centralization

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centralization

the vertical dimension of ORGANIZATION structure. Organizations are centralized when important decisions are largely taken by managers at the top of the organization. There is a persistent tension between DECENTRALIZATION and centralization organizations. Centralization of decisions is useful to provide central direction to the organization. However, it can mean that the organization cannot respond quickly to PRODUCT MARKET developments. Also, if lower level managers are precluded from making important decisions it can have negative effects on their job satisfaction. See ORGANIZATIONAL ANALYSIS.

centralization

the concentration of economic decision-making centrally rather than diffusing such decision-making to many different decision-makers. In a country, this is achieved by the adoption of a CENTRALLY PLANNED ECONOMY where the state undertakes to own, control and direct resources into particular uses. In a firm, centralization involves top managers retaining authority to make all major decisions and issuing detailed instructions to particular divisions and departments.

See U-FORM ORGANIZATION.