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Explain what centralization and decentralization of authority mean. Would you rather be a manager in a centralized or a decentralized organization? Why?

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• Anonymous answered this 14 minutes later660 answers• 65% Best AnswerCentralization is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. According to Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be :-
  1. Reservation of decision making power at top level.
  2. Reservation of operating authority with the middle level managers.
  3. Reservation of operation at lower level at the directions of the top level.

  Decentralization is a systematic delegation of authority at all levels of management and in all of the organization. In a decentralization concern, authority in retained by the top management for taking major decisions and framing policies concerning the whole concern. Rest of the authority may be delegated to the middle level and lower level of management.

  The degree of centralization and decentralization will depend upon the amount of authority delegated to the lowest level. According to Allen, “Decentralization refers to the systematic effort to delegate to the lowest level of authority except that which can be controlled and exercised at central points.

  I would rather be a manager in Decentralised organisation.

  Advantages of Decentralisation

  • Decentralisation reduces the workload of top executives.
  • It improves job satisfaction and morale of lower level managers by satisfying their needs for independence, participation and status.
  • Decision making is quicker.
  • It facilitates growth and diversification. As each product division is given sufficient autonomy for innovation and creativity.
  • It gives opportunity to subordinates to exercise their own judgment. They develop managerial skills which will be useful to the organisation in the longer run.
  • Decentralisation requires wider span of control and fewer levels of organisation. It speeds up communication.
  • Decentralisation increases the administrative expenses and each division or department has to be sufficient in terms of physical facilities and trained personnel.
  • As each department or division enjoys substantial autonomy it might lead to co-ordination problems.
  • There might be lack of uniformity and inconsistent procedures as each department might have the authority to formulate its own policies and procedures.
  • Disadvantages of Centralisation
  • Due to the fact that all decisions are made at the top it might result in delays in decision-making and communication.
  • Centralised power and authority might be abused.
  • Doesn’t give an opportunity to lower level managers/supervisors to develop their managerial skills.
  • Centralised organisation faces the problem of lower motivation levels among workforce.
  • The success of organisation depends on the competence of top executives which might be quite risky.