Centralization and Decentralization-1

Today we are going to discuss on Centralization and decentralization as part of Organizations. Centralization refers to consolidating decision making in one coordinating head. Decentralization refers to delegation of decision making to subordinate units. Both centralization and decentralization are intended to improve organizational effectiveness. Theories are of little avail in suggesting which is the proper thing to do in a given situation. At one point Ford Motor Company suffered because of centralization and General Motors because of decentralization.

 

If one were discerning enough, it is possible to identify two basic types of centralization and decentralization.

  1. Geographic/territorial concentration (centralization) or dispersal (decentralization) of operation. If all operations are under one roof or in one geographic region, Geographic regions could refer to a city (eg. Bombay), State (Maharashtra), country (India) or continent (Asia).
  2. Functional concentration or decentralization. As an example, personnel functions in an organization could be concentrated in one separate department or handled in various functional departments.

However, from a practical point of view, merely by looming at charts it is difficult to determine to what extent authority is concentrated or dispersed. There is need therefore to analytically study how the chain of command operates in an organization.

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