Centralisation is the tendency to concentrate decision making authority at the top level of an organisation. To the extent that authority is not delegated, it is centralized. An organisation is thus centralised if its main area of authority is handled by a few senior managers at the head office. Then managerial functions of planning, research and development, personnel and finance are delegated with enough authority. There is little diffusion of appropriate authority because the senior managers at the centre do not want to delegate more work to their subordinates.
Decentralisation is the tendency to disperse decision-making authority throughout all levels of management by extensive delegation. To the extent that authority is not delegated, it is centralized
Under decentralisation, power and control are systematically delegated to lower levels in the organisation. Decentralisation is pursued
i. when the environment is complex and uncertain;
ii. when lower level managers are talented; and
iii. when decisions being made are minor
Decentralisation involves:
i. determining what authority to push down to subordinates;
ii. developing policies and procedures to give to subordinates on how to use this authority
iii. controlling the use of this authority
iv. geographical relocation of activity.
