CENTRALISATION AND DECENTRALISATION
CENTRALISATION
- The process of
systematically retaining power and authority in hands of higher level
managers.
- According to
Allen,centralisation is the systematic and consistent reservation of
authority at central points within the organisaton.
THE
CIRCUMSTANCES FORCING MANAGERS TO RESERVE AUTHORITY AND CENTRALISE DECISION
MAKING POWER
- To facilitate personal
leadership.
- To provide for integration.
- To handle emergencies.
DECENTRALISATION
• Decentralisation is the
pushing down of authority and power of
decision making to the lower levels of an organisation.
• Decentralisation is said to be
greater because
v When more important decisions are
made at lower levels
v When more functions are affected
by decisions made at lower levels.
• When the checking on the
decisions made at lower levels is minimal
TYPES OF DECENTRALISATION
- PROFIT CENTRES
It is a responsibility centre
whose budgetory performance is measured by the difference between revenues and
costs –in otherwords ,profits.
v Responsibility centre is a
subunit headed by a manager who is responsible for achieving
one or more goals.
2. COST/EXPENSE CENTRES
It is a responsibility centre where
budgetary performance depends on
achieving goals by operating within
standard cost limits.
. 3. INVESTMENT CENTRES
It is a responsibility centre
whose performance is evaluated on the basis of return on investment.
ADVANTAGES
OF DECENTRALISATION
It
reduces the workload of an overburdened executive.
-It brings the decision making process closer
to the scene of the action.
-It
facilitates product diversification.
-It
gives individuals an oppurtunity to
learn by doing.
-It
often results in effective controls and
performance measurements.
-It is
associated with the profit centre principle.
DISADVANTAGES
OF DECENTRALISATION
- Conflict
- Cost
- Profit centre concept
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