Question

What is meant by centralisation and decentralisation? Tell the difference between two.

Hint:

Define both terms clearly first, then contrast them point by point (location of decisions, speed, workload, development, suitability).

Answer 1

Step 1: Meaning of centralisation:
Centralisation is the systematic and consistent concentration of authority at central points within the organisation, typically with top management, so that most important decisions are made only at the top.

Step 2: Meaning of decentralisation:
Decentralisation is the systematic dispersal of authority to lower levels of management throughout the organisation, allowing managers at various levels to take relevant decisions without needing constant approval from the top.

Step 3: Difference 1 — Decision-making location:
In centralisation, decisions are made mainly by top management; in decentralisation, decision-making authority is spread across multiple levels.

Step 4: Difference 2 — Speed of decisions:
Centralisation can slow decisions since everything routes through the top; decentralisation typically speeds up decisions since lower-level managers can decide on the spot.

Step 5: Difference 3 — Burden on top management:
Centralisation increases workload on top executives; decentralisation reduces this burden by sharing decision-making responsibility.

Step 6: Difference 4 — Development of managers:
Centralisation offers fewer opportunities for lower-level managers to develop decision-making skills; decentralisation actively develops future managerial talent by giving them real decision-making practice.

Step 7: Difference 5 — Suitability:
Centralisation suits small organisations or situations needing uniform policy and tight control; decentralisation suits large, diversified, or geographically spread organisations needing local responsiveness.

Final Answer:
Centralisation concentrates decision-making authority at the top; decentralisation disperses it across levels — they differ in decision location, speed, burden on top management, managerial development, and suitability.