Centralisation or centralization (see spelling differences) is the process by which the activities of an entity or organization, particularly those regarding planning, decision-making and control of strategies and policies, become concentrated within a particular group, sector, department or region within that entity or organization. This creates a power structure where the said group, known as head or core group, occupies the highest level of hierarchy and has significantly more authority, prestige and influence over the other groups, who are considered its subordinates.
An antonym of centralization is decentralization, where authority is shared among numerous different groups, allowing varying degree of autonomy for each.
The term has a variety of meanings in several fields. In political science, centralisation refers to the concentration of a polity's governance — both geographically and politically — into a centralized government, which has sovereignty over all its administrative divisions. Conversely, a decentralized system of government often has significant separation of powers and local self-governance.
Centralisation of authority is the systematic and consistent concentration of authority at a central point or in a person within the organization. This idea was first introduced in the Qin Dynasty of China. The Qin government was highly bureaucratic and was administered by a hierarchy of officials, all serving the First Emperor, Qin Shi Huang. The Qin Dynasty practised all the things that Han Feizi taught, allowing Qin Shi Huang to own and control all his territories, including those conquered from other countries. Zheng and his advisers ended feudalism in China by setting up new laws and regulations under a centralised and bureaucratic government with a rigid centralisation of authority.
The acts for the implementation are needed after delegation. Therefore, the authority for taking the decisions can be spread with the help of the delegation of the authority.
The centralisation of authority can be done immediately, if complete concentration is given at the decision-making stage for any position. The centralisation can be done with a position or at a level in an organisation. Ideally, the decision-making power is held by a few individuals.
Centralisation of authority has several advantages and disadvantages. The benefits include:
Disadvantages, on the other hand are as follows:
As written in V.I. Lenin’s book, Imperialism, the Highest Stage of Capitalism, "The remarkably rapid concentration of production in ever-larger enterprises are one of the most characteristic features of capitalism." He researched the development of production and decided to develop the concept of production as a centralised framework, from individual and scattered small workshops into large factories, leading the capitalism to the world. This is guided by the idea that once concentration of production develops into a particular level, it will become a monopoly, like party organisations of Cartel, Syndicate, and Trust.
Most businesses deal with issues relating to the specifics of centralisation or decentralisation of decision-making. The key question is either whether the authority should manage all the things at the centre of a business (centralised), or whether it should be delegated far away from the centre (decentralised).
The choice between centralised or decentralised varies. Many large businesses necessarily involve some extent of decentralisation and some extent of centralisation when it begins to operate from several places or any new units and markets added.
According to a 2021 study, "firms that delegated more power from the central headquarters to local plant managers prior to the Great Recession outperformed their centralised counterparts in sectors that were hardest hit by the subsequent crisis."
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