Friday, February 12, 2010

Centralization & Decentralization



Centralization:
The extent to which authority is concentrated at the top management levels.
The act or process of centralizing, or the state of being centralized; the act or process of combining or reducing several parts into a whole; as, the centralization of power in the general government; the centralization of commerce in a city.
Situation in which decision-making power is at the top of an organization and there is little delegation of authority. It is the opposite of Decentralization. Centralization and decentralization are really a matter of degree. Full centralization means minimum autonomy and maximum restrictions on operations of subunits of the organization. As an organization grows in size and complexity, decentralization is generally considered to be effective and efficient.
Centralisation, or centralization, is the process by which the activities of an organisation, particularly those regarding Planing decision-making, become concentrated within a particular location and/or group.

In political science, this refers to the concentration of a government's power - both geographically and politically, into a centralised government.

In neuroscience, centralization refers to the evolutionary trend of the nervous system to be partitioned into a central nervous system and peripheral nervous system.

In business studies centralisation and decentralisation is about where decisions are taken in the chain of command.

Decentralization:
The extent to which authority is delegated to lower management levels.
Delegation of decision-making to the subunits of an organization. It is a matter of degree. The lower the level where decisions are made, the greater is the decentralization. Decentralization is most effective in organizations where subunits are autonomous and costs and profits can be independently measured. The benefits of decentralization include: (1) decisions are made by those who have the most knowledge about local conditions; (2) greater managerial input in decision-making has a desirable motivational effect; and (3) managers have more control over results. The costs of decentralization include: (1) managers have a tendency to look at their division and lose sight of overall company goals; (2) there can be costly duplication of services; and (3) costs of obtaining sufficient information increase.
1. The devolution of ‘decision-making powers to the lowest levels of government authority…to promote democracy and participation, such that local people are directly involved in decisions and developments which affect them personally’ (Nel and Binns, Geography 88).

2. A process counteracting the growth of urban areas, and known also as counter-urbanization. Even while the city is still growing, it has many negative externalities such as congestion, noise, pollution, crime, and high land values. Such problems are a spur to spontaneous movement away from the cities which has been compounded by the increasing locational freedom of shops, offices, and industries to move to out-of-town shopping centres, office parks, and industrial estates, respectively, together with the increase in numbers of white-collar workers and the consequent rise in incomes, and mass car ownership. Research in the late 1970s indicated that a number of city regions in the UK and north-west Europe were undergoing absolute or relative decline in their cores while growth continued in their hinterlands, and by the mid-1980s similar trends were observed in Mediterranean cities, especially in Italy.

On a national scale, governments may favour decentralization to restore the fortunes of declining regions which are suffering from out-migration to the extent that services and infrastructure may be under-used. Governments may attempt to decentralize by discouraging new investment at the centre and encouraging growth in the depressed areas. Incentives for such relocation include grants, loans, tax concessions, and the provision of industrial premises.

Decentralization or Decentralisation is the process of dispersing decision-making governance closer to the people and/or citizen. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy, sociology and economics. Decentralization is also possible in the dispersal of population and employment. Law, science and technological advancements lead to highly decentralized human endeavours.

"While frequently left undefined (Pollitt, 2005), decentralization has also been assigned many different meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen & Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general contexts (Conyers, 1984), fields of research, and specific scholars and studies." (Dubois and Fattore 2009)

A central theme in decentralization is the difference between a hierarchy, based on:
authority: two players in an unequal-power relationship; and
an interface: a lateral relationship between two players of roughly equal power.

The more decentralized a system is, the more it relies on lateral relationships, and the less it can rely on command or force. In most branches of engineering and economics, decentralization is narrowly defined as the study of markets and interfaces between parts of a system. This is most highly developed as general systems theory and neoclassical political economy.

Decentralization in history

Decentralization and centralization are themes that have played major roles in the history of many societies. An excellent example is the gradual political and organizational changes that have occurred in European history. During the rise and fall of the Roman Empire, Europe went through major centralization and decentralization. Although the leaders of the Roman Empire created a European infrastructure, the fall of the Empire left Europe without a strong political system or military protection. Viking and other barbarian attacks further led rich Romans to build up their latifundia, or large estates, in a way that would protect their families and create a self-sufficient living place. This development led to the growth of the manorial system in Europe. This system was greatly decentralized, as the lords of the manor had power to defend and control the small agricultural environment that was their manor. The manors of the early Middle Ages slowly came together as lords took oaths of fealty to other lords in order to have even stronger defense against other manors and barbarian groups. This feudal system was also greatly decentralized, and the kings of weak "countries" did not hold much significant power over the nobility. Although some view the Roman Catholic Church of the Middle Ages as a centralizing factor, it played a strong role in weakening the power of the secular kings, which gave the nobility more power. As the Middle Ages wore on, corruption in the church and new political ideas began to slowly strengthen the secular powers and bring together the extremely decentralized society. This centralization continued through the Renaissance and has been changed and reformed until the present centralized system which is thought to have a balance between central government and decentralized balance of power.
Decentralised governance

Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi-independent government organizations and/or the private sector[1]—is a complex and multifaceted concept. It embraces a variety of concepts. Different types of decentralization shows different characteristics, policy implications, and conditions for success.

Typologies of decentralization have flourished (Dubois & Fattore 2009). For example, political, administrative, fiscal, and market decentralization are the types of decentralization[2]. Drawing distinctions between these various concepts is useful for highlighting the many dimensions of successful decentralization and the need for coordination among them. Nevertheless, there is clearly overlap in defining these terms and the precise definitions are not as important as the need for a comprehensive approach (see Sharma, 2006). Political, administrative, fiscal and market decentralization can also appear in different forms and combinations across countries, within countries and even within sectors.
Political decentralization

Administrative decentralization seeks to redistribute authority, responsibility and financial resources for providing public services among different levels of governance. It is the transfer of responsibility for the planning, financing and management of public functions from the central government or regional governments and its agencies to local governments, semi-autonomous public authorities or corporations, or area-wide, regional or functional authorities. The three major forms of administrative decentralization -- deconcentration, delegation, and devolution -- each have different characteristics.
Deconcentration

Delegation is a more extensive form of decentralization. Through delegation central governments transfer responsibility for decision-making and administration of public functions to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it. Governments delegate responsibilities when they create public enterprises or corporations, housing authorities, transportation authorities, special service districts, semi-autonomous school districts, regional development corporations, or special project implementation units. Usually these organizations have a great deal of discretion in decision-making. They may be exempted from constraints on regular civil service personnel and may be able to charge users directly for services.
Devolution
Main article: Devolution

Devolution is an administrative type of decentralisation. When governments devolve functions, they transfer authority for decision-making, finance, and management to quasi-autonomous units of local government with corporate status. Devolution usually transfers responsibilities for services to local governments that elect their own elected functionaries and councils, raise their own revenues, and have independent authority to make investment decisions. In a devolved system, local governments have clear and legally recognized geographical boundaries over which they exercise authority and within which they perform public functions. Administrative decentralization always underlies most cases of political decentralization.
Fiscal decentralization

Dispersal of financial responsibility is a core component of decentralisation. If local governments and private organizations are to carry out decentralized functions effectively, they must have an adequate level of revenues – either raised locally or transferred from the central government– as well as the authority to make decisions about expenditures. Fiscal decentralization can take many forms, including
self-financing or cost recovery through user charges,
co-financing or co-production arrangements through which the users participate in providing services and infrastructure through monetary or labor contributions;
expansion of local revenues through property or sales taxes, or indirect charges;
intergovernmental transfers that shift general revenues from taxes collected by the central government to local governments for general or specific uses; and
authorization of municipal borrowing and the mobilization of either national or local government resources through loan guarantees.

In many developing countries local governments or administrative units possess the legal authority to impose taxes, but the tax base is so weak and the dependence on central government subsidies so ingrained that no attempt is made to exercise that authority.

Centralization
 Don’t trust subordinates
 Decisions are always made by top management

Decentralization
 There is close participation between the employees and top management
 Decisions are made throughout organization

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