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Centralization in an Organization

In: Business and Management

Submitted By hiraimi
Words 540
Pages 3
“The vast majority of corporations are decentralized to a considerable degree. What kinds of organizations are best run in a largely centralized manner, and why?” Corporations nowadays are mainly run under the decentralization concept, where empowerment and appropriate delegation has been given to the lower level i.e. in this case, the Heads of the decentralized units, with regards to the decision making and also in terms of control and monitoring of their respective units. Decentralization has been chosen to reduce the burden at the corporate level and also to ease the running of the business so that some decisions can be made efficiently without many layers of approving authority. Nevertheless, the performance of the respective decentralized units will still be measured as per the targets that have been set earlier and with the agreement between the top management and the lower level. Also, there will still be some top-­‐level management involvement but majority of the decisions made are under the control of the respective decentralized units. As described earlier on the general view of decentralization, we can summarize that centralization works totally in the opposite direction. All decisions are made and controlled centrally, with fewer delegations towards the lower level. In other words, all the decisions and actions relating to the departments or unit under a centralized organization are subject to the approval and under the purview of the top management. This is also true with regards to instructions and orders that have been set centrally, which have to be followed accordingly by the lower level. As compared to a decentralized organization where employees can govern themselves, a centralized organization portrays an organization that feels its members need high degrees of control and monitoring. As decentralization suits well for a huge and complex organization where delegation of authority / empowerment is crucial in ensuring a smooth running of business/operations, centralization is more suitable in a small, family operated businesses e.g. sole proprietorships. This is because the owner has the autonomy in giving the final say of the business decision, as they are considered as the ultimate shareholder of the organisation. Centralization is also suitable for an organization, which has high autocratic, pyramid style organization structure where most of the decisions are made centrally and also a set of rigid rules that has to be followed. This can normally be seen in public sector organization or armed forces such as army. Nevertheless, as an organization grows and flourishes, there is a likelihood that a centralized organization will skew towards moving to become a decentralized structure. This will stay true if the top management of the said centralized organization is willing to consider in delegating some of the decision making processes to their lower level management. This will also be beneficial, looking from motivational perspectives, as the lower level management will feel responsible and empowered in ensuring delivery of good results. However, proper planning and discussion amongst the top management team is crucial before the final consideration is made. Centralization and decentralization will work wonders if both parties i.e. the top management and lower level has reached some kind of agreement and “territory line” with regards to the decision making and monitoring has been clearly drawn.

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