Centralization is known as the systematic reservation of decision making authority at the top level management. It is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. It reduces the roles of subordinates and the top level assumes full authority of running business activities.
The following are the main benefits or advantages of centralization:
Centralization Facilitates Unified Decision
Top level managers take all decisions in centralization. It is not necessary to consult and take consent of subordinates while taking a decision. The subordinates perform activities on the basis of instructions which facilitates maintenance of uniformity and consistency in performance.
Unbiased allocation of work
Being fair and just in assigning a particular amount of work, not only between different units but also between responsible individual employees will increase momentum within the Company.
Centralization Simplifies Structure
In centralized organization, the structure tends to be simple and clear. It involves two levels- managerial and operating levels. Managerial level is responsible for decision making whereas operating level is responsible for execution.
Standardization of work
By implementing centralization, one of the outcomes would result in equality of behavior that guarantees unvarying judgment and standardized progression.
Centralization Facilitates Quicker Decision
Centralization facilitates quicker decision as one manager takes all the decisions. Managers can take suggestions and guidance from experts and professionals, but the final decision is taken by him. Quick decision is essential for business success in competitive environment.
Area of specialization
There is an immediate advantage if a leader who handles a particular area is an expert in the same field. This will ease the work distribution process within the other levels of the team.
Economy in Operation
In centralization. many levels and positions of management are reduced. It minimizes overhead cost of the organization. It also helps in effective utilization of skilled, qualified and experienced members.
In a crisis or an emergency, standardization of work takes just one step to revise all the activities at once. This guarantees a greater degree of flexibility in an organization than a Company with no centralized training.
Centralization integrates Operation
Centralization helps to integrate and unify all the operations of the organization. The top level manager maintains close supervision of the subordinates and their functions. On the basis of requirement, a manager takes quick decision to maintain control over the activities of the employees.
Centralization is Suitable for Small Firms
Centralization is highly appropriate for small business organization performing business in a competitive environment. In such organizations, managers can personally look after overall activities of the organization.