CENTRALISATION AND DECENTRALISATION

INTRODUCTION
Centralisation and decentralisation are very important concepts of prganisation. They explain the manner in which the decision making authority' is distributed or delegated among various levels of the organization. The concept of centralisation and decentralisation deals with the distribution of overall organizational authority. Centralization is that condition where in much of decision making authority is retained at the top of management authority. Decentralization on the other hand is that condition where in much of the decision making authority is pushed downwards to the lower management levels.

CENTRALISATION
Centralisation refers to systematic reservation of authority at central points within the organization. Centralisation means the concentration of formal authority at the top levels of an organization. It is a tendency aimed at centralized performance. Hence, it is the Opposite of dispersal and delegation of authority: It has an important bearing on the Processes of policy formulation and decision-making. these two major areas of Management or administration are the! reserves of the top management in a centralized organization. The lower levels of the organizational hierarchy always look upwards for direction, advice, clarification, interpretation, etc.

Need For Centralisation

Centralisation is needed to achieve the following objectives: Establishing Personal Leadership o Personal leadership is effective function of small organizations. Success in such organizations depends on aggressiveness, singleness of purpose and flexibility. The leader can take quick decisions without losing time in discussion and arriving at a consensus which prove not only time consuming but also wasteful.

Forgoing Integration o The functions of unification and integration may best be performed if a single person is endowed with centralized authority. It will help to keep different components together and move harmoniously toward achieved the common objective.

Uniformity Of Action o Personal or departmental goals have to be subordinated to the major goal of the organization. To ensure uniformity of action there is the need for centralized authority; only then uniformity is planning and control may be possible.

Handling Emergency o Emergency demands quick decision; any loss of time in decision making may prove suicidal to the enterprise. In a decentralised decision making lot of time is wasted in making people to agree to then common approach. This situation is averted in centralized system of authority.

Merits Of Centralisation
Centralisation offers a more flexible base for organizational structure. Higher level people in organization can take more effective and intelligent decisions. The benefits of higher specialization can be secured. Having a uniform policy and coordination of all activities are possible.

Demerits Of Centralisation
Loser and middle level management will not have interest and initiative in the job. It hampers effective communication Top management unnecessarily has to waste a lot of time and energy on unimportant and routine matters.

DECENTRALISATION
As organizations grow bigger these days, the power is distributed at different levels to be able run the organization more efficiently. This is called decentralization. Thus, decentralization can be defined as the delegation of authority at all levels of an organization. In a decentralized organization, a lot of the decision-making is delegated to the lower levels of the organizational structure. Due to the shared decision-making, the chances of being able to make improvements increases. A decentralized structure follows a bottom-to-top approach. Thus, if the lowest tier faces an issue, they are in a better position to suggest improvements and, with a few approvals, can apply changes. This allows the application of changes and improvement with minimal delay. It is obvious that the top management will not have all the required information and firsthand experience to deal with the issues that crop up on the field. Such issues are better solved by those directly dealing with the issue rather than waiting for decisions from top management.

Need For Decentralisation

It is important to increase efficiency of organization. To Make Top Management Free Of Routine Work Top management mainly concerned with the basic planning and control functions of management. If the activities and in turn the authority are not decentralized, to top managers if they are overwhelmed with routine functions, they will be left with little time for thinking, policy formulations and other creative activities which have a vital bearing on the efficiency of organization. To Encourage Diversification Decentralization is helpful in diversification of functions and activities. All the products should be properly diversified and each division should have proper authority and responsibility. Creation Of New Posts In Higher Echelous Of Organization Departmentation by process, products or territory will require more persons in the managerial and supervisory cadres apart from requisitioning the services of a large number of specialists. The class of managers, supervisors and specialists will require an infrastructure for training and development.

Feature Of Decentralization
It is provided with the physical facilities and the needed manpower to function effectively. Each division is practically a self contained division unit which has the authority to purchase its own materials, prepare its own schedule of work, design its method of work and even market its own product on competitive basis. Each division may complete with its own sister divisions in the same manner, there are competitors in the open market. The process of decentralization starts with divisionalisation of activity generally on product basis. Each division becomes the profit center. There is an element of competition along different divisions. The divisions are not wholly autonomous. The efforts are guided and channelized within the frame of corporate policy y a system of centralized planning, coordination and control.

Factors That Influencing Decentralization

Environmental influences, such as market, characteristics, competitive pressures and availability of materials. The organizations size and growth rate. Other characteristics of organization such as costliness of given decisions, top management preferences, the organizations culture, abilities of lower level managers.

Degree Of Decentralization
A number of factors needs to be analyzed before deciding the degree of decentralization. Degree of decentralisation is greater when more decisions are taken at the lower levels both in routine and important matters, In other words greater the freedom allowed to the subordinate levels the more decentralised organisational structure will be. Under this system there is less control and supervision of the higher levels over the subordinate units. Mervin Kohn opines that depending upon the location of facilities (plant, personnel, etc.) and decision-making authority, we get four ,models of an organisation where authority.concentration or its a'id'lBpersal gives us a centralised or decentralised organisation. Both theke principles have their relative merits and demerits. We can use either or both depending upon the nature, objectives and the area of operation of the 'biganisation.

 Size Of Organization The speed and accuracy of decision making, flexibility and efficiency are enhanced through decentralization in case of very large multi product, multi location organization. History And Age Of The Organization A high degree of centralization is needed at the start when new values and culture is to be induced and when organizations grows and adopts the values and culture desired, decentralizations can be induced. Philosophy Of Management Owner manager firms tend to be centralized in contrast to professionally managed companies. Strategy And Organizational Environment The company strategy with regards to produce technology markets and competition influence the degree of decentralization. Ability Of Lower Level Managers The competence and ability of lower level managers is a factor to be considered in deciding degree of decentralization. Nature Of Management Function In some companies, the prime functions like finance and marketing are centralized where as purchasing and other are decentralized.

Merits Of Decentralization
Promotes establishment and use of broad controls which may increase motivation. Gives manager more freedom and independence in decision making Facilitates product diversification Facilitates setting up of profit centers

Demerits Of Decentralization
Can be limited by availability of qualified managers. May be constrained by inadequate planning and control systems. May be limited by inadequate control techniques May result in some control by upper level managers May be limited by external forces like national labour unions, governmental controls, tax policies.

Conclusion
Centrdlisation and decentralisation are important principles for the formation of an organisation. They deal with authority distribution within an organisation. Under a centralised system authority is concentrated at the top levels. The lower levels always depend on the top levels for direction', guidance and advice. Under this system field agencies or the area units are only implementation agencies guidelines for which are given to them by the central authority. On the other hand, deccntralisation refers to the democratic method of devolution of administrative and political authority. It also refers to the physical location of facilities like plant and personnel and the extent of dispersal of authority throughout the organisation.