Centralization is the Systematic and consistent reservation of authority at the Central point within the organization. Also, Decentralization is the tendency to disperse decision-making authority in an organized structure.
Centralization and decentralization both are principles of management.
What is Centralization in Management?
Centralization is the reservation or withholding of authority by individual managers within the organization.
Thus, in centralization, the little delegation of authority is the rule. which means that power and discretion are concentrated in Few executives.
Control and decision-making are withheld and reside at the top level of management.
Centralization may be Essential and Practicable for small organizations to survive in a highly competitive world.
But as the organization grows more Complex in terms of its increasing size, The interdependence of work-inflow-completeness of tasks, and Spatial physical Barriers within and among Groups.
It is necessary that the decision-making Centre should be moved to the operating level for achieving Efficiency.
Thus, the largest the size of an organization, the more urgent the need for decentralization.
However, this does not mean that centralization is bad and decentralization is good.
What is Decentralization in Management?
Decentralization means consultant delegation of authority throughout the organization.
It is pushing down authority and power decision-making to the lower levels of the organization.
The centers of decision-making are dispersed throughout the organization.
The Essence of decentralization is the transference of authority from a higher level to a low level.
Differences between Delegation and Decentralization
Though decentralization is closely related to delegation the following are some points of difference between the two concepts:
- Delegation refers to the transfer of authority from one individual to another, while decentralization refers to the systematic delegation of authority to all units in an organization widely. It means that decentralization is consistent and wide dispersal of authority throughout the organization.
- The Delegation Can take place from one person to another and be a complete process. However, decentralization is complete only when the fullest possible delegation is made to all or most of the people up to the lower level in the organization.
- Delegation is between a superior and a subordinate, while decentralization is organisation-wise delegation between top management and departments of divisions.
- Delegation is necessary for effective management because no individual manager can afford to look after everything. However, decentralization is optionally necessitated by the growth of the organization.
Thus, centralization and decentralization, are different from their control and decision-making process of business.
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