CENTRALIZATION AND DECENTRALIZATION ADVANTAGES AND DISADVANTAGES

 

In a centralized business or organization, the power of decision making and planning lies with the high ranking personnel in a particular location. Usually, instructions are sent from the headquarters to the target receivers. Decision making and planning for activities is done by the senior most people or a board of directors. Unlike centralization, decentralization is the process in which the power to plan and make decisions is assigned to all levels of management across all branches in a company. Managers and other senior staff are given the authority to determine what is best for a company.

Advantages of centralization.

Easy resolutions. A limited number of people are allowed to take part in making choices hence little time is used.

Immediate implementation of resolutions. As soon as employees receive directives from their seniors, they act upon them. The orders are to be followed to ensure the company keeps delivering the best services.

No room for internal conflicts. All members are equal and there is no room for hatred due to favoritism from senior local officers.

Accountability lies with decision makers. Administrators receive praise or blame when a company incurs profits or losses.

Limited number of people make decisions thereby making centralization cost effective. Staff members do not have to travel for meetings as this is expensive

Easy flow of work. Each person is aware of their duties and responsibilities. Therefore staff members put all their energy on the task assigned.

Disadvantages of centralization

Limits employees from being creative. They do not take part in decision making hence cannot pitch their ideas for implementation. Their job is to run a business and follow directives.

Haas a dictatorial leadership. They cannot question decisions made by the executives. They follow orders whether correct or incorrect.

Difficult to handle urgent issues. Responding to emergencies that require the board of directors to have an urgent meeting and address an issue may take time since they may be engaged in other activities.

Advantages of decentralization

Quick decision making. In cases where a decision has to be made with immediate effect, managers are able to decide on the best way to address an issue. They can be able to handle emergencies since they operate in the same branch.

Staff members are allowed to work on their areas of expertise. Members are allowed to work on areas they are best in. The companies help bring out the best in them.

There is direct interaction with consumers hence one is able to know the strengths and weaknesses of the organization.

Encourages creativity. Decision makers are able to come up with creative ideas that help a business or organization grow.

Shared responsibilities. The burden of decision making lies on a number of people. They are to blame in case they make wrong decisions.

Encourages healthy competition. This mainly happens locally where branches compete in making the right decisions for their companies. At most of the times, the best managers and branches are awarded a token of appreciation.

Disadvantages of decentralization

Conflict of who is accountable in case of wrong verdict. This may cause conflict and hatred between staff therefore unhealthy for businesses.

Costly. Holding meetings is expensive, especially in small organizations.

Have limited power to make railings. There is a limit to the decisions they have to make. Delicate issues are handled by specialists who in most cases are at the headquarters

Decision makers are liable for rulings. Making wrong choices would cost employees their jobs.

 

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