Premium Essay

Centralisation and Decentralisation

In: Business and Management

Submitted By uzma
Words 544
Pages 3
Centralisation & Decentralisation models within an Organisation
In a centralised organisation head office (or a few senior managers) will retain the major responsibilities and powers. Conversely decentralised organisations will spread responsibility for specific decisions across various outlets and lower level managers, including branches or units located away from head office/head quarters.
Centralisation
The main decisions are made by senior management, where little authority is passed down the organisation.

Advantages
• Decisions are made by experienced people with an overview of the company.
• Ensures policies are consistent throughout the company.
• Ensures quick decisions can be made without consultation.
• Procedures such as ordering and purchasing can be standardised throughout the company, leading to economies of scale.
• In times of crisis the firm may need strong leadership by a central group of senior managers.
Disadvantages (mainly advantages of decentralisation)
• Centralisation reduces the input of the day to day experts, e.g., the shop floor staff, into the firms’ decision making.
• It risks demoralising branch managers who may feel mistrusted or powerless.

Decentralisation
Decisions are made by junior management as authority is passed down the organisation, thereby accepting less uniformity in how things are down. There has been a trend in the 1980s and 1990s is to decentralise to provide greater flexibility. An example of a decentralised structure is Tesco the supermarket chain. Each store of Tesco has a store manager who can make certain decisions concerning their store. The store manager is responsible to a regional manager.

Advantages
• Reduces the stress and burdens of senior management
• It can empower local managers encouraging them to be more innovated and motivated.
• It…...

Similar Documents

Premium Essay

Decentralisation

...Question: The vast majority of corporations are decentralized to a considerable degree. What kinds of organizations are best run in a largely centralized manner and why? ​Robbins and Coulter describe a company is centralized ‘if the managers make the organization’s key decisions with little or no input from below’. Thus, small businesses are the kinds of organizations that are best run in a largely centralized manner. ​There are numerous reasons why small organizations suit to run in a centralized manner. Usually, small organizations are typically controlled by the owner or the partners who develop the organization’s vision and mission and ultimately set the objectives for the business operations. In small businesses, the owners possess the necessary skills, knowledge and experience to run the business smoothly. Since they share the common goals and objectives, the decision making process can be done in a more effective manner as they do not have to consult their subordinates. On top of that, with centralized organizational structure, conflicts and long-stretch arguments with subordinates could be avoided and this will not distort the business operations. Centralized business structure is most suitable for small organization because of its small number of employees and capital to run the business. To implement decentralized organization it requires more employees and higher cost will have to be incurred. This is something that small organizations cannot afford to have.......

Words: 478 - Pages: 2

Premium Essay

What Is Authority, Delegation and Decentralization

...AUTHORITY, DELEGATION AND DECENTRALISATION What is an authority? Authority is the cement of organisation structure in which various units of organisation are integrated. Without authority a manager cesses to be a manager. It is the authority that gives managers power to act. Authority is glue that holds organisation together. It is impossible to have an organisation unless some persons have the authority to command action of others. The word Authority is derived from the Latin word “auctoritas” meaning invention, advice, opinion, influence, or command. In English, the word 'authority' connotes power given by the state or by academic knowledge of an area (someone can be an authority on a subject) Weber defined domination (authority) as the chance of commands being obeyed by a specifiable group of people. Legitimate authority is that which is recognized as legitimate and justified by both the ruler and the ruled. Authority sometimes refers to;- 1) The Institutionalized and legal power inherent in a particular job, function, or position that is meant to enable its holder to successfully carry out his or her responsibilities. 2) An agency or body created by a government to perform a specific function, such as environment management, power generation, or tax collection is an authority. 3) Judgment of a court or judicial opinion quoted in support of a legal argument. In management field, the concept authority can be defined as:- 1. The right to guide and direct the......

Words: 3379 - Pages: 14

Premium Essay

Organization Behaiviour

...ob : organization behaiviour14 Organisation Strategy and Structure 542 The importance of strategy 543 SWOT analysis 545 Organisational goals 546 Objectives and policy 549 Dimensions of organisation structure 551 The importance of good structure 552 Levels of organisation 553 Underlying features of organisation structure 555 Division of work 557 Centralisation and decentralisation 560 Principles of organisation 561 Span of control 562 The chain of command 563 The importance of the hierarchy 564 Formal organisational relationships 566 Project teams and matrix organisation 569 Effects of a deficient organisation structure 572 Organisation charts 573 Empowerment and control 574 Synopsis 576 Review and discussion questions 577 Management in the news: A taxing merger 577 Assignments 1 and 2 578 Personal awareness and skills exercise 579 Case study: Zara: a dedicated follower of fashion 580 Notes and references 582 15 Patterns of Structure and Work Organisation 585 Variables influencing organisation structure 586 The contingency approach 586 Size of organisation 588 Technology 589 The Woodward study 589 Major dimensions of technology: the work of Perrow 593 Environment 594 The Burns and Stalker study 594 ‘Mixed’ forms of organisation structure 595 The Lawrence and Lorsch study 597 Evaluation of the contingency approach 598 Contribution of contingency theory 600 Culture as a contingent factor 601 The changing face of the workplace 603 The......

Words: 901 - Pages: 4

Premium Essay

Decentralisation

...related terms used in papers presented at the Interlaken Workshop on Decentralization, 27-30 April 2004, Interlaken, Switzerland. As this is a work in progress, there may be many parts needing improvement/changes. We look forward to receiving your comments and suggestions (L.yuliani@cgiar.org). Decentralization Definitions and descriptions of decentralization used in the papers include: • “Decentralisation is usually referred to as the transfer of powers from central government to lower levels in a political-administrative and territorial hierarchy (Crook and Manor 1998, Agrawal and Ribot 1999). This official power transfer can take two main forms. Administrative decentralisation, also known as deconcentration, refers to a transfer to lower-level central government authorities, or to other local authorities who are upwardly accountable to the central government (Ribot 2002). In contrast, political, or democratic, decentralisation refers to the transfer of authority to representative and downwardly accountable actors, such as elected local governments” (Larson). • “The term decentralisation is used to cover a broad range of transfers of the "locus of decision making" from central governments to regional, municipal or local governments” (Sayer et al.). • Decentralization reform refers to “transforming the local institutional infrastructure for natural resource management on which local forest management is based” (Ribot). • “Decentralization is "the means to allow for the......

Words: 1676 - Pages: 7

Premium Essay

A Critical Analysis of the Queensland Health

...organisational efficiency. Narrow Span Drawbacks • The expenses that would be incurred with additional sectors of management • Vertical communication increased in complexity • Support/encouragement towards close supervision and discouragement towards employee autonomy • Centralisation and decentralisation Centralisation is the formal decision-making process that is held by authority, usually at the top of the organisation. Decentralisation is the decision-making process in which authority is spread throughout the organisation. Formalisation ■ The extent in which organisations regulate behaviour through rules, procedures, formal training and related mechanisms. ■ As firms get older, larger and more regulated, formalisation increases. ■ Disadvantages ← Reduces organisational flexibility ← Productivity undermined vie an increased amount of regulation 2. Types of Structure (Robbins, 1990) • Mechanistic Model • A structure characterised by widespread departmentalisation, high formalisation, a limited information network, and centralisation. • Organic Model • A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalisation, acquires a wide-ranging information network, and is reliant on collective decision making. • Simple Structure Model • In an organizational form, a simple......

Words: 1522 - Pages: 7

Premium Essay

Ikea

...of HRM over time, and the context in which empirical work was carried out. In this paper we focus on the context of the increasing internationalisation of firms and how this has an effect upon modern-day typologies of HR roles. We explore these roles by focusing on the way in which HRM practices come about. Especially in a MNC setting of increasing internationalisation of firms the issues of coordination, shared learning and standardisation versus leeway for adapting to the local context (customisation) are prominent. These issues present themselves both at the corporate and regional level and at the national and local (plant) level. On all these levels HR practitioners are active and find themselves amidst the interplay of both (de-)centralisation and standardisation versus customisation processes. This paper thus explores the way in which HR practices come into being and how they are implemented and coordinated. These insights help us understand further the roles of international corporate HR functions that are being identified. Our data is based on 65 interviews, which were held (as part of larger study of HR-function excellence) with HR managers, line managers and senior executives of six multinational companies in eight countries from September to December 2004. This data reveals new classifications of processes by which HR activities are developed, implemented and coordinated, both in terms of who is involved and how these processes are carried out. Keywords Human......

Words: 9324 - Pages: 38

Premium Essay

Organisational Structure

...experience and so on. Centralisation and decentralisation The extent of centralisation or decentralisation refers to the point of critical decision making in an organisation which reflects patterns of authority in a structure. In centralised structures decision making authority is within the power of top management while decentralised structures, decision making authority is delegated (Rollinson, 2005). The arguments in favour of centralisation in an organisation entail the easier implementation of a common policy, easier coordination and management control, preventing sub-units from becoming too independent, over-head cost reduction and faster decision making because of the smaller number of people involved. In contrary, arguments for decentralisation include decisions being made at a point closer to operational levels, increased responsiveness to local circumstances, improved level of personal customer service, more flexible structure, control is distributed more evenly which provides opportunity for development for those lower down, and encouraging effect on motivation and morale of staff. Basically, decentralisation tends to be easier to implement in the private sector organisations than public sector ones where procedures and protocols are the order of the day. Decentralisation being a more flexible approach provides support for employee participation and empowerment at all levels which increases innovation and improves technology while centralisation ensures......

Words: 1510 - Pages: 7

Premium Essay

Doc, Pdf, Wps, Rtf, Docx, Odt

...NHS. In this organization the management is on high levels, a lot of bureaucracy Reference: (http://khijji.blogspot.co.uk/2014/03/tall-organizational-structures-vs-flat.html ) Flat structure- The flat structures have fewer management levels with each level controlling a broad area or group. Flat organizations focus on empowering employees. For example organizations with flat structure are Mont Rose College, Charity organizations or small companies. Centralisation and Decentralisation structures- In Centralisation and Decentralisation structures decision- making is about authority. In centralized structures need office will retain the major responsibilities and power. Conversely decentralised organisations will spread responsibilities for specific decisions across various outlets and lower level managers, including branches or units located away from head office. An example of a decentralised structure is TESCO and EBAY. Each store of TESCO has a store manager who can makes decisions in their store. Centralisation means that the Head office keeps the main responsibilities of decision-making of the organisation. Head management have the control, making decisions and using regular methods for the good of the company. For example for this structure are AMAZON, APPLE. Organisations culture is the set of values, rules, beliefs, attitudes and regulations. This factures can help members if the organization to how we will work. Power culture- this culture may found in......

Words: 674 - Pages: 3

Premium Essay

Business

...(8) Centralisation and Decentralisation: According to this principle, the superiors should adopt effective centralisation instead of complete centralisation and complete decentralisation. By effective centralisation, Fayol does not mean that authority should be completely centralised. He feels that the superiors should keep the authority of taking important decisions in their own hands, while the authority to take daily decisions and decisions of less importance should be delegated to the subordinates. The ratio of centralisation and decentralisation can differ in different situations. For example, it is advantageous to have more centralisation in a small business unit and more decentralisation in a big business unit. For example, the decisions in respect of determining the objectives and policies, expansion of business, etc. should remain in the hands of the superiors. On the other hand, authority for the purchase of raw material, granting leave to the employees, etc. should be delegated to the subordinates. Positive Effect (i) Decrease in the workload of superiors (ii) Better and quick decisions (iii) Increase in the encouragement to the subordinates Violating Effect (i) Unnecessary increase in the workload of the superiors in case of centralisation and of the subordinates in case of decentralisation (ii) Impatient and wrong decisions by the superiors in case of complete centralisation and weak decisions by the subordinates in case of complete......

Words: 3071 - Pages: 13

Premium Essay

Computer

... Centralisation implies the concentration of authority at the top level of the organisation while decentralisation means dispersal of authority throughout the organisation According to Allen Centralisation is systematic and consistent reservation of authority at central points within an organisation. Decentralisation applies to the systematic delegation of authority in an organisation context. Advantages of Decentralisation Decentralisation reduces the workload of top executives. It improves job satisfaction and morale of lower level managers by satisfying their needs for independence, participation and status. Decision making is quicker. It facilitates growth and diversification. As each product division is given sufficient autonomy for innovation and creativity. 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. Decentralisation requires wider span of control and fewer levels of organisation. It speeds up communication. 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. Disadvantages of......

Words: 482 - Pages: 2

Premium Essay

Business

...differentiation indicates the number of hierarchy levels from the ‘’top’’ to the ‘’bottom’’ and spatial dispersion refers to the spread of facilities and personnel globally within a company. The second component is formalisation, which refers to the amount of standardized jobs and procedures. A high degree of formalisation means an employee has many organisational rules to follow. Selection of employees, setting role requirements, creating rules, procedures and policies, socialisation, training and rituals are methods that can be used to promote standardisation. The third component is centralisation. The degree of centralisation defines whether decisions are made by a small number of top managers (centralisation) or divided over more people organisation-wide (decentralisation). Decentralisation is often necessary to avoid putting too much pressure on too few people. Also, decentralisation can often result in quicker and more accurate decisions. It motivates employees to be able to have a say in the decision-making and it is a good way to train lower-level managers. Coordination means integrating the objectives and activities of small units within an organisation in order to achieve organisation-wide goals in an efficient way. There are three kinds of coordination; programmed, individual and informal. There are five basic parts to any organisation. Those are the operation core, the strategic apex, the middle line, the technostructure and the support staff. Firstly......

Words: 896 - Pages: 4

Premium Essay

Decentralization

...there might be several reasons. In this essay, I try to analyse which aspects of centralisation and decentralisation can enhance the function of a particular organisation. I set out various organisational circumstances, and then assess which types of companies are appropriate to be centralised. It has been argued that centralisation has to do with the locus of authority to make decisions affecting the organisation. It can also refer to the tools to measure the degree of centralisation ‒ how many decisions have to be referred to headquarters or to a parent organisation (Pugh et al,, 1968, p. 76)? From this point of view, centralisation can be regarded as the degree to which decision making is confined to the upper levels of the organisation. In a small organisation, decision-makers can make decisions well and efficiently; they can set goals by themselves, communicate them to the employees and properly evaluate performance, because they are able to acquire information and communicate with employees directly. In other words, centralisation can operate well in a small company, as the upper levels of the organisation are able to be aware of issues throughout the departments and can make useful decisions. On the other hand, in a large company it may be impractical for a small number of executives to be responsible for most of the decision making. Thus, in terms of size of organisation, centralisation can be more suitable for a small business than for a large one. Returning to......

Words: 580 - Pages: 3

Free Essay

Jisco

...Chapter 10 Defining organisational structure and design Organisational structure The formal arrangement of jobs within an organisation. Organisational Structure and Design Organisational design A process involving decisions about six key elements: Work specialization Departmentalization Chain of command Span of control centralisation and decentralisation Formalization Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 2 Organisational structure Work specialisation The degree to which tasks in the organisation are divided into separate jobs with each step completed by a different person. Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover. Departmentalisation by type Functional Grouping jobs by functions performed Process Grouping jobs on the basis of product or customer flow Product Grouping jobs by product line Customer Grouping jobs by type of customer and needs Geographic Grouping jobs on the basis of territory or geography Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 3 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 4 1 Functional departmentalisation Geographical departmentalisation • Advantages • Efficiencies from putting together......

Words: 1604 - Pages: 7

Premium Essay

Note on Business Organisations

...Notes on Business Organization Centralisation and Decentralisation Centralisation implies the concentration of authority at the top level of the organisation while decentralisation means dispersal of authority throughout the organisation According to Allen Centralisation is systematic and consistent reservation of authority at central points within an organisation. Decentralisation applies to the systematic delegation of authority in an organisation context. Advantages of Decentralisation * Decentralisation reduces the workload of top executives. * It improves job satisfaction and morale of lower level managers by satisfying their needs for independence, participation and status. * Decision making is quicker. * It facilitates growth and diversification. As each product division is given sufficient autonomy for innovation and creativity. * 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. * Decentralisation requires wider span of control and fewer levels of organisation. It speeds up communication. * 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......

Words: 5865 - Pages: 24

Premium Essay

Definations of Differentiation

...Definitions of Decentralisation According to Henry Fayol, "Everything that goes to increase the importance of the subordinate’s role is decentralisation, everything that goes to reduce it is centralisation." According to Louis Allen, "decentralisation refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central point." This definition makes it clear that even in decentralisation, delegation to the lowest levels is not complete as the basic functions in the management process are centralized. level of standardization—both within and across markets—the greater the possible level of global efficiency Globalization 3.0, major software advances have allowed an unprecedented number of people worldwide to work together with unlimited potential. Advantages / Importance of Decentralization 1. Decentralisation helps to improve the quality of decisions/decision-making at the top level management : Decentralisation of authority among other executives at all levels in the Organisation relieves the top executive of the excessive burden saving his valuable time, which he can devote to more important and long-term problems. This is bound to improve the quality of his decisions regarding such problems. 2. Decentralisation facilitates diversification of activities : It is a matter of common experience that an Organisation with departmentation on the basis of products facilitates diversification of......

Words: 1388 - Pages: 6