CENTRALIZATION AND DECENTRALIZATION

◦ CENTRALIZATION AND DECENTRALIZATION
BUSINESS ORGANISATION AND MANAGEMENT
PRINCIPLES OF MGMT

Ø      MEANING OF CENTRALIZATION

◦     IS THE PROCESS BY WHICH THE ACTIVITIES OF AN ORGANIZATION PARTICULARLY THOSE REGARDING PLANNING AND DECISION MAKING BECOME CONCENTRATED WITHIN ORGANIZATION ARE CONCENTRATED TO SPECIFIC LEADER OR LOCATION. IN CENTRALIZED ORGANIZATION,THE DECISION MAKING POWERS ARE RETAINED IN THE HEAD OFFICE AND ALL OTHER OFFICES RECEIVE COMMAND FROM THE MAIN OFFICE.

Ø      FACTORS

1.     ACHIEVING UNIFORMITY OF ACTIONS

2.     FACILITATING INTEGRATION: NEED TO INTEGRATE ALL TH OPERATIONS

3.     PROMOTING PERSONAL LEADERSHIP

4.     HANDLING EMERGENCIES

Ø      MERITS OF CENTRALIZATION

A.    AS IT STANDARDIZATION OF PROCEDURES AND SYSTEMS AND IT WILL HELP IN SMOOTH WORKING IN THE ORGANIZATION

B.    EASY TO MAKE EVALUATION OF THE SAME POLICIES

C.    IT WILL BRING ECONOMIES BECAUSE OF PURCHASING DONE BY THE CENTRAL OFFICE OF BULK MATERIALS

D.    IT WILL HELP IN COORDINATION OF THE ACTIVITIES

Ø      DEMERIT OF CENTRALIZATION

1.     AS IT REVOLVES AROUND ONE PERSON ONLY. IT WILL DAMPEN THE SPIRIT AND INITIATIVES OF SUBORDINATES

2.     IT WILL OVERBURDEN FEW

3.     SLOW DOWN THE OPERATIONS

4.     DISTANCE FROM THE CUSTOMERS

5.     NO SCOPE FOR SPECIALIZATION

Ø      DECENTRALIZATION

◦     DISPERSAL OF DECISION MAKING AT THE LOWER LEVEL OF MGMT

◦     POWER DOES NOT CONCENTRATE IN FEW HANDS

◦     THE DECISIONS TAKEN AT THE LOWER LEVEL SHOULD BE SIGNIFICANT

◦     MCFARLAND,” DECENTRALIZATION IS A SITUATION IN WHICH ULTIMATE AUTHORITY TO COMMAND ULTIMATE RESPONSIBILITY FOR RESULTS IN LOCALIZED AS FAR DOWN IN THE ORGANIZATION AS EFFICIENT MANAGEMENT OF THE ORGANIZATION PERMIT

Ø      DEGREE OF DECENTRALIZATION

I.        DEPENDS UPON NUMBER OF DECISION: THE GRATER THE NUMBER MORE IS THE DEGREE

II.        IMPORTANCE OF DECISION:-TAKEN AT LOWER LEVEL. MORE IS THE DEGREE

III.        IF DECISIONS AFFECTING MORE FUNCTION ARE ALLOWED AT LOWER LEVEL THEN MORE DEGREE

IV.        BUT WHEN THE DECISIONS TAKEN ARE SUBJECT TO APPROVAL OF SUPERIOR THEN IT IS LESS

◦     FACTORS:-

I.        QUICK DECISIONS

II.        CHANGES IN TECHNOLOGICAL

III.        GROWTH AND DIVERSIFICATION REQUIRE FLEXIBILITY

Ø      DECENTRALIZATION AND DELEGATION

I.        ARE NOT THE SAME THING

II.        DECENTRALIZATION IS MUCH MORE THAN DELEGATION

III.        DELEGATION : RESPONSIBILITY AND AUTHORITY ARE DELEGATED FROM ONE INDIVIDUAL TO THE OTHER BUT DECENTRALIZATION IS SCATTERING OF AUTHORITY THROUGHOUT THE ORGANIZATION

IV.        DELEGATION IS COMPLETE WHEN AUTHORITY IS DELEGATED TO ANOTHER PERSON BUT DECENTRALIZATION IS COMPLETE WHEN FULLEST DELEGATION IS MADE TO ALL PEOPLE IN THE ORGANIZATION

V.        DELEGATION THE CONTROL REMAINS  WITH THE DELEGATOR BUT IN DECENTRALIZING TOP MGMT  GIVES CONTROLLING POWERS TO THE LOWEST LEVEL.

Ø      MERITS

I.        REDUCE BURDEN OF TOP EXECUTIVE

II.        QUICK REVISION

III.        FACILITATES DIVERSIFICATION

IV.        MOTIVATION TO SUBORDINATES

V.        SENSE OF COMPETITION

VI.        EFFECTIVE CONTROL AND SUPERVISION

Ø      DEMERITS

I.        LACK OF COORDINATION

II.        DIFFICULTY IN CONTROL

III.        COSTLY

IV.        LACK OF ABLE MANAGERS

Ø      HOW TO BALANCE

◦     FACTORS:-

I.        SIZE AND COMPLEXITY OF ORGANISATION

II.        COMMUNICATION SYSTEM

III.        COMPETENCE OF PERSONNEL

IV.        DEGREE OF STANDARDIZATION

V.        SPREAD OF ACTIVITIES