Centralisation / advantages and disadvantages of Centralisation
Meaning and Definitions of Centralisation
Centralisation is the systematic and consistent reservation of authority at central points within the organisation. Centralisation means concentration of all common functions under the supervision and charge of a designated manager.
According to Allen, “Centralisation is the systematic and consistent reservation of authority at central points in the organisation.”
According to Fayol, “Centralization is that organisation where the role of subordinate is reduced.” Implications of Centralisation
Implications of centralisation may be summarised as under:
(a) Reservation of administrative authority of planning, organisation, coordination and control at the top level of management.
(b) Reservation of operating authority by middle level managers.
(c) Operations at the lower levels are subservient to command, consent and control by higher authorities in the line.
(d) Sometimes work may be delegated to subordinates but authority may be retained to the largest possible extent.
Advantages of Centralisation
Centralisation represents certain attitudes and approaches. Management may choose to practise centralisation in order to accomplish some conceived objectives that fit into attitudes of men who matter. The size of the firm, the need of uniformity in business policies and desire to have strong personal control over the affairs are other factors facilitating centralisation of authority.
1. Smooth Functioning: Centralisation facilitates standardisation of procedures and systems essential to smooth administration and better servicing of customers. Consistency in policies is also the result of centralisation of decision-making authority.
2. Standardised Policies: Standardised uniform policies will help in evaluation of the result of different department activities and enable comparative cost-studies and cost-control. brings in the
3. Large Scale Economies : Centralised policies ec. nomies of large-scale operations through bulk buying, bulk selling, common management expenses etc.
4. Facilitate Personal Leadership: It facilitates personal leadership. A gifted dynamic leader by the virtue of authority concentrated in him can take quick decisions, enterprising actions and guide heroically and tactfully the entire organisation toward fulfilment of business objectives. Particularly small companies can progress effectively under unitary authority of management and face competition of bigger enterprises.
5. Uniformity and Consistency: Centralisation becomes inevitable to co-ordinate the diversified activities and direct them towards common goals. Absence of systematic centralisation leads to cracks in the unity and integrity of the undertaking. Centralisation ensures cohesiveness and harmony; throughout the organisation.
6. Quick Decision-making: Emergency decision can be taken without delay and hesitation under centralised set-up. Policies can be instantly changed as a consequence of certain contingencies under centralised management.
Disadvantages of Centralisation
1. It destroys the individual initiative and enterprising spirit.
2. It overloads a few officers with heavy burden of duties and little time is left for them for attending to vital aspects of administration like planning, perspective improvements, motivation etc.
3. It does not afford full scope for specialisation since personnel tend to be mere rubber-stamps of higher authorities enjoying centralised authority.
4. It makes the administration unwieldy and unsystematic in its practical working. It tends to “slow up the operations” because of multipliciy of critical decisions concentrated in top and middle managements.
5. Centralisation keeps the customers far away from the decision -points in the organisation. Thus there is no intimate understanding of the market problems and customers’ attitudes. It is not possible to build-up wider and deeper goodwill because of the gap between the patrons of the enterprise and the office-bearers of the enterprise with fountain-head of authority.
6. Mental and material motivation of the subordinates is difficult when they do not possess the authority to make decision and have no opportunity to get rewarded for their talents in administrations.
