The document discusses centralization and decentralization in organizational management, detailing the characteristics, benefits, and factors influencing each approach. Centralization tends to concentrate decision-making at the top, providing uniformity and control, whereas decentralization disperses authority, facilitating quicker decisions and executive development. Additionally, it differentiates between delegation and decentralization, highlighting their implications on authority and responsibility within organizations.

1. CENTRALIZATION
• In centralization, control and decision-making reside at
the top levels of management. In centralization most of
the authority is held at the hand of a few people only.
• “Centralization is the systematic and consistent reservation
of authority at central points within an organization”.
• Louis A.Allen

2. THE CIRCUMSTANCE VARYING CENTRALIZATION
ARE:
ESSENTIAL FOR
SMALL
ORGANIZATIO
N TO SURVIVE
THE
COMPETITION
IT ENSURES
EFFECTIVE
MEANS OF
CONTROLLING
THE
OPERATIONAL
UNITS
IT REDUCES
OVERALL
COSTS
CENTRALIZATIO
N MAY BECOME
ESSENTIAL TO
PROVIDE
UNIFIED
DIRECTION TO
ACTIVITIES AND
KEEP
INTEGRATION. IT
ENSURES
OVERALL
ORGANIZATION
AL PERSPECTIVE
TAKE
ADVANTAGE
OF
OUTSTANDING
LEADER IN
EARLY STAGES
OF ENTERPRISE
FOR TAKING
QUICK
DECISIONS
CENTRALIZATI
ON OF
DECISION
MAKING
ENSURES
PROMPT
ACTION
NECESSARY TO
MEET THE
EMERGENCIES

3. BENEFITS OF CENTRALIZATION
1. Reduced cost: the standardized procedure and method helps in
the reduction of office cost. Office cost is reduced as it does not
emphasize on more specialists, and more departmental machines
and equipment.
2. Uniformity in action: Uniformity in action is established
throughout the organization because of central administrative
control. The same executive supervises the work and same types
of office equipment are used which ensures uniform performance
of activities.

4. CONT…
3. Personal leadership: centralization encourages and permits
personal leadership. The introduction of personal leadership
facilitates quick action, aggressive marketing and attainment of
pin-pointed objective or purpose.
4. Flexibility: centralization permits flexibility and adaptability of
the organization to the changed circumstances.

5. CONT…
5. Better co-ordination: centralization facilitates better
coordination among various operations. Direct control and
supervision are facilitated which results in less likelihood of
conflict of authority and duplication of work.

6. DECENTRALIZATION
• “Decentralization refers to the systematic efforts to delegate to
lowest levels of authority except that which can only be exercised at
central points”.
Louis A.Allen
Decentralization is not the same thing as delegation.Delegation
means entrustment of responsibility and authority from one
individual to another. But decentralization means scattering of
authority throughout organization. It is diffusion of authority within
the entire organization.

7. BENEFITS OF DECENTRALIZATION
1. Reduces the burden on top executives: decentralization relieves the top
executives of the burden of performing various functions. Centralization of
authority puts the whole responsibility on the shoulders of an executive and his
immediate group. This reduces the time at the disposal of top executives who
should concentrate on other important managerial functions.
2. Facilitates diversification: under decentralization, the diversification of products,
activities and markets etc., are facilitated. A centralized enterprise with the
concentration of authority at the top will find it difficult and complex to
diversify its activities and start the additional lines of manufacture or
distribution.

8. CONT…
3. Executive Development: when the authority is decentralized,
executives in the organization will get the opportunity to develop
their talents by taking initiative which will also make them ready for
managerial positions. The growth of the company greatly depends on
the talented executives.
4. Quick Decision-making: Decentralization brings decision making
process closer to the scene of action. This leads to quicker decision-
making of lower level since decisions do not have to be referred up
through the hierarchy.

9. CONT…
5. Better control and supervision: Decentralization ensures
better control and supervision as the subordinates at the
lowest levels will have the authority to make independent
decisions. As a result they have thorough knowledge of
every assignment under their control and are in a position
to make amendments and take corrective action.

10. FACTORS AFFECTING CENTRALIZATION AND
DECENTRALIZATION
A. History and Nature of the organization:
Centralization or decentralization of authority depends on
the manner, in which the organization has built up over
time i.e., history of the organization. As organization that
has been primarily built by an individuals efforts tends to
have a highly centralized structure. Organizations that have
grown through a number of mergers, combinations and
consolidations tend to stay decentralized.

11. CONT…
B. Size of the organization: In a large organization, numerous
decisions have to be taken at different places. Therefore, it becomes
difficult to coordinate the functions of different departments. To
avoid slow decision- making and to bring down the costs associated
with managing a large organization, authority should be
decentralized. Decentralization enables the organization to operate as
a group of small independent units thus reducing the workload of
managers, reducing the amount of paperwork and improving the
quality of decisions.

12. CONT…
C. Availability of competent managers: the degree of
decentralization in an organization is influenced by the
availability of competent managers. Decentralization of
authority may not be possible if the managers of the
organization are not talented enough, and if they can’t
handle the problems of decentralized units.

13. CONT…
D. Time frame of Decisions: In order to survive in a highly
competitive environment, every organization has to
capitalize on the available opportunities. In a decentralized
organization, the authority to make decision lie with the
head of that particular unit. Therefore, decisions can be
made faster. The decisions are made closer to the scene of
action, and are therefore, timely and accurate.

14. CONT…
E. The importance of a decision: generally, decisions which involve
high risks and costs, are made by the top management, while the
decisions involving routine and low-risk activities are delegated o the
subordinates.
f. Environmental Influence: Government regulation of private business
is the most important factor, which affects the extent of
decentralization.
-Sarmaa, 2017

15. DIFFERENCE BETWEEN DELEGATION
AND DECENTRALIZATION
DELEGATION
1. Delegation is a process of
devolution of authority.
2. Superior continues to be
responsible and accountable
for the work delegated to
the subordinates.
DECENTRALIZATION
1. Decentralization is the end
result which is achieved when
delegation of authority is at
more than one level.
2. Superior is no more responsible
and accountable for the
decentralized tasks.

16. CONT…
DELEGATION
3. Delegation takes place
between one superior and one
subordinate.
4.It is vital and essential to the
process for the effective
involvement and efficient
performance of subordinates.
DECENTRALIZATION
3. Decentralization involves
spreading of the total decision-
making power
4. It is optional in the sense that
it may not be practice as a
systematic policy.

17. DIFFERENCE BETWEEN CENTRALIZATION AND
DECENTRALIZATION
CENTRALIZATION
1. Environmental is stable.
2. Lower-level managers are
not as capable or experience
at making decisions as
upper-level managers
3. Lower-level managers do not
want to have a say in
decisions
DECENTRALIZATION
1. Environment is complex,
uncertain
2. Lower-level managers want a
voice in decisions
3. Lower-level managers want a
voice in decisions

18. CONT…
CENTRALIZATION
4. Decisions are significant
5. Organization is facing a crisis
or the risk of company failure
6. Company is large
DECENTRALIZATION
4. Decisions are relatively minor
5. Corporate culture is open to
allowing managers to have a say
in what happens
6. Organization is geographically
dispersed

19. PRINCIPLE OF
DELEGATION OF
RESPONSIBILITY
1. A superior is always responsible for the success
or failure of his coordinates. It means the
responsibility can never be delegated, though the
authority can percolate from upwards to
downwards. In any organization, the superior is held
responsible for the actions of his subordinates and
the subordinates are accountable for the work to
their superiors. Delegation implies certain specified
functions by the subordinate’s authority. The
subordinate’s authority and the supervisor always
retains the right to issue direction or revise
decisions. When an individual or groups is given
some responsibility, the authority necessary to carry
out that responsibility should be delegated.

20. 2. PRINCIPLE OF CO-EXTENSIVENESS
• The authority and responsibility must be co-extensive and
coterminous. For the discharge of responsibility, a
subordinate must be given adequate authority. Authority
without responsibility will make him irresponsible, while
responsibility without authority will make him impotent.
Responsibility can be carried out effectively only with
adequate authority.

21. 3.PRINCIPLE OF BALANCE
• An organization is made up of different units. All these units should
be kept in balance. Each function should be given its proper
emphasis with regard to its basic purpose in the organization.
Moreover, a good organization must be balanced with respect of
centralization and decentralization, authority and responsibility,
span of control and line of communication.
• The object of this principle is that each portion and function of an
expertise should operate with equal effectiveness in making its
allotted contribution to the total purpose.

22. CONT…
• The object of this principle is that each portion
and function of an expertise should operate with
equal effectiveness in making its allotted
contribution to the total purpose.
• The departments or units within the organization
must be kept in balance by giving them proper
emphasis. The allocations of resources to
different departments and units should be
equitable and just on the basis of activities to be
carried out.

23. 4. PRINCIPLES OF
CONTINUITY AND
FLEXIBILITY
• . An organization is a continuous process. The
organization structure must adopt itself to the
environmental changes. As the enterprise grows, its
activities become varied and complex. The existing
organizational structure must be flexible enough to
incorporate such a growth. Reorganization is a sign of
a continuous and dynamic organization. The
organization structure should be such as to provide
not only for the activities immediately necessary to
secure the objectives of the enterprise but also for the
continuation of such activities in the foreseeable future

24. 5. INTEGRATION VERSUS DISINTEGRATION
• Integration means unification administrative language, integration
means connecting one or more of hitherto independent
organization with the rest of the organizational structure of the
country by placing them under the chief executive directly or
through common ultimate subordinates to the chief executive of
the country. In such system, the line of authority runs unbroken
from the chief executive, through various levels to all parts of the
system, so that these are no loose ends anywhere.

25. 6. CENTRALIZATION VERSUS
DECENTRALIZATION
• Centralization stands for concentration of authority at or
near the top. An organization is said to be centralized if
most of the power of decision is vested in the top level so
that the lower ones have to refer most problems to the
head of the organization or his immediate supervisor for
decision.

26. CONT…
• Decentralization means that the central authority gives
certain power to the local authorities. A decentralized
organization is one in which the lower levels are allowed
the discretion to decide most of the matters which come
up, reserving comparatively a few bigger and more
important problems only for those higher up.