Centralization

 

Centralization refers to the location or position where the decision-making centre is localized.  In a highly centralized organization, the decision making is at the top and in a decentralized organization; it is delegated down the line in the organization hierarchy. When business risks are high and difficult to manage, the organization emerges as centralized.

 

The organization is structured on the basis of the above four principle. The blend of these principles is decided on the nature of business, risk of business, management style and the environment of business. The blending of this principle would undergo a change as the business grows.  The organization is under a continuous process of change to meet the changing needs of business.  The organization emerges as centralized.

 

The organization is structured on the basis of the above four principle. The blend of these principles is decided on the nature of business, risk of business, management style and the environment of business.  The blending of this principle would undergo a change as the business grows.  The organization is under a continuous process of change to meet the changing needs of business.  The organization will have a different structure in its various business stages namely, inception, growth, maturity and decline. The structure of organization affects organizational productivity, individual performance, growth of human resource, and the manpower itself.  A considerable amount of saving in manpower and overhead expenses is possible, if the organization is properly structured to the business needs and towards fulfilling the objectives.

 

Independent of the blend of these principles, the effectiveness of the structure largely depends on the quality of people – ability, skills, knowledge, attitude and motivation. The basic model of the organization structure is shown in Fig 4.1.  It shows the arrangement of the people in a reverse tree structure.

The basic model will have more levels if the size of the organization is very large.  The number of levels will be determined on the basis of the span of control and the nature of work. The appropriateness of the structure can be decided based on the factors like responsibility and authority, economy in conducting the business, the ability to achieve the goals and objectives, a smooth flow of information exchange and communication. There are four variations of the basic model which are widely used in real life.