Question

How are centralized businesses different from decentralized businesses? In the past, companies used to be centralized. So what changed?

Answer 1

The points given below are noteworthy, so far as the difference between centralization and decentralization is concerned:

1. The unification of powers and authorities, in the hands of high-level management, is known as Centralization. Decentralization means dispersal of powers and authorities by the top level to the functional level management.
2. Centralization is the systematic and consistent concentration of authority at central points. Unlike, decentralization is the systematic delegation of authority in an organization.
3. Centralization is best for a small sized organization, but the large sized organization should practice decentralization.
4. Formal communication exists in the centralized organization. Conversely, in decentralization, communication stretches in all directions.
5. In centralization due to the concentration of powers in the hands of a single person, the decision takes time. On the contrary, decentralization proves better regarding decision making as the decisions are taken much closer to the actions.
6. There are full leadership and coordination in Centralization. Decentralization shares the burden of the top level managers.
7. When the organization has inadequate control over the management, then centralization is implemented, whereas when the organization has full control over its management, decentralization is implemented.

In ancient times, people used to run their organization in a centralized manner, but now the scenario has been changed completely due to rise in the competition where quick decision making is required and therefore many organizations opted for decentralization.

At present, most of the organisation are equipped wth both the features, as absolute centralization or decentralization is not possible. Complete centralization in an organisation not practicable because it represents that each and every single decision of the organisation is taken by the top echelon. On the other hand, full fledge decentralization is an indicator of no control over the activities of subordinates. So, a balance between these two should be maintained.