Decentralisation vs Centralisation

Decentralisation vs Centralisation. Image

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
Reduces supervisory costsDelayed decision making as top managers are slowed down by having to make even menial decisions
Uniform decisions and StandardisationOut of touch decisions which might not suit local conditions
Better coordination between different departmentsFails to take advantage of specialisation
Top managers have a better picture of the organisationCan lead to development of authoritative leadership and resentment
Improved quality of workAre not suitable for large and geographically spread organisations
Minimises duplication of effortLow morale and demotivation
Authority and responsibilities are well definedNot 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
Suitable for large and geographically spread organisationsIncreases supervisory/salary costs as
Empowers and Motivates employees boosting their moraleThere is duplication of efforts
Relieves top management from making routine decisions and leaves them to focus on important decisionsCan complicate coordination efforts
Can be an important form of manpower planning as future managers are prepared to eventually take overMakes standardisation /uniform decision making difficult as different individuals are involved in decision making each with their own style
Decisions can be made using localised knowledgeCan complicate the communication process especially with the Head Office/Top management
Allows for specialists to be hiredTop 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.