CAT / FIA FBT Syllabus B. Business Organisation Structure, Functions - Centralisation & Decentralisation - Notes 5 / 7
THE DIFFERENCE BETWEEN...
Centralisation implies that there exists more than one level within an organisation and that decisions are made only by the highest level.
Therefore, one may say that a centralised organisation has a central authority and no decisions are made at lower levels.
Decentralisation encourages the existence of more than one centre of decision-making.
A decentralised company empowers lower levels within the hierarchy to take decisions.
| advantages of centralisation | advantages of decentralisation |
| easy co-ordination of decision | decisions are delegated = less stress for senior management |
| wider view of consequences and problems | improves motivation |
| balance interests of different functions | greater awareness of local problems |
| quality of decisions better due to skill level of senior management | quicker decision making |
| cheaper.......less managers! | develops skill level of junior managers |
| crisis decisions taken quickly | separate responsibilities |
| standardised procedures | decisions can be made locally |