Principle: CENTRALISATION AND DECENTRALISATION

When the power to take decision rests with the top management it is called as ‘Centralisation’.

When the power to take decision is given to the person performing the job it is called as ‘Decentralisation’.

Fayol is of the opinion that there should be a proper balance between centralisation and decentralisation. An organization must not be completely centralized or decentralized, there should be a match between the two depending upon the size, nature and location of business.

The top management must keep the authority to take important decisions of the organization but adequate authority must be delegated to the lower level employees to take the department level decisions. This will facilitate the proper and timely functioning in the organization. And the top management will be free from extra burden of taking and handling each and every affair of the organization. All the lower level problems will be handled at that level only, this also gives a feeling of superiority to the lower level employees which motivates them to perform better.

Positive impacts of this principle:

• Facilitates proper functioning of the organization;
• Timely completion of work;
• No extra burden on the top management;
• Motivates the lower level employees; and
• Decisions will be taken at the level of action.

Consequences of violation of this principle:

• Over burden on the top management;
• Difficulty in the achievement of organizational objective;
• Delay in action, because the decisions of top management are to be waited.
• Sometimes it creates conflict between the management and the employees; and
• Ego clashes in case of different decision by lower level and top level management.