Centralization and Decentralization: Characteristics, Advantages and Disadvantages

CENTRALIZATION AND DECENTRALIZATION

CENTRALIZATION:

It is the process of transferring and assigning decision-making authority to higher levels of an organizational hierarchy. The span of control of top managers is relatively broad, and there are relatively many tiers in the organization.

Characteristics

          Philosophy / emphasis on: top-down control, leadership, vision, strategy.

          Decision-making: strong, authoritarian, visionary, charismatic.

          Organizational change: shaped by top, vision of leader.

          Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.

          Uniformity. Low risk of dissent or conflicts between parts of the organization.

Advantages of Centralization

            Provide Power and prestige for manager

            Promote uniformity of policies, practices and decisions

            Minimal extensive controlling procedures and practices

            Minimize duplication of function

Disadvantages of Centralization

            Neglected functions for mid. Level, and less motivated beside personnel.

            Nursing supervisor functions as a link officer between nursing director and first-line management.

DECENTRALIZATION:

It is the process of transferring and assigning decision-making authority to lower levels of an organizational hierarchy. The span of control of top managers is relatively small, and there are relatively few tears in the organization, because there is more autonomy in the lower ranks.

Characteristics

          Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.

          Decision-making: democratic, participative, detailed.

          Organizational change: emerging from interactions, organizational dynamics.

          Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.

          Participation, accountability. Low risk of not-invented-here behavior.

Three Forms of decentralization

De-concentration. The weakest form of decentralization. Decision making authority is redistributed to lower or regional levels of the same central organization.

Delegation. A more extensive form of decentralization. Through delegation the responsibility for decision-making are transferred to semi-autonomous organizations not wholly controlled by the central organization, but ultimately accountable to it.

Devolution. A third type of decentralization is devolution. The authority for decision-making is transferred completely to autonomous organizational units.

Advantages of Decentralization

            Raise morale and promote interpersonal relationships

            Relieve from the daily administration

            Bring decision-making close to action

            Develop Second-line managers

            Promote employee’s enthusiasm and coordination

            Facilitate actions by lower-level managers

Disadvantages of Decentralization

            Top-level administration may feel it would decrease their status

            Managers may not permit full and maximum utilization of highly qualified personnel

            Increased costs. It requires more managers and large staff

            It may lead to overlapping and duplication of effort

Centralization and Decentralization are two opposite ways to transfer decision-making power and to change the organizational structure of organizations accordingly.

There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.