In
any organization, there is a way of making hierarchy in order to ensure smooth
organizing of work to drive the business.
This has been possible because everyone knows what role they are going to play. What is being required out from them in order to layout a proper business plan for the organization?
As it is rightly said that hierarchy is laid down in an organization in order to ensure smooth organizing of work. These hierarchies are laid in terms of planning power and the decision making process.
One
cannot sideline the importance of Centralization and Decentralization as a
hierarchical structure, as they are very crucial to any organization
Both Centralization and Decentralization are two different structures for distributing authority in any firm. It does still exists and companies have aligned different structures for Centralization and Decentralization.
Centralization vs Decentralization
The main difference between Centralization and Decentralization is that centralization in an organization involves planning and decision-making power is given completely in the hands of senior management. It implies that all power and authority is concentrated at the highest level. Decentralization in an organization involves the delegation of power by middle management or lower management.
Unlike Centralization, Decentralization implies that all power, authority are distributed amongst middle and lower management.
Therefore,
we should keep in mind that both Centralization and Decentralization have an
important set of structures. They are very crucial in terms of the company’s
authority distribution.
In
this guide, we are covering all the essential details for you to understand the
difference between Centralization and Decentralization, so as you know about
these two roles.
Comparison Table Between Centralization and Decentralization (in Tabular Form)
| Parameter of Comparison | Centralization | Decentralization |
|---|---|---|
| Definition | Centralization in an organization involves decision-making capability in the hands of top management. It implies that all power, authority is upheld at the topmost level. | Decentralization in an organization involves decision-making capability through middle management or lower management. Power , authority are upheld by lower management. |
| Flow of Communication | Vertically aligned | No alignment, it is free and more open |
| Decision | Decision-making process is slower | This is comparatively faster. |
| Authority | Power is in hands of Senior management | Middle and Lower management have power |
| Suitability | No proper control over organization | Proper control over organization |
| Implementation | Implementation in small sized firms | Implementation in large sized firms |
What is Centralization?
Centralization
in an organization implies holding of authority through the senior management.
We
can see that the authority is consistent and a systematic hierarchical pattern
is observed in Centralization
Centralization in any organization has the flow of communication designed upright, so as the middle and lower management has to strictly follow the directions of the senior management.
Since authority, power is influenced by senior management. The decision-making process is time-consuming and slower.
Following
are some points in Centralization to be known;
- Vertically allied movement of communication
- Decision-making progression is slower
- The power lies with Senior management
- Leadership has apt coordination
- Implementation in small-sized organizations.
The
primary objective of Centralization structure in any business is to involve hierarchical
structure whenever there is inadequate control over the organization
Therefore,
it is equally important to also know, that Centralization is quite important
for any organization who are looking to ensure their vision, the mission is
fulfilled.
Thus,
it is required to understand that Centralization plays a very important role in
any organization and proper information should be known about it.
What is Decentralization?
Decentralization
in an organization involves spreading power, accountability, and responsibility
to various management levels.
Decentralization in any organization has the flow of communication designed freely, so as the middle and lower management has full freedom to overlook the strategies for the organization.
Since
the authority and power lie in the hands of middle and lower management. The
decision-making process is faster and not so complex.
Following
are some points in Decentralization to be known:
- The flow of communication is free and open
- Faster decision making and execution
- Lower management has the authority to work.
- There is significant control over the organization.
- Implementation in large-sized organizations
The
primary objective of the Decentralization structure in any business is to reduce
the amount of burden and responsibility equally among lower and middle
management.
Therefore,
it is equally important to also know, that Decentralization is quite important
for any organization that is looking to systematically distribute the authority
among the hierarchy.
Thus,
it is required to understand that Decentralization plays a very important role
in any organization and adequate information should be identified about it.
Main Differences Between Centralization and Decentralization
Although
both Centralization and Decentralization are important for an organization.
However, Centralization and Decentralization have a lot of differences with
respect to decision making, power and authority delegation.
- The flow of communication is vertical in centralization organization structure, whereas it is quite open and free in Decentralization.
- Decision-making process is faster in Decentralization whereas it is slower in Centralization
- Centralization is more suitable for small-sized firms whereas Decentralization is suited more for large-sized firms.
Frequently Asked Questions (FAQ) About Centralization and Decentralization
Is decentralization better than centralization?
Conclusion
While both Centralization and Decentralization are quite important for any organization in order to understand the authority and power delegation. For some organizations, Centralization is more favorable whereas some prefer decentralization.
In
ancient times, people used to function their organizations in a centralized way,
but this situation has completely changed due to increased organization’s
complexity of decision making, they have opted for decentralization.
Full concentration in the organization is impractical because it means that every decision of the organization is made by senior leadership.
On the other hand, overall decentralization is an indicator of the inability to control subordinate activities. So, in general, there should be a proper balance between Centralization and Decentralization in terms of authority delegation.
Both the senior and lower-middle management should contribute to achieving the overall mission and goals of the organization.
References
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6486.1992.tb00674.x
- https://www.jstor.org/stable/1909469
- https://onlinelibrary.wiley.com/doi/abs/10.1111/0952-1895.00150