Centralization and Decentralization Prepared by Pankaj Dobariya Pankaj Dobariya Email: pk_dobariya@yahoo. Email: pk_dobariya@yahoo.
Nov 19, 2014
Centralization and Decentralization
Prepared byPankaj DobariyaPankaj DobariyaEmail: [email protected]: [email protected]
Content
Definition Types of (De) Centralization Determinants of decentralization Benefits of (De) Centralization Limitation of (De) Centralization
Centralization
According to Louis Allen, “Centralization is the systematic and consistent reservation of authority at central points within an organization.”
“Decentralization applies to the systematic delegation of authority in an organization.”
According to Henry Fayol ”Every thing that goes to increase the importance of subordinate’s role is decentralization, every thing which goes to reduce it is centralization”.
(De)
Chart of (De)Centralized structure (De)
Types of centralization
Centralization of performance
Departmental centralization
Centralization as an aspect of management
Types of decentralization
Physical and geographical location
Functional decentralization
Determinants of decentralization
Size of organizationThe history of the company – how have
things been done in the pastThe nature of the decisions – riskier
decisions tend to be centralizedAvailability of managers – authority requires,
quality of managers
Cont..
Abilities of lower level managers – will they be able to handle the challenges
The general economic situation – recession – more centralization
Control techniques
Why do companies Centralize?
For personal leadershipFor integration of effortsTo handle emergenciesScarcity of managerial manpowerFor easy communication and controlTo reduce wastage of efforts
Why do companies Decentralize?
To reduce work burden of top management To facilitate growth and diversificationSometimes, subordinates or lower levels
may have more expertiseStimulus for motivation and also helps
develop lower level personnelPromotes development of general mangers
Limitation of centralized structure
Not suitable – for large organizations– for them who produce multiple products– Operating in different geographical location
Increase burden on the top executiveNeglect of human element
Limitation of decentralization
Not followed properly – inadequate planning and control – create chaos
Increase cost – facilities, trainingRequire qualified manager – otherwise failRequire high degree of self-motivation and
self-controlMay affect external forces – national labor
unions, tax policies
How to make decentralization effective
Centralized top policy and control
Appreciation of concept of decentralization
Development of managers
Competition among units
(De) Centralization and Woodward’s study
Routine technologies/mass production – centralized
Craft technologies – decentralized – production employees obtain decision authority because of expertise
Process – employees with technical training acquire moderate decision making authority because their technical knowledge is important to do the job
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