centralization can represent an oppressive system whereby people have no participation in the decisions that impact their lives. For example, an international organization that creates rules that impact people who have no influence whatsoever over such rules. This is a recipe for instability, revolt and revolution.
What is the difference of centralization and decentralization?In centralized organizations, strategic planning, goal setting, budgeting, and talent deployment are typically conducted by a single, senior leader or leadership team. In contrast, in decentralized organizations, formal decision-making power is distributed across multiple individuals or teams.
What is an example of a decentralized organization?In a decentralized organization, lower levels in the organizational hierarchy can make decisions. An example of a decentralized organization is a fast-food franchise chain. Each franchised restaurant in the chain is responsible for its own operation.
What is Centralisation and decentralization in business?In decentralization, a higher number of people from each level are involved in the decision-making process. In centralization, only a few handpicked people are involved in the decision-making process.
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