Decentralisation and centralisation simply describes different modes of decision making in an organization, a country etc.

In this article we will be analyzing the concept of decentralisation and centralisation; we would also be looking at their merits and demerits.

DEFINITION OF TERMS

CENTRALISATION:

In centralisation, the decision making of the company is not an open one, in other words, the decision making of the organization is delegated to the high rankings of that organization, this involves the business structure in which one individual or a specific group of individuals make the important decisions of that company (such as resource allocation and other managerial decisions) they provide the primary strategic direction for the company. This mode of business management is mostly common for small businesses in that the owner makes all decisions regarding products, services, direction, and other significant areas.

However, centralized businesses are not only limited to small business, take for instance most of the decision making of the Apple company is made by the Chief Executive Officer (CEO) Tim Cook, who assumed the leadership role within Apple following the death of Steve Jobs. Apple has long been viewed as an organization that maintains a high level of centralized control over the company’s strategic initiatives such as new product development, markets to operate in, and company acquisitions.

Many businesses in rapidly changing technological environments have a centralized form of management structure. In a centralized system the opinion and decisions of the lower level management board is most of the time not considered.

DECENTRALISATION:

In this management system, unlike the centralized system of government, there is delegation of authority by the top management of that organization to the lower and middle level of management in the organization. The decision making pattern of this system is distributed among the various levels of management boards that are in the organization.

In this type of organization structure, the top level management focuses on major decisions of the company like business diversification, business expansion etc. while the middle and lower tiers of government are left with the daily operations and minor decision makings of the company. The various examples of this type of organization structure are hotels, supermarkets, dress showrooms and many of such firms; one man management monitoring this type of businesses is near impossible feats as most times this form of business has various branches.

This makes it impossible for the owner of the business to focus on the daily administration and also focus on various aspects of the business like expansion and diversification. When a particular person holds a chain of hotels as his business for example, he particularly focuses on using decentralized structures so that local hotel managers, assistants and other delegated staffs are empowered to make on-spot decisions to handle customer problems, complaints and requirements.

DIFFERENCES BETWEEN DECENTRALISATION AND CENTRALISATION

From the definitions and examples of this organization structures, we could already know the difference between them.
While the decision making for centralisation is made by the top management of the organization, the decision making for decentralisation is spread among the low level and middle level management board of the organization.

Haven seen the what decentralisation and centralisation means and also haven looked at the difference between them, we proceed to the advantages and disadvantages of this various organization management structures.

ADVANTAGES OF CENTRALISATION

FOCUSED VISION:

Following a centralized management structure gives the organization a focused vision. There is always a distinction in communication, this ensures that the senior executive of the organization is able to communicate the vision of the organization to the employees and also provide them with guidance towards achieving that vision.

When the company is not operating on a centralized management system, there will be no clear line of authority and so there will be an inconsistent communication of vision. Directing the organization’s vision from the top gives the management the edge of having a smooth implementation of its visions and strategies.

LESS EXPENSIVE:

In a centralized management organization system, the organization follows standard procedures and regulations that serves as a guide to the organization, this reduces office and administrative costs as there will be no need deploying more departments and equipment to other branches.

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The thinking and administration of the organization is done by the “boss” and so there will be no need hiring specialists for its branches as the decision is made by the boss and communicated to the other branches.
The only duty of the employees of this organization is carrying out the laid down protocols set by the boss.

EVALUATION OF FACILITIES:

Since the same policy is used in all segments of the organization, the performance of staffs can be easily evaluated. This also helps in evaluating and comparing the results of the various departments, this act gives the staffs a sense of competition and in turn all will like to put in their best efforts. This will improve the overall performance of the organization.

THE ACTIVITIES OF THE ORGANIZATION IS WELL CO-ORDINATED:

A centralized management system facilitates the co-ordination of activities of the various segments of an organization. If the system is not centralized then the different segments of an organization will have to come up with their goals, this could sometimes cause disunity as a result of conflicting ideas, but when the goal is from the top, all that will be required of the various segments is to implement the goal
IMPROVED QUALITY OF WORK: The standard procedures and better supervision system in a centralized management system of an organization ensures that staffs put in their best to work which will in turn yield an improved quality of work which brings good results.

DISADVANTAGES OF CENTRALIZATION

THERE IS NO SCOPE FOR SPECIALIZATION:

In a centralized system, there is no scope for specialization as all the decision making of the organization is done by one individual who may not even be a specialist in all areas. This will not help the performance of the organization in any way.

DISTANCE OF DECISION MAKERS FROM CUSTOMERS:

The customers do not have access to meeting the decision maker of the organization in most of the centralized organizations; the staffs that have interactions with customers do not have the power to influence any decision of the organization, and this result most of the time in customer dissatisfaction.

IT SLOWS DOWN THE OPERATIONS OF THE ORGANIZATION:

There are times when issues will come up in the organization that may require urgent attention but the unavailability of the decision maker will keep it pending, this affects the running of the organization.

DICTATORIAL LEADERSHIP:

employees in the centralized system are expected to only implement orders and deliver results. They are unable to make contributions to the administration of the company; this has limited so many organizations as there are potentials left dormant in the staffs.

LACK OF LOYALTY FROM EMPLOYEES:

faced with a rigid administrative system where employees are not creative of expressive of their ideas, the employees are bound to get tired in the long run which will result in disloyalty to the decision maker.

ADVANTAGES OF DECENTRALIZATION

REDUCES THE BURDEN ON TOP EXECUTIVES:

Thinking and setting of administrative protocols is done by a good number of persons and so helps in reducing the load on one man. This also helps to maintain focus.

IT PROMOTES MOTIVATION:

The employees can express their ideas in this system of organizational management; they are motivated when they see their ideas being implemented.

NEARNESS TO CUSTOMERS:

The decision makers are close to the customers unlike in the centralized system. The complaints of customers can be easily resolved.

FACILITATES DIVERSIFICATION:

when the minor decision making of the organization is distributed, it will help the boss to focus on diversification.

BUSINESS EXPANSION:

It is said that no man is an island; riding on the ideas of so many persons helps the company to expand in a short possible time.

DISADVANTAGES OF DECENTRALIZATION

PROBLEM OF CO-ORDINATION:

DISUNITY:

everyone would want their ideas to be implemented; this could cause the employees to be disorganized and not united.
They do not follow uniform policies
Each department tend to be self-centered on their personal goals
Increased cost due to duplicated efforts.

MY PREFERED SYSTEM OF ORGANIZATION MANAGEMENT STRUCTURE

Haven seen the merits and demerits of centralization and decentralization, I will recommend that for anyone going into business/trading, it is better to engage in decentralization. This will help your business to grow at a fast pace since there are a lot of active minds running the business. also this helps you to maintain focus, as a business man/woman, our focus is of paramount importance, it is when you are focused that you see possibilities that will help in the growth of your business. Engaging your employees in the administration of your business will help you achieve that focus.

HOW TO KNOW IF A BLOCK-CHAIN IS DECENTRALIZED OR NOT

Block chain is a specific type of database, it differs from a typical database in the way it stores information; block chains store data in blocks that are then chained together. As new data comes in it is entered into a fresh block. Once the block is filled with data it is chained onto the previous block, which makes the data chained together in chronological order. Decentralized block chains are immutable, which means that the data entered is irreversible. For example in Bitcoin, this means that transactions are permanently recorded and viewable to anyone.

@yousafharoonkhan