Centralization Vs Decentralization

Centralization and decentralization both are organizational structures which are followed in various organizations across the world. Both are quite opposite of each other and therefore it is important to know about the differences between centralization and decentralization –

  1. While under centralization the decision making power is in the hands of top management. In other words all major decisions are taken at top management while lower management has no or very little power to take decisions regarding the company matters whereas under decentralization decision making authority is delegated to lower levels of the management, in simple words under this method all decisions are not taken by top management rather some decision making authority is delegated to middle and lower level management.
  2. Under centralization the chances of conflict among middle and lower level managers is less because decisions are taken by higher management and all have to abide by it irrespective of their opinion whereas under decentralization chances of conflict increases because of multiple decision making authorities due to delegation of power.
  3. Centralized organizational structure is best suited for a small company which is operating in a limited geographical area because of its simplicity while decentralized organizational structure is ideal for big MNC companies which are operating in different geographical locations as in huge organizations it is not possible to have single or centralized decision making authority.
  4. In centralized organization sometimes decision making may take time because all matters go to top management and therefore it leads to delay and increases inefficiency of the company while under decentralization middle or lower management can take decisions regarding minor problems themselves which leads to quick decision making thereby improving the overall efficiency of the company.
  5. In centralized organizational structure workers may feel disheartened because they know that all decisions will be taken by top management and they just have to follow and therefore they will be unwilling to give suggestions regarding the work related problems faced by them whereas under decentralization even lower level manager can give his or her suggestions regarding the work related problems and therefore workers tend to fell motivated as they know that they too have some say in the working of the organization.

As one can see from the above that both centralization and decentralization have their advantages as well as disadvantages and hence an organization should look at both of them carefully and then decide which organizational structure is best suited for the company.

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