DECENTRALIZATION &

CENTRALIZATION

DECENTRALIZATION

Everything that goes to increase the importance of the subordinates’ is decentralization and everything which goes to reduce it is centralization.

- Henry Fayol

CHARACTERICS OF DECENTRALIZATION

Extended form of delegationGives importance to the role of subordinatesProcess applicable to entire organizationReduces the work-load of the managers in the

top hierarchyDecisions are taken by those employees who

implement them.Under it along with authority, responsibility is

also transferred.

Principles or Factors making decentralization more effective :

Principle of Good DelegationPrinciple of Proper CommunicationPrincipal of Adequate ControlPrinciple of Centralized DecentralizationPrinciple of Proper MotivationPrinciple of Minimum Interference

Advantages of decentralizationRelieves the Top Executives of Excessive Workload.

Managerial Development Increase in morale of employeesQuicker and better decisions Improvement in Industrial RelationsExpansion of Market Increase in InitiativeReduces problem of Communication

Disadvantages of decentralization

Dependence on the ability of subordinatesLack of cooperationLack of uniformity of decisionCostly set- upLack of control

CENTRALIZATION

• Centralization is the systematic and consistent reservation of authority at central points in the organization.

- Louis A. Allen

Characteristics of Centralization

Almost all the authority to take decision is kept reserved at the top level.

Role of subordinates is to implement decisions.

Process of delegation of authority is used to the minimum.

Distance between the place of work and the place where decisions are taken.

Advantages of Centralization

Independent set-upMore CoordinationUniformity of decisionsCheap set-upAdvantages of Expert’s ServicesMore control

Disadvantages of CentralizationExcessive work load for top executivesDiversification impossibleDecrease in the Morale of EmployeesDelay in decisions Industrial DisputesDecrease in InitiativeExpansion of Market ImpossibleProblem of Communication

Factors Affecting the degree of Centralization & Decentralization

Size of the organizationManagerial OutlookHistory of the organizationAvailability of competent subordinatesControl TechniqueRiskiness of DecisionsExtent of DiversificationGovernment Interference

Delegation Vs. Decentralization

Transfer of Accountability Control Compulsion Permanency in Transfer of Authorities Scope Relations b/w Delegator & Delegant Deliberate Policy Dependence

Centralization Vs. Decentralization Delegation of Authority Quickness of Decisions Dependence Uniformity of Decisions Cooperation Work-load of Executives Development of Employees Industrial Disputes Suitability Expansion of Market