Difference Between Centralization and Decentralization

Difference Between Centralization and Decentralization : Centralization and decentralization are two types of structures that can be found in organizations, government, management, and even procurement. Centralization of authority means that the power to plan and make decisions rests exclusively in the hands of top management. It indicates concentration of all powers at the top level.

On the other hand, decentralization refers to the dissemination of powers by the top management to the middle or lower-level management. It is the delegation of authority at all levels of management. There are some important differences between Centralization and Decentralization, which we will understand below through the Difference Table, but before that, let us better understand what is Centralization and Decentralization.

Difference Between Centralization and Decentralization

Difference Between Centralization and Decentralization

To decide if an association is concentrated or decentralized incredibly relies upon the area of dynamic power and the level of dynamic power at lower levels. There is an endless discussion between these two terms to demonstrate which one is better. In this article, massive contrasts among Centralization and Decentralization, in an association is made sense of.

What is Centralization?

The centralization of managerial personnel to a major location or group for planning and decision making of the organization. In this type of organization all the important authority and powers are in the hands of the top level management.

In the earlier times, centralization policy was most prevalent in every organization to keep all the powers in a central place. They have complete control over the activities of middle or lower-level management.

However, due to the concentration of authority and responsibility, the role of the subordinate employee in the organization is reduced as the head office holds all the authority. So the employees only have to follow the orders of the top managers and act accordingly; They are not allowed to take active part in the decision making purposes. Apart from this personal leadership and co-ordination can also be seen as well as work can be easily distributed among the workers.

Advantages of Centralization

  • Centralization plays a vital part in giving a trained climate in an association. The more significant level of the administration doesn’t just care for taking fundamental choices for the association, they are likewise the portable hearing assistant for the representatives when they deal with issues in regards to work.
  • Each association be it unified or other, they have an arrangement or a dream that they need to see achieved before long. For the outcome later on, it can’t be anticipated from the endeavors yet assuming that they have concentrated or more elevated level specialists which have power in the hand for choosing for a long term benefit.
  • In a unified association, the higher specialists are the people who began the business. Thus, they set aside the cash for recruiting some other business specialists for the choice they need to make.

Disadvantages of Centralization

  • As the laborer is continually working under rules and management through higher specialists, they get the sensation of slaves as opposed to association representatives. This prompts traitorousness, and they will quite often leave whenever they get a superior open door.
  • The lower-level specialists work under the direction of their bosses, who are qualified to take any choices at whatever point required.
  • Workers at lower levels need to rely upon the choice made by top administration, which diminishes efficiency. In a brought together association, the leader has the power.

What is Decentralization?

The assignment of authority and responsibilities by top level management to middle or lower level management is known as decentralization. This is the exact opposite of centralization, in which decision-making powers are delegated to departmental, divisional, unit, or center-level managers, organization-wide. 

Decentralization can also be said to be in addition to delegation of authority. Decentralization lacks leadership and coordination, which leads to inefficient control over the organization. For an effective decentralization process, there must be open and free communication in the organization.

Managers take decisions regarding delegation of authority to subordinates. Thereby, functional level managers get an opportunity to perform better, as well as have freedom to work. It is a very effective process for expansion of business organization, such as for mergers and acquisitions.

Advantages of Decentralization

  • Decentralization spurs their representatives as there are opportunities to show their abilities without the obstruction of top administration. This permits working on the nature of work.
  • Decentralization permits center to bring down specialists to take part in the dynamic cycles. It assists with decreasing the strain of higher specialists.
  • Decentralization permits the worker to show their imagination and abilities. It helps the representative for their power and freedom.

Disadvantages of Decentralization

  • Decentralization isn’t compelling for building little firms. It is viable in light of the fact that it includes a high measure of cost to run the association.
  • In a decentralized association, numerous representatives are expected to be recruited by their work encounters and information.
  • In decentralization, there is no consistency in light of the fact that each administrator has their method for making individuals work. Because of the trouble in coordination, decentralized administration frameworks become helpless to outer powers.

Centralization vs. Decentralization

Centralization Decentralization
Centralization is the most common way of concentrating power and authority in the possession of senior administration. Then again, decentralization alludes to the hierarchical appointment of force and position to practical level administration.
Centralization gives extensive authority and coordination. Decentralization shares the heap of high level administration.
Formal correspondence is conceivable in a unified association. Decentralization, then again, scatters correspondence.


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