centralization and decentralization

The debate over whether to centralize or decentralize is not so much over which type of strategy is more effective but in the degree to which each strategy is used in combination with one another. Organizations are left with the task of deciding which operations should be centralized, decentralized, or left alone. Neither strategy is better or worse, the strategies are simply more or less appropriate under given circumstances. Below are two charts outlining some benefits and costs for each type of strategy.

Centralization

Benefits

Greater efficiency
Increased professionalism
Less parochialism
Uniform corporate image
Standardization of space allocation and furniture distribution
Cost Savings on bulk purchases of building services and materials
Minimizes company's dependence on outside consultants and vendors
Allows for company wide databases

Costs

May lessen internal communication
May lessen involvement with organizational image
May lessen the extent of "team member" feelings
Possible loss of innovation
Delayed response time
Manipulation of zoning, space allocation, and lease requirements probable
Dependence on centralized authorities may discourage the development of local skills and talents
Necessary changes become slow to implement
Decentralization
Benefits
Enhances communication and interaction among employees
Promotes project prioritization
Creates a need for less formalized communication
Facilitates a more comprehensive understanding of individual units
Less formal restrictions promote innovation and creativity
Increased input from local hubs
Costs

Loss of objectivity may occur
Possible loss of budget control failure
Possible loss of ability to address cross-therapeutic issues
Limited opportunity and ability to think more broadly
Need for constant employee training since operations are separate
Veteran knowledge easily lost with turnover
More difficult to ensure and monitor employee compliance with company policies

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