Distinguish between centralisation and decentralisation.
Distinguish between centralisation and decentralisation.
2 Answers
Following are the differential factors between Centralisation and Decentralisation.
| Basis of Difference | Centralisation | Decentralisation |
|---|---|---|
| Authority | Authority remains concentrated only in few hands at the higher level of management. | Authority is delegated to lower levels of management. |
| Creativity | Restricts creativity of middle and lower level managers. | Promotes creativity and innovation at all the levels. |
| Work Load | Higher work load on the top level managers. | Lesser workload as sharing of authority and responsibility is done. |
| Scope of Delegation | Scope of delegation is limited as power is concentrated in a few hands. | Wider scope of delegation as authority can be transferred. |
| Subordinate Initiative | Limits the scope of initiatives by subordinates as the workers have to work on the pre-decided path. | Encourages the subordinates to come forward and take initiative as they are allowed the needed freedom for working. |
| Decision Making | The decision making is slowed down as the power lies only with the top management. The problem has to pass through different levels before an action is taken. | The decision making is quick as the authority lies near the actual action. |
Centralization and decentralization both are organizational structures which are followed in various organizations across the world. Both are quite opposite of each other and therefore it is important to know about the differences between centralization and decentralization:
1. While under centralization the decision making power is in the hands of top management. In other words all major decisions are taken at top management while lower management has no or very little power to make decisions regarding the company matters whereas under decentralization decision making authority is delegated to lower levels of the management, in simple words under this method all decisions are not taken by top management rather some decision making authority is delegated to middle and lower-level management.
2. Under centralization the chances of conflict among middle and lower-level managers is less because decisions are taken by higher management and all have to abide by it irrespective of their opinion whereas under decentralization chances of conflict increases because of multiple decision-making authorities due to delegation of power.
3. Centralized organizational structure is best suited for a small company which is operating in a limited geographical area because of its simplicity while decentralized organizational structure is ideal for big MNC companies which are operating in different geographical locations as in huge organizations it is not possible to have single or centralized decision making authority.