What is Centralization and Decentralization Principle?
Centralization and decentralization are the two means to manage the organization. This principle states that there must be a balance between centralization and decentralization.
Centralization means the authority to make important decisions is only vested in top managers.
They enjoy the right to make decisions that subordinates should have to follow.
Whereas, decentralization means the authority is also given to lower employees to make relevant decisions where the work is to be done.
It is a means to lower the burdens of the top management.
The relevant authority is provided at department levels to make quick decisions and make smooth functioning.
A manager must maintain a balance between them. However, it depends upon the size, nature, location, and capabilities of employees he must delegate authority considering the possible outcomes.
Usually, in small organizations where the range of activities is limited centralization is preferred, and in large organizations, since there is a range of activities to be performed decentralization is preferred.
Usually, no organization is completely centralized or decentralized there formally or informally these concepts are applied.
So a manager should centralize or decentralize authorities considering the requirements, conditions, and employees’ capabilities.
Advantages of Centralization and Decentralization Principle
An effective balance between decentralization and centralization provides many benefits to the business:
Encourages Efficient Completion and Achievement of Work and Goals
Both centralization and decentralization contribute to achieving organizational goals in different ways.
Centralization ensures that decision-making is streamlined and aligned with the organization’s overall strategy, promoting efficiency in execution.
On the other hand, decentralization allows lower-level managers to make decisions, which can lead to quicker and more effective actions toward achieving departmental and organizational goals.
Reduced Burden on Top Management in Decentralization
In decentralized organizations, authority is distributed among various levels of management, reducing the burden on top management.
This not only improves the decision-making process but also empowers lower-level managers and employees.
As a result, lower employees are motivated because they are given more decision-making power and responsibility, fostering a sense of ownership and accountability.
Better Coordination in the Workplace
Decentralization improves coordination by allowing decision-making to happen closer to the point of action, ensuring that departments and teams can adapt quickly to changes.
Centralization, meanwhile, maintains a unified direction by centralizing strategic decisions, ensuring that all actions align with the organization’s overall objectives.
Both systems, when used appropriately, foster better collaboration and coordination within the organization.
Read More: Unity of Direction Principle
Centralization Ensures Faster Decision-Making
In a centralized system, decision-making is concentrated at the top levels of management, which allows for faster decisions in critical situations.
There is less time spent on consulting multiple layers of authority, enabling the organization to respond quickly to changes or challenges.
This is especially beneficial in environments that require rapid and consistent decisions.
Completion of Work Within Expected Time
Both centralization and decentralization contribute to timely task completion. Centralization ensures clear direction and control, reducing delays caused by the need for approval from multiple levels.
In decentralized systems, the empowerment of lower-level managers leads to quicker decisions, allowing work to proceed without waiting for top management’s approval.
This combination ensures tasks are completed within set deadlines and expectations.
Results of Avoiding Centralization and Decentralization Principle
Avoiding a balance between centralization and decentralization leads to the following consequences:
Disrupted Organizational Balance
Without a clear balance between centralization and decentralization, decision-making becomes chaotic.
This imbalance can lead to confusion about authority and responsibility, undermining the organization’s overall structure and harmony.
Related: 14 Principles of Management
Excessive Work Burden on Top Management
If authority is overly centralized, top management may be overwhelmed with decisions, causing delays and inefficiencies.
This not only strains top managers but also slows down the organization’s ability to respond to issues quickly.
Conflicts Between Management and Employees
A lack of a clear delegation of authority can lead to conflicts.
Employees may feel disempowered or frustrated with excessive control, while management may struggle to maintain consistency in decision-making.
Hindered Achievement of Organizational Goals
Without proper delegation and structure, the organization may struggle to meet its goals.
Centralized decision-making can slow down progress, while decentralized decision-making without oversight can lead to inconsistent or misaligned actions.
Delays and Inefficiencies in Work Completion
When authority and decision-making are unclear, tasks may be delayed or performed inefficiently.
Centralized systems may create bottlenecks, while decentralized systems without coordination can lead to duplication of effort, preventing work from being completed on time and with efficiency.
Read Next: The Order Principle

Joshep Mahesh holds Bachelor in Management (BiM) Degree. He loves to share his business knowledge in his free time.