examine the merits and damarits of centralization?
Answers
Explanation:
Advantages of Centralization:
Following are the advantages of centralization:
1. Standardization of Procedures and Systems:
Centralization enables standardization of procedures and systems. It facilitates smooth working in the organization. There is also a consistency in day-to-day working. The consumer service will also improve if standard policies are used.
2. Facilitates Evaluation:
When same policies are used for all segments of the enterprise their performance can easily be evaluated. It also helps in comparing the results of different departments. This will bring a sense of competition among various segments. Ultimately the overall performance will improve.
3. Economies:
Centralization of management will bring in economies of large scale. There will be a centralized buying and selling. This will enable bulk buying resulting in discounts and savings in transportation expenses. When sales are done in large quantities then customers are offered better terms and low prices. There will be an economy in managerial expenses also.
4. Co-ordination of Activities:
Co-ordination of activities of various segments is also facilitated by centralized management. In the absence of centralization, different segments may pursue their independent policies. This may result in disunity and disintegration. Different segments may emphasize their own goals only without bothering about organizational objectives. Centralized management will help in coordinating the work of different segments in such a way that organizational goals are achieved.
Disadvantages or Evils of Centralization:
Centralization may be useful only up to a certain level and also under certain conditions. Beyond a certain point it creates difficulties in day-to-day working and also restricts the growth of an enterprise.
Following are some of the disadvantages of centralization:
1. Destroys Individual Initiative:
Centralization revolves around one person only. One man takes all the decisions and decides the modes of implementing them. Nobody is given the authority to use his own judgment even if there are glaring lacunae in the decisions. It destroys initiative of subordinates. They do not make any suggestions and just carry on with whatever has been conveyed to them.
2. Over Burden of Few:
This system gives all responsibilities to few persons in the organization. They remain over-burdened with routine work while sub-ordinates do not have sufficient work. The centralization of all powers do not allow the chief executive to devote sufficient time for important tasks of planning, coordinating and motivating. In a decentralized set-up routine matters are left to the subordinates and manager concentrates on important administrative work only.
3. Slows Down the Operations:
The operations of the enterprise are slowed down under centralized set-up. All decisions are taken only by one person and his unavailability keeps the matters pending. Even clarifications about decisions are referred to the top which destroys invaluable time in formalities. If the subordinates have powers to interpret decisions then operations can be toned up. Things move very slowly in a centralized set up because everything has to pass through the manager.
4. Distance from Customers:
The customers do not come into contact with policy-makers. They meet only those officials who do not have the powers to take decisions. Moreover one person cannot meet and know the reactions of customers regarding products and service. This also comes in the way of intimate understanding of market situations by the chief executive.
5. No Scope for Specialization:
Centralization does not offer any scope for specialization. All decisions are taken by one person and he may not be a specialist in all the areas. In the present competitive world there is a need for employing the services of specialists. The specialists will be able to introduce new things in their fields and they may improve the performance of the enterprise.
Explanation:
(i) Consistency/Lack of Consistency in Decision-Making
(ii) Strong/Weak Top Management
(iii) Lower/Higher Costs of Administration
(iv) Broad/Narrow Approach to Managing
(v) Discouraging/Encouraging Inter-Departmental Conflicts