Centralization Versus Decentralization

September 7th, 2008 Comments off
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Append below some pointers on Centralization and Decentralization:

 

Centralization

  • The holding of formal authority and decision making at the higher echelons of management hierarchy.

Decentralization

  • When a larger part of authority is delegated down the level of management &
  • Decision making is near the source of information

 

Salient Points

(1.0) Two important tests whether an organization has its authority centralized or decentralized are

  • (a) place of decision making authority in the management hierarchy
  • (b) degree of decision making at lower echelons of the organization.

Therefore, the greater number of decisions made and the more function affected by decisions at lower level, we can see a higher degree of decentralization.

(2.0) Note that decentralization is a systematic effort to delegate.

(3.0) Remember that decentralization is not merely a handing over process of authority to subordinates but is really all about the attitudes and philosophy of the organization and management.

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Financial Accounting

 
 

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