Strategic Management: Formulation and Implementation

Centralization Versus Decentralization

Centralization refers to the location of decision making authority in the hierarchy of the organization. Centralization is the extent to which power and authority are retained at the top organizational levels.

Decentralization involves the transfer of authority to those lower in the command structure.

Positive Aspects Of Centralization

If all major decisions are made at the top levels, it can be easier to keep the activities of various units and individuals coordinated.

Top managers usually have the most experience and make better decisions than individuals at lower levels.

Toplevel managers usually have a broader perspective and can better balance the needs of various parts of the organization in making decisions.

Coordination from the top can help reduce duplication of effort and resources by ensuring that similar activities are not carried on by different organizational units.