Table of Contents
What is Centralization?
Centralization is a process by which authority controls the actions of its subordinates. When an authority centralizes, it becomes its subordinates’ sole decision-maker and point of contact. There are different types of centralization, including political, economic, and cultural. Each type of centralization affects those under the authority‘s control differently. Political centralization, for example, leads to a loss of individual liberty, while economic centralization can lead to a loss of economic opportunity.
This often results in reduced communication and contact between the centralized authority and other parts of the organization. The decision-making process may also become more centralized because of centralization. The purpose of Centralization is to make decision-making more efficient and to allow for more consistent implementation of organizational policies.
While the definition and characteristics of centralization vary depending on the author, centralization generally refers to the concentration of decision-making power in a single individual or organization. Those in charge often seek to maintain as much control as possible when making decisions. This may be done to keep the decision-making process efficient or prevent rival factions from developing.
The opposite of centralization is decentralization, which disperses power among several individuals. Centralization occurs when decision-making authority rests with a small group of people within an organization. The decisions made by this group have a significant impact on the organization.
What is Decentralization?
Decentralization is the process of dispersing decision-making power within an organization. This often results in more excellent communication and contact between the centralized authority and other parts of the organization. The decision-making process may also become more decentralized because of decentralization. Decentralization is the process of dispersing power away from a central authority and distributing it among individuals or smaller groups.
Decentralization can also be used to increase organizational flexibility and creativity and to allow for more responsive decision-making. However, decentralization can also lead to a loss of control over organizational resources, making it more difficult for an organization to implement policies consistently.
Decentralization can also lead to a more decentralized organizational structure, as an authority is dispersed among different levels and units within the organization. Decentralization can have several advantages, including improved responsiveness to environmental changes and greater involvement of employees in decision-making. However, decentralization can also lead to a loss of control over organizational resources and increased conflict between different parts of the organization and can lead to a more democratic decision-making process, it can result in a loss of control and efficiency, and it can make it more difficult for an organization to implement policies consistently.
Difference Between Centralization and Decentralization
Centralization is the process by which an entity brings together smaller entities and elements under one umbrella to control and manage them. On the other hand, Decentralization is the process by which an entity diffuses power away from a central authority to smaller entities or components of the organization.
Centralization and Decentralization are two common types of organizational structures, centralized organization has a more hierarchical structure, while a decentralized organization has a flatter structure. Additionally, centralized organizations have more control over decision-making, while decentralized organizations give employees more autonomy.
Centralization and Decentralization are two common management strategies. The main difference between the two is that centralization involves concentrating power in the hands of a few individuals, while Decentralization spreads the power among the organization’s employees. In general, centralization is more traditional, while Decentralization is more modern.
Comparison Between Centralization and Decentralization
| Parameter of Comparison | Centralization | Decentralization |
| Facilitates | Constant and organized reserve of power. | Systematic transfer of power. |
| Flow of communication | Vertical | Open for all |
| Process of Decision making | Mostly slow | Faster |
| Suited for | Small organization | Big organization |