Difference between Centralization and Decentralization

The difference between Centralization and Decentralization is based on the modes of performing the task in the organization. Centralization refers to the Power or authority in few hands on the other hand decentralization defines the appropriate distribution of power in different hands.

Meaning of centralization:

When an organization’s working is under one authority. In other words, we can say that the whole power is in the hands of top-level management. In this, only top-level management decides about the working pattern and the command to the other departments for the operation of the organization.

Example: An owner of a general store appoints a salesman, sweeper, cashier. He delegates the work among the staff according to the skills and positions of the workplace. However, the owner retains the decision-making power and instructs the staff to do the routine work accordingly.

Definition:

 “Centralization must be used specifically because in everyday meaning it implies the absence of any organization structure at all i.e. that responsibility for this or that is retained at the center.”

-E.F.L Breech

Meaning of Decentralisation: 

Decentralization refers to the adequate distribution of power at different levels to perform the operations of the organization. In other words, we can say that top-level management ensures that people positioned at various levels are capable and competent for performing the activities properly.

For example Hotels, Supermarkets having different branches and it is not possible to manage all the operations by one person.

Definition:

“Decentralization refers to tire systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.”

The Chart of difference between Centralization and Decentralization

Points of differences

CentralizationDecentralization
MeaningIt refers to an organization’s working is under one authority.Decentralization refers to the adequate distribution of power at different levels.
AuthorityTop-level management retains the maximum authority in the organization.In decentralization, authority is divided into several departments.
SuitabilityCentralization is suitable for small-scale organizations.Decentralization is applicable and suitable for large-scale business units.
Freedom of actionsManagers of other departments have less freedom because the majority of power is in the hands of top-level management.Departmental managers having more freedom of action.
Communication patternIn Centralisation, proper hierarchy is followed and there is a direct interaction But in Decentralization, there is an informal communication line that is flexible and can be changed according to the requirement.
ExampleAn owner of a general store appoints a salesman, sweeper, cashier. He delegates the work among the staff according to the skills and positions of the workplace.For example Hotels, Supermarkets having different branches and it is not possible to manage all the operations by one person.

Conclusion:

Thus, Centralization refers to the Power or authority in few hands In other words, we can say that the whole power is in the hands of top-level management. On the other hand, Decentralization defines the appropriate distribution of power in different hands.

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