Difference between centralization and decentralization

Difference between Centralization and Decentralization

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The two types of structures that can be found in organizations, government, management, and even purchasing are centralization and decentralization. The power of planning and decision-making is exclusively in the hands of top management when authority is centralized. It alludes to the apex level’s concentration of all powers.

Decentralization, on the other hand, refers to the delegation of authority from top management to middle or lower-level management. It is the delegation of authority at all management levels.

In this article, we will know the difference between Centralization and Decentralization.

What is Centralization?

Centralization refers to a group of managerial personnel for the organization’s planning and decision-making or taking activities. All important rights and powers are held by the top-level management in this type of organization.

What is Decentralization?

Decentralization refers to the delegation of authority and responsibilities by top-level management to middle or lower-level management. It is the contrary of centralization, in which decision-making authority is delegated to the departmental, divisional, unit, or center level managers across the organization. Decentralization can also be thought of as an extension of delegation of authority.

Difference between Centralization and Decentralization:

Centralization Decentralization
Stability
Centralization is appropriate in stable environmental conditions. If the environmental conditions are unstable like complex, an uncertain organization requires a greater amount of decentralization
Decision making
If the lower-level managers do not tend to make decisions then it is better to follow centralization If the lower-level managers are able to make decisions then the advisable way is decentralization.
Risks
If the organization faces a risk or threat, it relies on centralized policies. To follow this, the organizational cultures must be more open and trustworthy.
Requirement
To effectively running of the organization opting for centralization is required. The multi-location of the organization, the greater amount of decentralization is required
Process time
The processing time is slow as the information needs to pass from lower-level management to top management Here, the decisions are fast and prompt as lower-level management takes decisions with their experience and standards.

Bottom line:

As a result of the preceding discussion, the difference between centralization and decentralization. Some people assume that centralization is preferable, while others assume that decentralization is preferable. People used to run their organizations in a centralized manner in ancient times, but the scenario has changed completely due to increased competition, which requires quick decision-making, and many organizations have opted for decentralization.

Further related readings:

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