Centralization

Centralization is a business structure in which one individual makes the important decisions
(such as resource allocation) and provides the primary strategic direction for the company. In this
type of organizational structure, all decisions and processes are handled by the top management.
Apple is an example of a business with a centralized management structure. Within Apple, much
of the decision-making responsibility lies with the Chief Executive Officer (CEO) Tim Cook,
Apple has viewed as an organization that maintains a high level of centralized control over the
company’s strategies such as new product development, markets to operate in, and company
acquisitions

Decentralization
A decentralized organizational structure is one in which senior management has shifted the
authority for some types of decision making to lower levels in the organization for fast and
effective decisions and to improve efficiency. By letting the middle and lower level in the
process of decision-making, the top management can focus on other major decisions. This also
increases the responsibility and accountability of the employees.
For Example; the HR Manager at ABC Company, has to finalize a deal with a vendor. for this,
he negotiates best prices with discounts to close the deal. If his organization is a centralized one,
then he will first seek senior management permission to finalize the deal and wait for their
approval. If there is a delay by the management part, he might lose the deal. However, if his
company is decentralized, then, he has authority to close the deal all by himself with the vendor
without seeking any approval from the management which, in turn, results in finalizing cost-
effective and quick decision-making
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Formalization
Formalization is the element that determines the company’s procedures, rules and guidelines
as adopted by management. Formalization also determines company culture aspects, such as
whether employees have to sign in and out upon arriving and exiting the office, how many
breaks workers can take and how long those breaks can be, how and when employees can use
company computers and how workers at all levels are expected to dress for work.
Formalization indicates the goals and vision of an organization, tasks, hierarchy and
relationships, authority and responsibilities, different processes, and work methods.

A formal organization emphasizes on job roles, responsibilities, and assigning work to the
individuals as per the requirement of roles. These are controlled by rules and procedures.
An informal organization emphasizes on individuals, and the job responsibilities are designed
based on individual employee skills and preferences irrespective of the department in which
he/she is working. An individual can be assigned the role of different departments as well based
on self-interest, skills, etc.