The centralization management is the process by which an organization 's activities, particularly planning and decision making, are concentrated in one place or in a small particular group. All power in making important decisions is held within the central office or in the center of the organization.
The process of transferring administrative authority from a lower level to a higher level is also called centralization in administration. It is simply the process of transferring from a number of local or regional centers to a single center.
The term centralization is generally used in public administration because, in this sphere, the administrative powers are centralized in a particular center; this is done to ensure effectiveness. Most companies are concerned with analyzing issues related to the centralization or decentralization of decision-making.
The key question in a company is whether an authority should manage everything from the center of a company (centralized) or if it should be delegated to other people far from that center (decentralized).
The centralization in the administration is a process in which the concentration of decision-making is given in few hands. All important decisions and actions at the lower level are subject to the approval of senior management.
The organizational structure will be called centralized if the decision made at lower levels is supposed to pass the strict compilation of rules, procedures and policies. In case the decisions do not give the desired result, they are referred to a higher management level.
In earlier times, the policy of centralization in the administration was commonly the most practiced in all organizations, in order to retain all power in a central establishment.
You have full control over the activities of middle or low level management. Apart from that, better coordination and personal leadership can also be observed. Work can also be easily distributed among workers.
Advantages of centralization
-The centralization is convenient to generate a good coordination of the different individuals and units.
-Probably top management can be more professional and experienced, which can lead to effective and efficient decision-making.
-Regarding decision-making, senior management has a fairly broad perception, depending on the situations.
-It can help avoid duplication of efforts made in different units throughout the organization.
-Leadership that is strong and efficient is promoted.
Disadvantages of centralization
-Due to the concentration of authority and responsibility, the role of the subordinate employee in the organization is diminished because all orders come from a central office.
-The junior staff is only limited to following the instructions of senior managers and working in accordance with them, since they are not allowed to take an active part in decision-making.
-A hodgepodge is created due to excess workload, resulting in hasty decision making. Bureaucracy is also another disadvantage of centralization.
-A quick decision is possible but only at the top level, since decisions are only made by senior management, it is not possible to make a quick decision when senior management is unavailable or not in the mood. This results in delays at work.
-In centralization a subordinate is required only to implement what he is asked to carry out. The subordinate does not take the initiative or is allowed to do so.
-You cannot keep a secret in a centralized configuration, since orders and decisions flow from one place and are transmitted to everyone.
Centralization vs. decentralization
Choosing between whether a company should be centralized or decentralized is complicated. Many large companies must necessarily have a certain degree of decentralization and a certain degree of centralization when they start operating from several different locations or new units and markets are added.
The organization's movement should move towards a decentralized structure when certain conditions occur or are expected as detailed below:
-If the organization is very large, when senior managers do not have the additional knowledge or time to solve all the problems.
-Some operations are geographically dispersed.
-Top managers are not able to survive with complex technology.
-Uncertainty in the organizational environment is increasing.
Today, most organizations are equipped with both features, as absolute centralization or decentralization is not possible.
Complete centralization cannot be practiced in an organization because it represents each and every decision in the organization being made by top management.
On the other hand, full decentralization is an indicator that there is no control over the activities of subordinates. So a balance must be maintained between these two approaches.
Centralization in administration can take one of the following forms:
It refers to the concentration of specialized activities, usually in a department. For example, staff recruitment for the entire organization is carried out by a single department. The same can happen with regard to the maintenance of the entire production plant.
Indicates a geographic concentration of activities, such as a company that has all its operations in one place.
Centralization as a managerial aspect
This indicates a tendency to restrict delegation for decision making. Top management concentrates and reserves all decision-making power.
All execution is decided by senior management with the help of the other levels of management.
The lower-level managers perform the tasks, which are directed and controlled by upper management.
For example, in a company the father and son, who are the owners, decide on all important matters.
The rest of the functions, such as production, finance, marketing and personnel, are carried out by the department heads. They have to act in accordance with the instructions and orders of these two people. Therefore, in this case the decision-making power remains in the hands of father and son.