Page 3 - Lesson Note 4

5. Better Control: It makes it possible to evaluate performance at each

level which results in complete control over all the activities.

Balance between Centralization and Decentralization

Interestingly, both the situations of complete decentralization and

complete centralization are hypothetical. Let us understand both the
scenarios individually. In a case of complete centralization, all the

decision making power will rest with only the higher levels of

management and the other levels would be completely useless. This

means that there would be no use of a management hierarchy in such

an organization.

For the case of complete decentralization, all the decision making

power will be in the hands of lower levels of hierarchy. This would lead

to redundancy of the higher managerial positions. Hence both the cases

are non-applicable in real-world situations. As an organization grows in
size and complexity, the degree of decentralization generally increases.

This is because in a large organization the employees who are closer to

certain processes possess more knowledge about them than the top

management. Effectively, in every organization, there must be a

balance between both centralization and decentralization.

Difference between Centralization and Decentralization

Basis of Centralisation Decentralisation

Difference
Authority remains Authority and
Authority concentrated at the top responsibility are

level of management. shared with the lower