Advantages of Centralised Structure for Organisations

1. Senior managers enjoy greater control over the organisation. 2. Senior managers have time to concentrate on the most important decisions (as the other decisions can be undertaken by other people down the organisation structure. 3. The use of standardised procedures can results in cost savings. 4. Decision making is a form of empowerment. Empowerment can increase motivation and therefore mean that staff output increases. 5. Decisions can be made to benefit the organisations as a whole. Whereas a decision made by a department manager may benefit their department, but disadvantage other departments. 6. People lower down the chain have a greater understanding of the environment they work in and the people (customers and colleagues) that they interact with. This knowledge skills and experience may enable them to make more effective decisions than senior managers. 7. The organisation can benefit from the decision making of experienced senior managers. 8. Empowerment will enable departments and their employees to respond faster to changes and new challenges. Whereas it may take senior managers longer to appreciate that business needs have changed. 9. In uncertain times the organisation will need strong leadership and pull in the same direction. It is believed that strong leadership is often best given from above. 10. Empowerment makes it easier for people to accept and make a success of more responsibility.

Centralisation Vs Decentralisation
Centralization is the process where the authority and power of an organization is in the hands of only a few. This power includes activities such as planning, decision-making and delegating authority. The top management takes all the important decisions if an organization is centralized. These decisions are then enforced on the lower tiers of the organization. This kind of a trend is usually followed in company where the Head of the organization has a particular future for the organization in mind, and wants to control it as much as possible to reach those goals. However, these days a centralized distribution of power is rare. 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.

Advantages of Decentralization over Centralization

Decentralization is favored over centralization for many reasons. Some of these are given below. 1. 2. 3. 4. Relieves the top management from dealing with mundane issues, so that they can concentrate on the daunting tasks that are faced by an organization. Since many of the decisions have to be made by lower level managers, this not only gives them a chance to display their decision-making skills, but also gives them the experience they would have missed in a centralized organization. The increased responsibilities of the lower level managers, increases their enthusiasm for work and acts as a motivator. Decentralization has more scope for diversification.

5. 6.

Makes an organization flexible to minor changes. Decision-making at lower levels for certain problems is better, as the lower level managers have a more in-depth knowledge of the situation, and can hence handle it better.

Advantages of Centralization over Decentralization

Even though centralization is not preferred anymore, it did have a few advantages. 1. 2. 3. Singular point of control, which helps make bigger decisions easier, as the top level managers have a better picture of the organization as a whole and are better equipped to make important decisions as compared to a lower level manager. The implementation of an idea, process or policies is easier in a company that has a strong central direction as compared to a decentralized organization. Due to a single vision of the head of the company, the organization can work towards a single goal, which would not be possible in a decentralized organization due to individual manager goals. Centralization allows corporate decision makers respond better and faster in urgent situations which require quick decisions.

4.

Advantages of Decentralisation
1. Decentralisation reduces the workload of top executives. 2. It improves job satisfaction and morale of lower level managers by satisfying their needs for independence,
participation and status.

3. Decision making is quicker. 4. It facilitates growth and diversification. As each product division is given sufficient autonomy for innovation and 5. It gives opportunity to subordinates to exercise their own judgment. They develop managerial skills which will be
useful to the organisation in the longer run. creativity.

6. Decentralisation requires wider span of control and fewer levels of organisation. It speeds up communication. 7. Decentralisation increases the administrative expenses and each division or department has to be sufficient in 8. As each department or division enjoys substantial autonomy it might lead to co-ordination problems. 9. There might be lack of uniformity and inconsistent procedures as each department might have the authority to
formulate its own policies and procedures. terms of physical facilities and trained personnel.

Disadvantages of Decentralisation
1. 2. 3.
Decentralisation increases the administrative expenses and each division or department has to be sufficient in terms of physical facilities and trained personnel. As each department or division enjoys substantial autonomy it might lead to co-ordination problems. There might be lack of uniformity and inconsistent procedures as each department might have the authority to formulate its own policies and procedures.

Advantages of Centralisation
1. 2. 3. 4. 5. 6. 7. 8. 9.
Effective utilisation of talents of the top management. It reduces co-ordination problems as a unifying force integrates all operations. It allows the development of a strong co-ordinates top management team. There is uniformity of policies and plans across the organisation. Centralisation organisations are best suited where resources and information has to move swiftly, especially in emergencies. Duplication of functions and facilities is minimised which in turn reduces costs. Due to the fact that all decisions are made at the top it might result in delays in decision-making and communication. Centralised power and authority might be abused. Doesnt give an opportunity to lower level managers/supervisors to develop their managerial skills.

10. Centralised organisation faces the problem of lower motivation levels among workforce. 11. The success of organisation depends on the competence of top executives which might be quite risky.

Disadvantages of Centralisation
1. 2. 3. 4. 5.
Due to the fact that all decisions are made at the top it might result in delays in decision-making and communication. Centralised power and authority might be abused. Doesnt give an opportunity to lower level managers/supervisors to develop their managerial skills. Centralised organisation faces the problem of lower motivation levels among workforce. The success of organisation depends on the competence of top executives which might be quite risky.