Centralization (Meaning and Explanation)

We explain what centralization is, how it is classified and its advantages and disadvantages. Also, examples and what is decentralization.

Centralization - company - organization — Centralization creates nuclei of power, responsibility or processing.

What is centralization?

We speak of centralization when the powers of decision or process within any organization tend to converge in the same instance, or in simpler terms, when all the power or all the obligations tend to fall in the same organizational instance whether as part of a government, a company or any administrative model.

Centralization will then be the tendency to centralize, that is, to create nuclei of power, responsibility or processing which have many inputs and a few (or a single) output, thus creating a convergence. This can occur in many human and even biological areas, since centralized resource management can be, on certain occasions, much more efficient than dispersed one.

For example, the Centralist governments are those that prefer a single and hegemonic center of power from which to govern the rest of the country, instead of a tendency towards dispersion and autonomy such as that proposed by the decentralization of federal or federative governments. In the business sphere, similarly, we speak of centralization when the lower levels in the business hierarchy transfer their administrative authority to a higher level, that is, they converge in the same leadership or supervision.

Types of centralization

Centralization - organization - company — Managerial centralization manages communications to team leaders.

In the administrative field, we can talk about different types of administration, such as:

Performance centralization Applies to geographical and operational centralizations within an organization, as would be the case of a company that locates all the personnel for a given process in one of its headquarters, or that channels all requests from a given region through a branch. .
Department centralization It occurs when an organization builds specialized departments or coordinations, to which the systems will take charge of all the IT and technological requirements of the rest of the company.
Managerial centralization It strictly concerns decision-making, concentrated in high-level management or in some type of leadership, which also manages communications to team or department leaders, thus having full and centralized control of the company.

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Advantages of centralization

All centralization seeks an increase in control. The centralist models facilitate surveillance, single decision making, control of resources and the specificity of the organization, given that decision or processing nuclei for the different tasks are created, preventing tasks from being duplicated, repeated or dispersed. All centralization generates hierarchies and establishes leadership dynamics, making it an ideal system for strong leadership.

For example, centralist governments were very important during the formation of Latin American nations, because By focusing all political and economic power on the figure of a president, the nation was more easily established and much less room was left for anarchy and the eventual dismemberment of the country.

Disadvantages of centralization

Centralization also has its disadvantages, especially with regard to the dependency between the core and the periphery regarding decision making and information processing. It is common in centralized models for “bottlenecks” to appear, that is, funnel dynamics in which the input of a department is much higher than its processing or decision-making capacity, but since everything is centralized, no one else can vent the problem. volume of pending work. This causes delays and sabotages productivity time.

Another risk of centralization has to do with despotism or excessive rigidity in the hierarchy thus being able to generate authorities on whom everything falls. This reduces junior staff to merely following orders or instructions, forcing them to wait for a response from management that usually takes time, and is often required quickly, for immediate decision-making. Bureaucratization is usually a consequence of excessive centralization.

Example of centralization in a company

A clear example of centralization in The management of a company constitutes the creation of a Strategic Management o Operations Management, in charge of supervising absolutely all sections of organizational management. This authority will enjoy full powers in the company and will therefore be able to make appropriate decisions to promptly resolve difficulties, will be able to freely request information and will be able to intervene in any process as it deems necessary. This will reinforce the company's work criteria, prevent risky decision-making and aim to create a common administrative criterion, reducing anarchy to a minimum.

In exchange, however, there will be a notable increase in business bureaucracy, since All communications and documents must also be sent to the new management which in turn will issue new documentation to transmit its decisions. In addition, there will be a risk that the decisions of this management will be delayed (suppose, due to the momentary absence of key personnel) and subject the rest of the company to a waiting time, delaying the entire production line.

Decentralization

Decentralization is, logically, the opposite process to centralization, that is, the tendency to give autonomy of action and independence in their procedures to the various units of an organization such as coordinations or departments. A decentralized regime consists of a number of independent units, each capable of meeting similar obligations.

Political decentralization It is key for federal or federative governments which consist of the union of equals between the different states or departments that make up the country.

Continue in: Decentralization