What about centralization


Centralisation is a common ocuurrence in small enterprises. The success of a small enterprise depends upon the dynamic manager who single-handedly commands the running of the concern. He takes all the decisions himself and entrusts only implementation to the subordinates. There is a direct link between the proprietor and his employees, he personally supervises all managerial functions of production, marketing, financing, etc. In fact, he has no organisaguidance and his counselling is final.tion other than himself. He is consulted for every type of Centralisation is generally successful in small-scale enterprises. This is possible because the operations are limited and the proprietor is able to deveote personal attention to every activity of the business. This type of management is useful where emergency decisions are to be taken. With the expansion of business the control becomes difficult and the need for decentralisation arises,

Factors Determining Centralisation of Authority

The management of an undertaking may centralise decision-making for the following reasons :

1. Achieving Uniformity of Action-Uniformity of action is possible when decision-making authority is centralised. The decisions taken at the top will be implemented at every level. There may be more than one unit under the same management and it may be desired to have same types of policies and procedures. If the units take their independent decisions then uniformity of action will not be achieved.Under such situations centralised decision-making will enable unity of action.

2. Facilitating Integration- There may be a need to integrate all operations of the enterprise for achieving common objectives. Centralised management will facilitate integration of activities by devising common policies and programmes.

3. Promoting Personal Leadership-The small enterprises grow on the strength and capability of their manager. Even big concerns too depend upon the qualities of their managers during initial periods. The whole authority will be in the hands of the chief executive. This will result in quick decisions and imaginative actions. The manager will acquire more and more skill and experience which will promote their personal leadership.

4. Handling Emergencies Under uncertain business conditions there is a need to take emergency decisions. Sometimes the existence of small-scale units is endangered if timely actions are not taken. Centralised authority will enable quick and timely decisions from short-term as well long-term perspective

Advantages of Centralisation

Following are the advantages of centralisation:

1. Standardisation of Procedures and Systems-Centralisation enables standardisation of procedures and syslems. It facilitates smooth working in the organisation. There is also a consistency in day-to-day working. The consumer Service will also improve if standard policies are used.

2. Facilitates Evaluation- When same policies are used for all segments of the enterprise their performance can easily be evaluated. It also helps in comparing the results of different departments. This will bring a sense of competition among various segments. Ultimately the overall performance will improve.

3. Economies-Centralisation of management will bring in economies of large scale. There will be a centralised buying and selling. This will enable bulk buying resulting in discounts and savings in transportation expenses. When sales are done in large quantities then customers are offered better terms and low prices. There will be an economy in managerial expenses also.

4. Co-ordination of Activities-Co-ordination of activities of various segments is also facilitated by centralised management. In the absence of centralisation, different segments may pursue their independent policies. This may-result in disunity and disintegration. Different segments may emphasise their own goals only without bothering about organisational objectives. Centralised management will help in co-ordinating the work of different segments in such a way that organisational goals are achieved.

Disadvantages or Evils of Centralisation

Centralisation may be useful only upto a certain level and also under certain conditions. Beyond a certain point it creates difficulties in day-to-day working and also restricts the growth of an enterprise. Following are some of the disadvantages of contralisation :

1. Destroys Individual Initiative-Centralisation revolves around one person only. One man takes all the decisions and decides the modes of implementing them. Nobody is given the authority to use his own judgement even if there are glaring lacunae in the decisions. It destroys initiative of subordinates. They do not make any suggestions and just carry on with whatever has been conveyed to them.

2. Over burden of Few- This system gives all responsibilities to few persons in the organisation. They remain over-burdened with routine work while subordindates do not have sufficient work. The centralisation of all powers do not allow the chief executive to devote sufficient time for important tasks of planning, co-ordinating and motivating.In a decentralised set-up routine matters are left to the subordinates and manager concentrates on important administrative work only.

3. Slows Down the Operations. The operations of the enterprise are slowed down under centralised set-up.All decisions are taken only by one person and his unavailability keeps the matters pending. Even clarifications about decisions are referred to the top which destroys invaluable time in formalities. If the subordinates have powers to interpret decisions then operations can be toned up. Things move very slowly in a centralised set up because everything has to pass through the manager.

4. Distance from Customers. The customers do not come into contact with policy-makers. They meet only those officials who do not have the powers to take decisions. Moreover one person cannot meet and know the reactions of customers regarding products and service. This also comes in the way of intimate understanding of market situations by the chief executive.

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