Dupo, Kathrine Pearl A.

BSA 3-A March 7, 2022

STRABA

1. Discuss the difference of Centralization and Decentralization. Give at least 5

comparisons.

Centralization and decentralization are the two types of structures found in

an organization. These structures refer to how planning and decision-making are
done. Among several comparisons, some of the differences between
centralization and decentralization include the following:

1. Centralization refers to the retention of authority and powers concerning

planning and decision-making with the top management. On the other
hand, decentralization refers to the dissemination or delegation of
authority, responsibility, and powers by the top management to the
middle or low-level management.

2. Centralization involves the systematic and consistent reservation of

authority at central points, while, decentralization involves the
systematic dispersal of authority in an organization.

3. In centralization, decision-making takes time due to the concentration of

powers in the hands of a single person or the top management.
Meanwhile, as decisions are taken much closer to the actions due to the
delegation of powers, decision-making is comparatively faster in
decentralization.

4. Centralization is implemented when there is inadequate control over the

organization and decentralization when there is considerable control
over the organization.

5. Centralization is best suited for small-sized organizations and

decentralization for large-sized organizations.
2. Give at least 5 advantages and disadvantages of centralization and
decentralization.

CENTRALIZATION

ADVANTAGE
Allows for common standards
and metrics
This may lead to greater
uniformity within the organization as
1
each branch of the business will be
using standardized procedures.
Easier integration with
external stakeholders
2 It only needs the top
management to deal with external
stakeholders.
Improved quality of work
The standardized procedures
and better supervision result in
3 improved quality of work.
Reduces the replication
tasks
4 Standardization of work also
reduces the replication of tasks that
may result in high labor costs.
Reduced costs
The organization does not need
to incur extra costs to
5 specialists for its branches since
critical decisions are made at the
head office and then communicated
to the branches.
DISADVANTAGE
Often less responsive to
localized external pressures
Because authority is given solely
to the top management, and
communication is done formally, there
may be a lack of certain relationships
that may address localized external
pressures.
Can lead to demotivated staff
Since employees are not given the
opportunity to be involved in the
decision-making process, they may
become less eager to work.
Delays in work
As records are sent to and from
the head office, and employees rely
on the information communicated to
them from the top, there may be a
loss in man-hours if there are delays
in relaying the records.
of Slower decision making
Decision-making lies only with the
top management which needs to
consider several areas before moving
on.
Fewer career opportunities for
employees
hire Since employees only follow what
the top management orders, they tend
to miss the opportunity to explore their
careers and be involved with the
organization they are in.
 DECENTRALIZATION

ADVANTAGE DISADVANTAGE
More responsive to changes in May lead to poor a decision-
individual/local markets making
As staff in each department Since power is delegated to lower-
1 have a piece of greater local level managers, poor decisions could
knowledge, the business will be be made if managers are not as
more responsive to changes in the experienced and competent as the
markets. managers in the head office.
More motivated employees Slower to adopt best practices
Employees are allowed to make Practices may be different from
decisions and be creative, thus department to department, thus
2 making them motivated and eager to becoming a competition for which the
work harder due to their involvement best practices are yet to be
in the future of the organization they discovered and adopted by the
are working for. organization as a whole.
Leads to a direct relationship Difficulty in comparing
with customers performance across units
Since there may not be many Since each unit almost acts on its
restrictions regarding outreach and own, and the way they are being
3
communication, the organization managed may vary, performances
may become closer to its customers across units might be difficult to
and more responsive to their assess.
concerns.
Fast decision-making Can duplicate efforts or
Decentralized organizations resources
delegate authority down the chain Without standardization and single
4
of command, thus reducing the command, decentralization may lead
speed of decision-making. to the duplication of efforts or
resources among departments.
Greater career options May result in higher costs
Given the opportunity to be Replication of efforts may result in
involved in the organization’s higher costs, also, may lead to extra
5
decision making, be creative, costs in finding talents suitable for
innovative, and resourceful, greater leading each department without
career options will be opened. risking the quality of work.
3. What do you think is the most effective system, Centralization or
Decentralization?  Rationalize your answer to why you chose it as the
effective system.

To answer which is better between centralization or decentralization

actually depends on what type of business or organization you are in. However, if
I were to choose, after weighing both the advantages and disadvantages of
centralization and decentralization, I think the most effective system would be
decentralization.

Decentralization allows involvement, thus, encouraging creativity,

innovation, flexibility, career development, and empowerment, which fuels
passion and will to work towards organizational goals. Several trends foresee the
shifting towards decentralization. As current trends are continuing to change and
develop, it is better to keep closer relationships among customers and to allow
lower-level management to participate in decision-making as they are the ones
who can see, understand, address, and respond quickly to these changing
customers’ needs.

Moreover, the cons of decentralization can be controlled and lessened with

proper coordination and orientation of every department. Though power and
authority are spread to lower-level management, it is still important for the top
management to see if its units are working effectively and efficiently, as well as
making sure that everything is still done accordingly to achieve common goals. It
is always important to let lower-level management explore but this does not mean
that top management does not have to be involved at all. Further, with open
communication, I believe that interaction among various departments will enable
effective brainstorming and coordination that will lead to the organization’s
success as a whole.