In business environments we mainly came across two types of organizational structures; centralization and decentralization. Both the organizational structures act upon as the antonym of each other. At the same time long debates are always there that which one out of them is more efficient and leads to stability of the organization. In centralization, the power or the authority to make decisions are attached with the hand-picked people, who are designated as the top management in the organization. On the other hand, in decentralization, the authority or the decision power is divided among different management levels i.e. Upper management, middle management, and lower management. The authority in the decentralization is sub-divided into the departmental, divisional or unit-level.
What is Centralization?
Centralization is the organizational structure, which is successfully being followed by many governments, organizations or managements across the globe. In this structure the authority of decision and power is attached to the top management. It should be kept mentioned that top management comprises of the most experienced and most educated people in the organization. So the hand-picked people are designated as the top brass of an organization as they are in the driving seat, with power to steer the organization either in the wrong or right direction. As expected, this organizational structure has several pros and cons. The most exciting benefit it is up with is that the conflict of decisions doesn’t take place between staff, and the stance and idea about work remain clearer. On the other hand, it minimizes the role of subordinates and it ends up making employees good followers not the leaders themselves. In this structure, power is with some people and remaining others are just asked to follow their orders. With seeing no active part in the decision-making process the lower-level employee sometimes feels quite demotivated.
What is Decentralization?
Decentralization is the organizational structure in which the power and the authority of decision-making is divided into different sub-level, units and departments. Means that only the top level management is not involved in the decision making, middle and low-level management are also handed responsibilities and authority, with using them they can become an active part of the different decision-making process. With power and authority to more and more levels or employees, organizations get staff in more confidence and use their best for their success. Not only this, the individuals seeing their authority in the organization, work more dedicatedly. The adaptation of decentralization is most often seen when two companies get merger or accusations, with the aim to allowing power to the employees of both the companies, it is used. It is equally effective within the big organizations, where handpicked people alone can’t make decisions. For the more effective implementation of this system, open and free communication between authoritative people should be organized on a regular basis.
Centralization vs. Decentralization
- In centralization the power of decision making is just attached with top-level management, whereas in decentralization authority of decision-making is divided into different sub-level, units and departments.
- Centralization is more effective in the small-sized organizations, whereas decentralization is more effective for the large-sized organizations.
- In centralization few handpicked people are involved in decision-making process. On the other hand, more people are involved in the decision-making process of decentralization.
- In centralization the role of the subordinates is minimized which leads to their demotivation, whereas in decentralization the decision of conflict might take place.