Centralization: Definition and Description

Centralization: Definition and Description

Centralization of authority means the authority of planning and assessment making is completely in the hands of top management An organization is centralized when decision-making authority is retained by higher management levels whereas it is decentralized when such authority is delegated. The concentration of management and decision-making power at the top of an organization’s hierarchy.

The implication of centralization can be:-

  • Reservation of decision making power at the top level.
  • Reservation of operating authority with the middle-level managers.
  • Reservation of operation at a lower level at the directions of the top level.

Complete centralization would imply a concentration of all decision making functions at the apex of the management hierarchy. Such a scenario would obviate the need for a management hierarchy. On the other hand, complete decentralization would imply the delegation of all decision-making functions to the lower level of the hierarchy and this would obviate the need for higher managerial positions. Both the scenarios are unrealistic. An organization can never be completely centralized or decentralized.

Example: In political science, centralisation refers to the concentration of a government’s power. In business studies, centralisation and decentralization refer to where decisions are made in the chain of command.