Meaning of Centralization and Decentralization
Centralization refers to the degree to which decision-making process is concentrated at a single point in the organization. If top management makes all the important decisions in the organization with little or no input from the lower level employees, then the organization is said to be a highly centralized organization. In contrast, if the organization encourages lower level personnel to participate in the decision making process and allows a greater amount of discretion, the organization is called a decentralized organization.
It is however, to be noted that the concept of centralization - decentralization is relative and not an absolute one. No organization can be labeled as totally centralized or decentralized. It can perhaps be best understood if we consider that an organization may lie along a continuum with centralization at one end and decentralization at the other extreme. Thus, an organization may be relatively centralized or decentralized in its ways of functioning and operations. The table below summarizes the factors determining the amount of centralization-decentralization of an organization.