Course Content
Definition and importance of management Functions of management Managerial roles Evolution of management thought Types of management environment
Meaning and importance of planning Principles of planning Purpose of planning Types of plans Planning tools Process of planning Planning challenges Making plans effective Management by objectives
Meaning and Importance of Organizing Structure and Designs of Organizations Principles of Organizing Process of Organizing Delegation Coordination Centralization and Decentralization Informal Organizations
Meaning and Importance of Staffing Human Resource Planning Recruitment and Selection Training and Development Performance Management Reward Management Separation
Meaning and Importance of Directing Leadership Motivation Communication Group Dynamics Conflict Management
Meaning and Importance of Controlling Elements of Control Characteristics of Effective Controls Control Process Role of Control in an Organization Tools of Controlling
Overview of Strategic Management SWOT Analysis Strategy Formulation Strategy Implementation Strategy Evaluation
Organization Culture Ethics and Social Responsibility Managing Innovation and Change Diversity and Inclusion Corporate Governance Globalization
Principles and Practices of Management
About Lesson

Centralization: This is a process of formulating authority in the same place. When top managers develop policy in the head office, it is said that the management has been centralized.

Decentralization: This is a process of formulating authority at different centers, especially in the organization’s branches.

Factors determining the degree of centralization and decentralization of authority
  1. Costliness of the decision.
  2. Desire for uniformity of policy.
  3. Size and character of the organization
  4. History and culture of the organization.
  5. Management philosophy.
  6. Desire for independence.
  7. Availability of managers.
  8. Control techniques.
  9. Decentralization performance.
  10. Environmental influence.
Advantages of centralization
  1. Senior management can exercise greater control over the organization’s activities and co-ordinate their subordinates or sub-units more easily.
  2. With central control, procedures can be standardized throughout the organization
  3. Senior managers can make decisions from the organization’s point of view as a whole. In contrast, subordinates would tend to make decisions from the point of view of their department or section.
  4. Centralized control enables an organization to maintain a balance between the different functions or departments. For example, if a company has only a limited amount of funds available to spend over the next few years, centralized management would take a balanced view of how the funds should be shared out.
  5. Senior managers ought to be more experienced and skillful in making decisions. In theory, senior managers’ centralized choices should be better in quality than decentralized decisions by less experienced subordinates. 
  6. Centralized management will often be cheaper in terms of managerial overheads.
  7. Centralized decisions are accepted by all staff because they are made by senior management.
  8. Centralization enables senior managers to know what is happening throughout the organization.
Disadvantages of centralization
  1. Increase’s stress and burdens senior management. 
  2. Deprives subordinates of job satisfaction and more so in decision making, which affects their work.
  3. Senior managers do not have better knowledge of local
  4. Subordinates in centralized organizations are denied the chance to prepare for senior positions.
  5. Centralizing authority enhances the possibility of top management misuse of power.
  6. Centralizing authority adversely affects the relationship between management and subordinates. 
Advantages of decentralization
  1. It reduces the stress and burdens of senior management.
  2. It provides subordinates with greater job satisfaction by giving them more say in decision-making, which affects their work.
  3. Subordinates may have a more excellent knowledge of local conditions affecting their area of work.
  4. Decentralization allows greater flexibility, a quicker response to changing conditions, and quicker decision-making.
  5. By allowing the delegated authority to subordinates, management at middle and junior levels are groomed for eventual senior management positions, because they are given the necessary experience of decision making.
  6. By establishing appropriate sub-units or profit centers to which authority is delegated, the system of control within the organization might actually be improved.
  7. By decentralizing authority reduces the possibility of top management misuse of power.
  8. Decentralization improves relations between management and subordinates. 
Disadvantages of decentralization
  1. Senior management is denied the possibility of controlling the activities of the organization.
  2. Decentralization of authority undermines the standardization of procedures throughout the organization.
  3. Senior management is not able to maintain a balance between different functions or departments.
  4. Subordinate managers’ decisions are likely to be of low quality because they are less qualified and experienced.
  5. Senior management is deprived of the right to make decisions from the point of view of the whole organization.
  6. Decentralized operations are often expensive in terms of Senior managers will not know what is happening throughout the organization.
  7. Decentralized decisions tend to be ignored by subordinates because they are not made by senior management.
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