Centralization versus Decentralization in Management

Abstract

ET us understand by decentralization, diffusion throughout the personnel, as far as practicable, of the active principles or motivation of the organization. These active psychological principles are perception of purpose, responsibility, authority, initiative, interest in the outcome of the enterprise as a whole, together with an understanding of the social value of the enterprise. The application of these principles is materially affected by the mechanical arrangement of the organization, but decentralization must have a broader meaning than the mere arrangement of component parts. Mechanically speaking, organization of management is the harmonious marshalling of the functions of management and the coordination of the activities of its different elements for the purposes of production. The mechanical influences tending towards centralization, or towards decentralization in management are largely affected by the questions of size and complexity of the undertaking. Decentralization of management in a very small shop is hardly possible, and is certainly not desirable, while over centralization in management of a very large manufacturing industry may be highly undesirable. In the early days of industry organization was a simple matter, but as manufacturing developed from household industry and the small individually owned and managed shop, with its unspecialized labor, to the complex relationships of the elements of modern large scale production with its specialization of labor and subdivision of processes, organization of management has become a matter of most serious concern to the leaders and organizers of productive enterprises. Centralization and decentralization are opposite and balancing conceptions and the center of gravity of an organization lies intermediate between the two extremes, now approaching one,