Centralisation, or centralization (see spelling differences), is the process by which the activities of an organisation, particularly those regarding planning and decision-making, become concentrated within a particular location and/or group.
The term has a variety of meanings in several fields. In political
science, centralisation refers to the concentration of a government's
power – both geographically and politically – into a centralised government. In neuroscience,
centralisation refers to the evolutionary trend of the nervous
system to be partitioned into a central nervous system and peripheral nervous system. In business
studies, centralisation and decentralisation
refer to where decisions are made in the chain of
command.
Centralization 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. According to Allen, “Centralization”
is the systematic and consistent reservation of authority at central points in
the organization. The implication of centralization can be:-
- Reservation
of decision making power at top level.
- Reservation
of operating authority with the middle level managers.
- Reservation
of operation at lower level at the directions of the top level.
The
degree of centralization and decentralization
will depend upon the amount of authority delegated to the lowest level.
According to Allen, “Decentralization refers to the systematic effort to
delegate to the lowest level of authority except that which can be controlled
and exercised at central points.