Centralization and Decentralization

Centralization and decentralization are about the amount of authority to

delegate. Centralization means that little or no authority and job activities are delegated to

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subordinates. A relatively small number of line managers make the decisions and hold most of

the authority and power. Decentralization is the opposite. Authority and job activities are

delegated rather than being held by a small management group.

Depending on various factors, organizations move back and forth on the centralization-

decentralization continuum. For example, managing a crisis requires more centralized decision

making because decisions need to be made quickly. A noncrisis or a normal work situation

would favor decentralized decision making and encourages employee empowerment and

delegated authority.  There are no universally accepted guidelines for determining whether a

centralized or a decentralized approach should be used. It has been noted, however, that, “the

best organizations are those that are able to shift flexibly from one level of centralization to

another in response to changing external conditions.” Given the flexibility and the

responsiveness of small businesses that originate from their size, any movement that is needed

along the centralization-decentralization continuum will be much easier and quicker.

 

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