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Centralisation of Authority refers to systematic and consistent concentration of authority for decision making at higher levels of management. In centralised organisation top mgt. has the absolute authority for making almost all the decisions. Middle and lower managers are given little authority.
They depend on the top mgt. for instruction and guidance on all matters. They are expected to show no initiative and freedom in their day to day activities. The top Mgt. exercises strict supervision and control over all the activities in the organization.For eg. The owner of a grocery store may himself take all decisions relating to purchase , sales accounts , stocks etc.
Merits of Centralisation
Standardized systems and procedures
Professional and personal leadership
Economy of operation
Coordination and cooperation of functional activities
Utilization of personnel
Demerits of Centralisation
Individual efforts are restricted
Over burden of work of subordinates
Slow operation of business
Distance from customers
No scope for specialization
Decentralization of authority means dispersal of authority in all departments and all levels of management. An organization said to be decentralized when managers at middle and lower levels are given the authority to take decisions on matters relating to their functions. For e.g.. The production manager and the factory manager are authorized to decide the quality and quantity of the product ,the tech. , the materials to be used. They are required to take decisions keeping in view the overall policies of the company.