In this article we will discuss about the centralisation and decentralisation of authority.
These two concepts are two opposite ends of an organisation continuum. Question arises in the minds of managers is to have a centralised set up or a decentralised set up. But the answer is it is matter of degree. In reality, it is not possible to find any organisation which is exclusively centralised as some degree of decentralisation is bound to exist. In case of small organisations centralisation may prevail.
The degree of centralisation and decentralisation is determined by taking into consideration size and nature of enterprise, diversity of the organisation’s products, economies of division of labour, location of markets, nature of services to be performed, availability of competent managers, outlook and philosophy of management etc.;
In bigger organisations which are of dynamic in nature have adopted decentralised authority in some form or other in a formal and conscious manner.
In such organisations the processes of centralisation and decentralisation are co-existent and mutually dependent on the basis of the following considerations:
(1) There is to be workable balance between the concepts. The top management is to concentrate on determination of major objectives, strategies, and policies of the organisation. The top management is to concentrate on coordination, control and over-all organisational-wide matters. The operating units must be free to concentrate on authority and anatomy of making operating decisions and other related activities. They are to be given a free hand to focus on revenue generation activities.
(2) Management may be broadly divided into two mutually dependent stages. Known as strategy management and operations management. The strategic managers are responsible for development of strategies and they rely on operating managers for translating strategies into operational decisions, action plans and results. Similarly the managers at the operational level are to function within the framework of corporate strategies, policies and other constraints.
(3) Centralisation and decentralisation are mutually dependent since they ensure fusion of corporate unity and diversity freedom and control, creativity and conformity, economies of large scale operations and informal simplicity of small scale organisations.
(4) Centralisation does not mean complete totalitarianism. In a set up there must be a centralised and decentralised structure. Both the central unit and the decentralised set up must be strong. Each should be capable of performing effectively. They should actively co-operate with each other.
(5) Span of control is narrow and management levels are many organisations tend to be highly centralised but when the span of control is wider with few levels of management organisation are tend to be decentralised.
Centralisation brings uniformity in policy and action and utilises closer control over operating units. It tackles emergencies promptly and effectively. Decentralisation ensures dynamic functioning of operating staff and it motivates them. In reality success of organisation depends on a fair blend of centralisation and decentralisation. Absolute centralisation or absolute decentralisation is not found in practice in organisations. It exists only in theory. So a proper mix of both is needed.