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Explain the factors that influence centralization and decentralization

Factors Affecting Decentralisation The ten important factors affecting or influencing decentralisation are: Size of the organisation Large organisation makes a lot of decisions.

Centralization: Factors, Advantages and Disadvantages

Their decisions are taken at different levels. So large organisations are more decentralised. Small organisation makes few decisions. All their decisions are taken at the top level. So small organisations are less decentralised. Thus, we can say, the bigger the organisation, the more the decentralisation and vice-versa. Cost and Importance of decisions The most costly and important decisions are made by the top level of management.

So, there is less decentralisation of costly and important decisions. Thus, we can say, the higher the cost and importance of the decision the lesser the decentralisation and vice-versa. Uniformity If the management wants more uniformity, then there will be more centralisation and less decentralisation. History of organisation An organisation which expands from within has more centralisation.

Henry Ford made most of the decisions for Ford Motors.

However, an organisation which expands with the help of business combinations has more decentralisation. Management Philosophy The management philosophy also influences decentralisation. If the management wants to make all the decisions themselves, then the organisation will be more centralised and vice-versa.

Availability of efficient managers If more efficient managers are available, then there will be more decentralisation. However, if there is a shortage of efficient managers then there will be more centralisation. Control Systems If there is a good control system in the organisation, then there will be more decentralisation. This is because authority cannot be decentralised and delegated without proper control techniques.

Types of Business If a business is old and slow moving, then it will have more centralisation. However, if the business is new and fast moving, then it will have more decentralisation.

Branches of organisation If an organisation has many branches at different places, then it will have more decentralisation. However, if the organisation does not have any branches, it may have more centralisation.

Type of organisation Joint-stock companies are generally more decentralised compared to sole trading concerns and partnership firms.