Difference Between Centralization and Decentralization

In any organization, there is a way of making hierarchy in order to ensure smooth organizing of work to drive the business.

This has been possible because everyone knows what role they are going to play. What is being required out from them in order to layout a proper business plan for the organization?

As it is rightly said that hierarchy is laid down in an organization in order to ensure smooth organizing of work. These hierarchies are laid in terms of planning power and the decision making process.

One cannot sideline the importance of Centralization and Decentralization as a hierarchical structure, as they are very crucial to any organization

Both Centralization and Decentralization are two different structures for distributing authority in any firm. It does still exists and companies have aligned different structures for Centralization and Decentralization.

Centralization vs Decentralization

The difference between Centralization and Decentralization is that centralization in an organization involves planning and decision-making power is given completely in the hands of senior management. It implies that all power and authority is concentrated at the highest level. Decentralization in an organization involves the delegation of power by middle management or lower management.

Unlike Centralization, Decentralization implies that all power, authority are distributed amongst middle and lower management.

Therefore, we should keep in mind that both Centralization and Decentralization have an important set of structures. They are very crucial in terms of the company’s authority distribution.

In this guide, we are covering all the essential details for you to understand the difference between Centralization and Decentralization, so as you know about these two roles.

Centralization in an organization implies holding of authority through the senior management.

We can see that the authority is consistent and a systematic hierarchical pattern is observed in Centralization

Centralization in any organization has the flow of communication designed upright, so as the middle and lower management has to strictly follow the directions of the senior management.

Since authority, power is influenced by senior management. The decision-making process is time-consuming and slower.

Following are some points in Centralization to be known;

1. Vertically allied movement of communication
2. Decision-making progression is slower
3. The power lies with Senior management
4. Leadership has apt coordination
5. Implementation in small-sized organizations.

The primary objective of Centralization structure in any business is to involve hierarchical structure whenever there is inadequate control over the organization

Therefore, it is equally important to also know, that Centralization is quite important for any organization who are looking to ensure their vision, the mission is fulfilled.

Thus, it is required to understand that Centralization plays a very important role in any organization and proper information should be known about it.

Decentralization in an organization involves spreading power, accountability, and responsibility to various management levels.

Decentralization in any organization has the flow of communication designed freely, so as the middle and lower management has full freedom to overlook the strategies for the organization.

Since the authority and power lie in the hands of middle and lower management. The decision-making process is faster and not so complex.

Following are some points in Decentralization to be known:

1. The flow of communication is free and open
2. Faster decision making and execution
3. Lower management has the authority to work.
4. There is significant control over the organization.
5. Implementation in large-sized organizations

The primary objective of the Decentralization structure in any business is to reduce the amount of burden and responsibility equally among lower and middle management.

Therefore, it is equally important to also know, that Decentralization is quite important for any organization that is looking to systematically distribute the authority among the hierarchy.

Thus, it is required to understand that Decentralization plays a very important role in any organization and adequate information should be identified about it.

1. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6486.1992.tb00674.x
2. https://www.jstor.org/stable/1909469
3. https://onlinelibrary.wiley.com/doi/abs/10.1111/0952-1895.00150

Chara Yadav

My name is Chara Yadav, and my goal is to simplify finance-related topics. Read more at my bio page.