Professional Documents
Culture Documents
Unit 25
Unit 25
Unit 25
Structure .. . .
25.0 Objectives
. ,
25.1 Introduction
, . 25.2 Meaning of Centralisation
25.3 Meaning of ~ecentralisation
25.4 Types of Decentralisation
25.5 Factors Affecting Centralisation and Decentralisation
25; Merits and Demerits of Centralisation . .I,.
25.0 OBJECTIVES
After studying this unit, ypu should be able to:
s explain the concepts of centralisation and decentralisation and the relationship
between the two
e analyse the facmrs that lead to the adoption of either of the two concepts or a
example, most of the powers of the heads of departments of the state government are cpntrnllsPtionand DeecntrPlisPlion
d e c e n t r a l i ~ eto~their field officers at the regional and district levels. This facilitates
@ck decision making keeping in view the local requirements.
dependent. relatively;ndependent;
"Profit Centre" concept.
The above figure gives us four possible combinations and the extent of centralisation
and decentralisation differsin all of them. Now we explain these combinations as under:
1 The first combination indicates a high degree of concentration of facilities as also of
authority in the top levels of the organisation hierarchy. These levels also perform all
the management functions of decision-making and directing their effective
implementation. Such an organisation may exist under the government especially
dealing with sensitive subjects like defence or some aspects of defence production
and also in some situations in the ministry of foreign affairs.,It is a case of minimal or
no delegation of authority. In private industry it resembles the units operating under
single or family ownership whose area of operation is smaIl or well manageable bj
the owners.
2 The second combination results in an organisation whose physical facilities are
centralised at one place. In,otherwords, the products and services are centralised but
the decision-making.authority is delegated horizontally and vertically. The level to
which the authority of decision-makingis delegated remains accountable to the .
higher levels for effective management as its decisionsmust be in conformity with the
overall policy of the top manzgement. Such type of situation may befound in service
agencies like the State Trading Corporation or the agencies concerned with foodgrain
procurement and engaged in the public distribution system like the PUNSUP in the
state of Punjab,
3 Thirdly, we may come across an organisation in which physical facilities are dispered
among various units located in various partsof the country or a regidn but the major I
deeision-makingauthority is centralised in the top levels of management. The units
may be vested with only small authority like sanctioningof leave, overtime, etc. Thus
1
authority to perform a limited number of management functions, which are
consequeritial of the major policies, is delegated so as to enable them to implement
the minor aspects of the major'policies. Significant and major policy matters are
reserved to the top management and are located at the central office or the
headquarters. Various road transport organisations both in the public and,private
a
sectors, largely fall in this category.
4 Lastly, a situation in which both the physical facilities and the deeision-making
aut'hority is dispersed or decentralised between various levels and the units, we get
an organisation based on administrative decentralisation or deconcentration. Such
an organisation performs wide ranging fuhctions and the units are allowed significant ,
functional autonomy. TheHindustan Machine Tools Ltd., falls to a great extent, in
this category. Mervin Kohn also refkrs to the 'profit centre' concept as part of this
model of organisation. It may be mentioned that this concept can only be applied to
private businks which is largely run on profit motive. However, in government
orgadsiltions.profit is seen in terms of productivity or social and economic gains that
are advantageous to the nation as a whole or to a seaion of the people.for whom a
. particular service is sperzifically intended. , v
I
We may siiy that the adoption of one or a mix of both would depend upon the Centralhtbn and Dtrentrallsation
organisation and its objectives, the nature of functions, the products or services, long
term plans and the overall strateg~..of production and marketing. Hence, the
equilibrium between centralisation and decentralisation would vary with the internal
and external forces in operation. "Internal forces emanate from the requirement of the
principle of hierarchy based on the superior-subordinate relationships, on the one
hand, and the nature of services, on the other. External forces axe based on the
relationship with the clientele, on the one hand, and the environment in which the
organisation functions, on the other". Much would depend on the maturity of the
people and levels of development in a country. In the words of Muttalib, "... the
operation of the principle of hierarchy may not exhibit much authoritarianism when
members of the organisations and the clientele are drawn from,asociety that value
greatly the egalitarian concept". F w the success ufpoliti~aland admipishtiw41
decentralisation, Pfiffner and Sherwood suggest that decentralisation needs, very
careful treatment for achieving the desired benefits. Moreover, it requires maturity and
character, not only on the part of the individual members of the organisation but also
in the culture of the larger society as well as the subculture of the organisation itself.
.- 1
- in ~rganisation-II
concrp~s approach foecarrying out organisational operations which result in uniformity of
action. Moteover, this concept is quite handy in emergencies and for dealing with .
unanticipated matters. I
Merits of Centralisation
a) It is .eaSier t o develop uniform policies and, practices i n a centralised organisation.
Moreover, it can effectively achieve conformity to the prescribed procedures and
can bring about better coordination among the various units and levels of the
organisation.
b) Such a system further adds to the prestige and influence of the top executives.
Authority being concentrated at the top level, it is easier to identify the key person1
persons who exercise the real a u t h o r i t ~This is helpful in creating a suitable climate
for fulfilling the aspirations of those executives or leaders who prefer to combine
prestige with real organisational operations.
I c) If process of centralisation is strengthened, duplication in an administrative
organisation can be avoided.
d) It has been claimed by Menin Kohn that a centralised organisatioh deveTops a
corporate personality by enabling the full utilisation of the personnel and the
equipment in organisation.
4
It may be said that the merits of centralisationare very much limited and can largely be
obtained in small sized organisations. m ow eve^, in bigger organisations it becomes a n
obstacle for effective polioy formulation and its implementation.
~ e m e r i t of
s Centralisation
a ) A centralised organisation does not allow the development of second line of
executives as all the lower levels are more dependent on the orders and directions
of the top executives. The emergent situations require immediate decisions for
reaching the desired solytions. In a centralised organisation, if erpergencies arise at
the unit level, their solutions becomes difficult by the unity itself as they do not e n j o y
any decision makirig authority.
(1
of decisions made at the lower levels is quite large as compared to the decisions t a k e n
at the top levels of the organisation.
hierits of Decentralisation
. I
i In the process the top levels deal with very important matters; whereas, the lower . .
levels are left free to tackle less important issues. Hence unnecessary burden on top
management is avoided.
c) A decentralisedorganisation encourages innovations as it welcomes creative ideas
and new techniques recommeqded by the lower levels of the Gganisation.
Moreover, this system tries to assimilate the best of the generalist and specialist
personnel working in the organisation. It leads to more interaction among the
personnel. Futther, a decentralised system encourages the expansion of the
organisation and permits desirable diversification for effective achievement of goals.
Louis 4. Allen observes that a decentralised organisation helps to:
i) base the burden on top executives or on those who operate from the central points
ii) facilitate 'diversificatibn
iii) make decisions at the scene of action for effective and fruitful delivery of goods and
I
services
iv) encourage development of meaningful talents
v) improye motivation of people within the organisation
/
Apart from various advantages of decentralisation there are many draw backs of this
, system too. Some scholars feel that decentralisation may lead to disintegration and may
considerably weaken the top levels of an ,organisation.
Demerits of Decentralisation
a) In 4 decentiiiiised organisation communication among various levels becomes
'
difficult. At times the message communicated from top becomes blurred and
changes its contents and meaning when it reaches the concerned individual in the
organisation. Moreover, geographical distancedalso create problems in the way oq
effective communication and control systems.
b) It is very difficult to introduce effective system of coordination both at policy making
'. ' and policy iniplementation levels.
' c) It leadqto overlapping and duplication of efforts in most of the organisationsas they
fail to clearly identify and define the activities and responsibilitiesin precise terms.
Duplication in the performance of staff functions is a rule rather than an exce'ption
in a decentralised organisation.
d) It may become difficult to maintain desired uniformity in the standards in d,ecision
making due to comparatively less control of the higher levels df the organisation.
e) The decentralised system necessarily results in higher costs of its operational
aktivities. For such a situatiqn there can be many factors but one easily identifiable
factor is the underutilisation of the availab1.e talent in the organisation.
'W
--- ..
Check Your Progress 2
Note: i) Use the space below for your answers,.
ii) Check your answers with those given at the end of the unit. - I
' . 1 Discuss the merits and demerits of centralisation.
. . , , 4
I
.................. . . . . . . . . . . . . . . . . . . . .....................................;..........................
"
Concepts in Orgnnisation-1 2 What are the major advantages of decentralisation?
Degree of decentralisation is greater when more decisions are taken at the lower levels
both in routine and important matters, In other words greater the freedom allowed to
the subordinate levels the more decentralised organisational structure will be. Under
this system there is less control and supervision of the higher levels over the subordinate
units. Mervin Kohn opines that depending upon the location of facilities (plant,
personnel, etc.) and decision-making authority, we get four ,models of an organisation
where authority.concentration or its a'id'lBpersal gives us a centralised o r decentralised
organisation. Both theke principles have their relative merits and demerits. We can use
either or both depending upon the nature, objectives and the area of operation of the
'biganisation.
/ I
Pfiffner John M and Sherwood, Frank M,'1968. Administrative Organisation; Prentice-
Hall,of India Pvt. Ltd.: New Delhi.
.
Special Number on Decentralisation -Indian Journal of Public Administration, July-
September, 1978.
u