MERITS AND DEMERITS OF CENTRALISATION AND DECENTRALISATION IN MANAGEMENT

 

QUESTION

Briefly analyse the merits and demerits of centralisation and decentralisation.

 

SUGGESTED ANSWER

Centralisation

Centralisation is a management approach in which the top level of an organisation makes all the material decisions.

Advantages of centralised management

·         The command framework is clear. There is little confusion as to who directs what activity.

·         In times of emergency, response can be quick owing to plainness of authority and responsibility structure.

·         Employees tend to concentrate on developing a smaller skill set, which they tend to polish up well. They do not have to master any real management skills, which could simply be a strain on their obviously scarce time.

·         It is more likely the firm will operate as a single unit with minimal pulling in different directions.

Disadvantages of centralised management

·         Where a situation needs detailed information from a specific locality, top management

may not fully understand the situation. As a result, any action taken may also not be good enough.

·         Workers may not have enough motivation to work if everything appears dictated down to them by top management.

·         Repetitive and limited scope of work can be a disadvantage to employees interested in grown by way of learning and management responsibilities, especially as the organization expands.  

·         Overall company performance may go down when workers feel they are simply carrying out someone else’s instructions and not what they are part of.

·         Total centralisation may deny the organisation valuable input from talented people in lower echelons.

 

Decentralisation

This is when top management and lower-levels share management authority and responsibilities.

Advantages of decentralisation

·         Overall organisational levels of knowledge and effectiveness are raised because of marrying central and local-level perspectives.

·         Workers are more motivated because they feel they have a say in the running of the firm.

·         It reduces the potential of top management being overloaded.

·         Lower level employees become more alert as they feel they could be partly responsible as well if anything went wrong.

 

Disadvantages of decentralisation

·         Reporting lines can cause uncertainty and frustration as to who is in charge of what domain.

·         Passing the buck. More managers means the blame-game is easier to play.

·         Complex processes. It takes long for decisions to move through the established stages: in business, it is said that time is money.

 

Conclusion

Centralised and decentralised management each have positives and negatives. The best situation is probably leaving it to managers to decide whether their unique business situation will work better with centralisation or with decentralisation.  This means looking at such factors as type of business, size of organisation and capacity of human resource.