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STUDENTS CORNER - 15

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This week we will consider 'Centralization' and its effect on the organizational administration.

Centralization means in effect the authority to take decisions is at the top management of an organization. Generally, decision making is the prerogative of the owners of the business, though of course depending on the context which involves business diversification and attendant necessity of skilled mangers, the owners of the business will decide how far to centralize and when to decentralize; the focus is ever on the sustainability of the business. Decentralization indicates giving authority to the middle managers to decide. In a good business strategy, there must be an effective balance between centralization and decentralization.

The spirit of business being generating profit, the owners of the business will be extremely careful when they decide the plan of action along with the personnel whom they can entrust the task with. In this effort, there will not be room for personal prejudices and preferences. It means that an MD will not give a position to somebody who is not a match to the task just because he likes him or his close relative. So, ultimately, it ends up taking the right people for the right job and this practice will infuse confidence in the employees in the fairness of the top administration. This is a great advantage of the centralization.

Centralization might look very close to the principle of the Unity of Command; but there is a great difference. The command comes only after decision- making. In this sense, centralization precedes the unity of command.

Centralization, therefore, achieves standardization of work which means that an employee gets the job he is proficient and he knows that other fellow employees also are efficient in their job.

Another great advantage of centralization is it effectively avoids duplication of work, bringing in saving on expenditure if there had been duplication of work. Duplication of work is unproductive business practice costing money to the management; because, too many people are there for a task which will also affect efficient completion of the task.

Flexibility is another useful strategic benefit of centralization. Business demands dynamic engageemnt. The owner of the business or the one invested with the power to decide cannot afford to be insensitive to the happenings outside. A business is a network of various other activities which impact the business. And there are critical periods when the business-decision must make changes in its approach to the business. Without this alert flexibility, the business in the long run will lost itself.  Centralization helps fast decision-making in an efficient flexible manner.

We have seen the advantages of centralization and we will look into the opposite of it later. Meanwhile,  have you ever felt the power of centralization, at home, in office where you work or in an office where you go seeking some favour? Feel it; this will help understand the subject in a right and a proper way.