Wednesday, January 27, 2010

Centralization and Decentralization

Centralization refers to the union and consolidation of departments into one center. Within the center, standardization may occur on operations ranging from computer systems to networked resources, from employee policy and conduct to furniture layout and space allocation. Disadvantages are that organizational flexibility is often compromised and necessary changes in structure become difficult and slow to implement.

Benefits of Centralization:-

  • Greater efficiency
  • Increased professionalism
  • Less parochialism
  • Uniform corporate image
  • Standardization of space allocation and furniture distribution
  • Allows for company wide databases
  • Minimizes company’s dependence on outside consultants and vendors
  • Cost Savings on bulk purchases of building services and materials

Decentralization refers to a shift in organizational structure that distributes more administrative control to local centers or groups. Disadvantages are many and make this strategy slightly more risky than the former. They include possibilities of neglect, mismanagement, and the loss of objectivity.

Benefits of Decentralization:-

  • Enhances communication and interaction among employees
  • Promotes project prioritization
  • Creates a need for less formalized communication
  • Facilitates a more comprehensive understanding of individual units
  • Less formal restrictions promote innovation and creativity
  • Increased input from local hubs

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