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
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.