Centralization
The Basic Idea
Consider who makes decisions in your family. When you were young, you were likely to have little influence over important decisions – your parents would choose where you went to school, whether you were moving, and where the next vacation spot would be. The decision-making was concentrated in the hands of the bosses. When important decisions are reserved to those at the top level of the unit, we call the decision-making process a centralized one.
When we talk about centralization, we are usually referring to an organization’s structure when it comes to making decisions. Centralization means that decision-making power is reserved for a specific, small group of people. Usually, this tends to be the higher-ups – the Chief Executive Officers or Presidents of a company, but in theory, power can be condensed to any level. Regardless of whether the power is, a small number of people end up making all of the decisions that affect the company at large.1
The opposite of centralization is decentralization. Decentralization is the delegation of authority across all levels of management in an organization. More people are responsible for making decisions. Oftentimes, decentralization occurs as a result of people from the head office delegating tasks to people in the main office – the final say can still be the responsibility of the CEO, but multiple people put forward their input before that decision is made. Centralization and decentralization can be best visualized on a continuum, with organizations and political systems usually finding their operations fall somewhere in between the two extremes.
We might think about the difference between centralization and decentralization as the difference between a democratic society and an authoritarian society but on an organizational scale. In a democratic society, the people have the power – they get to have their say. In an authoritarian society, the power is in the hands of the government – they are a dictatorship.
An administrative organization is centralized to the extent that decisions are made at relatively high levels in the organization; decentralized to the extent that discretion and authority to make important decisions are delegated by top management to lower levels of executive authority.
– American economist, Herbert A. Simon, in his 1954 bookOrganizing the Controller’s Department: A Research Study and Report2
About the Author
Emilie Rose Jones
Emilie currently works in Marketing & Communications for a non-profit organization based in Toronto, Ontario. She completed her Masters of English Literature at UBC in 2021, where she focused on Indigenous and Canadian Literature. Emilie has a passion for writing and behavioural psychology and is always looking for opportunities to make knowledge more accessible.
