Reasons which determine the degree of centralization

The decision-making was concentrated in the hands of the bosses. When important decisions are reserved to those at the top level of the unit, we call the decision-making process a centralized one. Centralization means that decision-making power is reserved for a specific, small group of people. Usually, this tends to be the higher-ups — the Chief Executive Officers or Presidents of a company, but in theory, power can be condensed to any level.

Regardless of whether the power is, a small number of people end up making all of the decisions that affect the company at large. The opposite of centralization is decentralization. Decentralization is the delegation of authority across all levels of management in an organization. More people are responsible for making decisions. Oftentimes, decentralization occurs as a result of people from the head office delegating tasks to people in the main office — the final say can still be the responsibility of the CEO, but multiple people put forward their input before that decision is made.

Centralization and decentralization can be best visualized on a continuum, with organizations and political systems usually finding their operations fall somewhere in between the two extremes. We might think about the difference between centralization and decentralization as the difference between a democratic society and an authoritarian society but on an organizational scale. In a democratic society, the people have the power — they get to have their say.

In an authoritarian society, the power is in the hands of the government — they are a dictatorship. An administrative organization is centralized to the extent that decisions are made at relatively high levels in the organization; decentralized to the extent that discretion and authority to make important decisions are delegated by top management to lower levels of executive authority.

Chain of command : a hierarchical structure where each person reports to a singular figure of authority higher up in the organization. Bureaucracy: A management style that prioritizes rules, regulations, and formal structures. Adhocracy : A management style that prioritizes individual initiative and deemphasizes formal rules or hierarchies.

Adhocracies function according to decentralization most of the time. Decentralization: the transfer of authority and decision-making responsibilities to a larger group of people, not just the people in the top level of an organization.

Mechanistic organizations: hierarchical organizations with multiple levels of management where decision-making power is centralized at the higher levels.

Organic organizations: flat organizations with few levels of management where decision-making power is distributed relatively evenly across all levels. The centralization of authority was a structure first formally introduced in the Qin Dynasty of China. The Qin Dynasty ruled from BC after rivaling for power following the end of the previous dynasty, the Zhou Dynasty.

For hundreds of years, seven states in China fought during the time period now known as the Period of the Warring States. The power ended up being consolidated to the emperor of the state of Qin, Qin Shi Huang. Qin Shi Huang placed all the regional and local governors under the control of the central government, instead of allowing various regions to make their own decisions. Instead of independent states, he created one — which he had sole control of.

He monopolized all of the resources, making the Qin Dynasty one of the most extreme examples of centralization. Although the Qin Dynasty is usually cited as the first example of centralization, as long as humans have lived in organized communities — which goes all the way back to the Neolithic period BC — there has existed a degree of centralization. As societies grew, so did the complexity of disputes between people, which required authorities to resolve.

Hierarchical organizational structures were needed for a smooth running of societies, and chiefs and elders ended up being trusted with the power to make decisions. During the industrial revolution, the U. There were now hundreds of staff per organization, which meant hundreds of decisions as well. Systems had to be created to ensure efficient workplaces. In , French engineer Henri Fayol introduced 14 principles of management in his book General and Industrial Management.

One of the important principles of his book was the chain of command , a hierarchical structure where each person reports to a single figure of authority.

Introducing a hierarchy was a step closer to centralization, where some individuals hold greater power than others. Determine position on centralization then adjust position based on dominant organizational culture to find the degree of centralization. Review authority levels of each decision and create an authority matrix to establish decision-making points and reflect on the ideal degree of centralization. A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your HR problems.

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Get the help you need in this 3-phase advisory process. You'll receive 4 touchpoints with our researchers, all included in your membership. Guided Implementation 1 - Identify restructuring strategy and requirements Call 1 - Discuss business and function-level strategy, and how to effectively align structure design requirements.

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The general manager delegates this work to the personnel manager who is now responsible for receiving the leave applicants. In this situation delegation of authority has taken place.

On the other hand, on the request of the personnel manager, if the general manager delegates this power to all the departmental heads at all level, in this situation decentralization has taken place. On the other hand, in delegation the managers remain answerable even for the acts of subordinates to their superiors. As a premium member, you get access to view complete course content online and download powerpoint presentations for more than courses in management and skills area.

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