Decentralisation vs Centralisation. Image pixabay.com
ZIMSEC O Level Business Studies Notes: Centralisation and decentralization
- An organisation’s structure can be centralised or decentralised
- Centralisation-is when power, authority and decision making are concentrated at the top of the organisation’s hierarchy
- This means activities such as planning and decision making are mostly carried out by those who are at the top of the organisational structure
- An example is when all important and strategic decisions are made at the Head Quarters/Head Office of the organisation
| Advantages | Disadvantages |
|---|---|
| Reduces supervisory costs | Delayed decision making as top managers are slowed down by having to make even menial decisions |
| Uniform decisions and Standardisation | Out of touch decisions which might not suit local conditions |
| Better coordination between different departments | Fails to take advantage of specialisation |
| Top managers have a better picture of the organisation | Can lead to development of authoritative leadership and resentment |
| Improved quality of work | Are not suitable for large and geographically spread organisations |
| Minimises duplication of effort | Low morale and demotivation |
| Authority and responsibilities are well defined | Not suited for routine decisions |
- Decentralisation-the transfer/delegation of decision making power to the lower levels of the organisation
- This results in a decentralised organisational structure
- Where power, authority, responsibility and accountability are spread throughout the organisation
- Decentralisation is the process of redistributing or dispersing functions, powers, people or things away from a central location or authority
| Advantages | Disadvantages |
|---|---|
| Suitable for large and geographically spread organisations | Increases supervisory/salary costs as |
| Empowers and Motivates employees boosting their morale | There is duplication of efforts |
| Relieves top management from making routine decisions and leaves them to focus on important decisions | Can complicate coordination efforts |
| Can be an important form of manpower planning as future managers are prepared to eventually take over | Makes standardisation /uniform decision making difficult as different individuals are involved in decision making each with their own style |
| Decisions can be made using localised knowledge | Can complicate the communication process especially with the Head Office/Top management |
| Allows for specialists to be hired | Top management are not always clear on what is going on at various levels of the organisation |
To access more topics go to the O Level Business Notes page.
