Decentralization: The Centralization Process

I. Introduction

Decentralization is a process where the decision-making authority is distributed throughout a larger group. It also indicates a higher authority given to lower level functionaries, executives, and workers. This can be in any organization of any size, from a governmental authority to a corporation. In other words, decentralization is the perfect opposite of centralization, in which the decision making powers are delegated to the departmental, divisional, unit or center level managers, organization wide. While centralization, especially in the governmental sphere, is widely studied and practiced, there is no common definition for the term decentralization. However, the meaning of decentralization can vary to a limited extent

The causes of the existence of the decentralized decision making

First and foremost, decentralization provides lower-level managers with crucial experience in making decisions. Without this experience, they would not be prepared to act decisively when they are promoted into higher-level positions. These decisions are important but not as vital as developing a criteria for the hiring and dismissal of employees. Hansen, Mowen and Guan (2009) claim that firms may prefer decentralization because it ensures efficiency by making sure that managers closest to the local information make decisions in a more timely fashion; that managers have hands on training to prepare them to move up the management hierarchy; that managers are motivated by having the freedom to exercise their own initiative and creativity; that managers and divisions are encouraged to prove that they are profitable, instead of allowing their failures to be masked by the overall profitability of the company. Moreover, decentralized supply chain configuration (SCC) example could offer various contemporary advantages such as individual suppliers’ decision right protection and overall decision efficiency enhancement (Qu, Huang, Zhang and Dai, 2010). Furthermore, top management is free to concentrate on higher-level problem-solving, company strategy, higher-level decision-making and also coordinating activities. Decentralization allows top management to be free of the day-to-day "non-important" details of running a company. It can focus on important financial decisions, recruiting, training and maintaining a productive workforce, and positioning the company to be a force within its industry. Last but not least, according with Bardhan and Mookherjee (2000) decentralization, by shifting control rights from the central bureaucrat (who otherwise acts like an unregulated monopolist) to a local government, typically tends to expand senile deliveries as authority goes to those more responsive to user