What is the difference between centralization and decentralization?
Organizations, institutions, government, management, and purchasing tend to embrace either centralization or decentralization.
These two structures determine the decision making process and operation of tasks in an organization or institution. These two structures tend to confuse a lot of people.
Here is an article the gives out the difference between centralization and decentralization in a tabular form for easier understanding. Let’s dive into the topic.
What Is Centralization?
Centralization is where the power planning and decision making are done by top management level in an organization or institution.
The structure alludes to all authority is concentrated at the apex level of the organization. It implies that there is no form of delegation of tasks with centralized structures.
Advantages of Centralization
- Help the organization to strictly enforce uniformity of procedures and policies
- Help in the elimination of duplicate activities hence save on costs
- Help organization to utilize the potential of the employees
- Offer better control over activities to enhance consistency in operations
What Is Decentralization?
Decentralization is the delegation of powers by the top-level management to middle or low-level management.
Delegation of authority happens at all levels of management in an organization. The decision making under the structure tends to be quite complicated since it involves consultations.
Advantages of Decentralization
- Improve the effectiveness of the managers
- Result in better quality decisions due to consultations
- Create a good and democratic working environment
- Expose both middle and low-level management teams
- Help to improve the morale of managers due to good results
Comparison Chart: Centralization Vs Decentralization
| Basic Terms | Centralization | Decentralization |
| Concentration of power | At the top management level | Delegated to the middle or low tier management |
| Burden of accountability | Lies at the apex which is the top management level | All the level of management are accountable |
| Employee motivation | Make employee demotivated | Improve morale due to democratic working environment |
| Management indulgence | Policies and procedures tend to be quite strict | Employees perform duties according to the conviction |
| Method of communication | Tend to be quite formal | Tend to be both formal and informal |
| Time consumption | Decision making takes a lot of time | Decision making is quite easier and takes less time |
| Business suitability | Suitable for small to medium organization | Suitable for a large organization |
| Conflict in Decision | Less likely to occur | Tend to occur frequently |
| Decision-making speed | Tend to be faster | Tend to be slower due to consultation |
| Advantage | Proper coordination and Leadership | Sharing of burden and responsibility |
Core Difference Between Centralization and Decentralization
- The flow of information in decentralization is open and free while in centralization is vertical
- Decision making is made by top management level in centralization while decentralization there is delegation.
- Centralization is ideal for large size organization while decentralization for middle to small size organization
- Decision making under centralization tends to be quite slow while in decentralization is quite faster
- Employees under decentralization are highly motivated due to the democratic environment while centralization has a lot of demotivation
- Conflict decision is more likely to occur under decentralization while least in centralization
- The burden of accountability is shared among the various level of management while top-level management in centralization is responsible for the burden
- Centralization is relatively stable as decisions are made by central power while instability is quite common in decentralization.
- Centralization structure has proper coordination and leadership while decentralization there is sharing of burden and responsibility
- Power of decision making is based on the top management level in centralization while in decentralization is based in multiple persons
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Comparison Video
Summary
The difference between centralization and decentralization structure tends to be a hot topic. Some people prefer centralization while others prefer decentralization based on the above advantages.
Many organizations are adopting these structures depending on their size and activities taking place from within or outside.
More Sources and References
- Decentralization and Centralization. Academia Document
- Presentation of Decentralization and Centralization. Slide Share.