CENTRALISATION VS DECENTRALISATION Flashcards
What is centralisation vs decentralisation
Centralisation is when an organisation’s strategic decisions are made by the senior management team (senior management = the highest level of management - the top of the tree basically) and communicated down the organisational structure.
When does centralisation occur
Centralisation occurs when management make a decision and they tell everyone else in the organisation whats needs to be done, and how it will be done (often tied in with tall hierarchy structure)
What are the pros of centralisation
Decisions can be made quickly, as little consultation is needed
Managers are seen as the experts and therefore the best decision makers
Should lead to consistency across the organisation
Achievement of economies of scale if purchasing and marketing decisions are made by head office (If everyone is buying from the same supplier, hopefully you can get a lower price, as you are purchasing more materials)
What are the cons of centralisation
Costs of monitoring the carrying out of decisions - Need to communicate the decision, and male sure that everyone knows what needs to happen clearly
Central managers may not have specific local knowledge (They may make decisions that don’t help the specific area of an organisation, as they can’t make the best judgement, as they don’t specialise in that area)
Staff lower down the hierarchy are not given responsibility - They are just told which jobs need fulfilling, and they must get on with their work or they’ll be fired as they won’t fulfil the specified tasks
What is decentralisation
Decentralisation is when the authority to make strategic decisions is delegated to managers lower down in the organisation’s structure (allowing people closer to the final customer do make decisions, as they’ll probably make a decision that is best for the organisation - As they interact with the customers a lot more that others)
What are the pros of decentralisation
Local managers are closer to customers and so may be able to make better decisions
Increased responsibility may improve motivation
Easier to implement decisions as they are likely to be better understood
What are the cons of decentralisation
Can lead to inconsistency across the organisation
Depends on the skill level of managers lower down the hierarchy
