Centralisation (British), or centralization (both British and American), is the process by which the activities of an organisation, particularly those regarding planning and decision-making, become concentrated within a particular location or group, keeping all of the important decision-making powers within the head office or the centre of the organisation.
The term has a variety of meanings in several fields. In political science, centralisation refers to the concentration of a government's power - both geographically and politically - into a centralised government. In neuroscience, centralisation 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 refer to where decisions are made in the chain of command.
Centralisation in politics
Centralisation of authority: The systematic and consistent concentration of authority at a central point or in a person within the organisation.(Acharya, 2012)
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.(Ancientmilitary.com, 2012) The Qin Dynasty practiced 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. Under this system, both the military and government thrived, because talented individuals might be more easily identified and picked out to be trained for specialised functions.(Bachman et al., 2007).
- The monarchical power is the supreme power in the empire. The emperor monopolises all the resources in the country; his personality and abilities decide the prosperity of the country. This autocratic system allows for faster decision-making, and avoids complex solutions to problems that arise. One disadvantage is that courtiers, who compete for the emperor's favor, are able to amass power for themselves, leading to internal strife.(Jin and Liu, 1992)
- The administrative department has highly centralised power. The duties of each bureaucratic occupation are not clearly defined, leading to inefficiencies as functionaries manage the government and effectively rule the country.
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 the authority can be done immediately, if complete concentration is given on the decision-making at any position. This concept is generally referred to as the centralisation of the authority. The centralisation can be done with a position or at a level in an organisation. Therefore, the extension of the organisation is referred to as the centralisation of the authority. And the decision-making power must be hold in a few hands
- Responsibilities and duties are well defined within the central governing body.
- Decision making is very direct and clear.
- The central power maintains a large "encompassing interest" in the welfare of the state it rules, since it stands to benefit from any increase in the state's wealth and/or power. In this sense, the incentives of state and ruler are aligned.
- Decisions may be misled while passing on and lower position departments don't have the decision-making power, therefore it requires efficient and well-organised top department.
- Attentions and support on each department or cities may not be balanced.
- Delay of work information may result in inefficiency of the government.
- Discrepancies in economy and information resources between centre and other places are significant.
- Excludes actors at the local and provincial levels from the prevailing system of governance, reducing the capacity of the central government to resolve disputes or design effective policies requiring local knowledge and expertise.
Centralisation in economy
Relationship between centralisation (i.e. concentration of production) and capitalism
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."(Lenin, 1939), he researched on the development of production and decided to develop the production in a centralised way, from individual and scattered small workshops into large factories, leading the capitalism to the world; when concentration of production develops into a particular level, it will become monopoly, like party organisations of Cartel, Syndicate and Trust.(Lenin, 1939)
- Cartel - In economics, a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organisation of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics.(O'Sullivan and Sheffrin, 2003)
- Syndicate - A syndicate is a self-organising group made up of individuals, companies, corporations or entities formed to transact some specific business, to pursue or promote a shared interest.
- Trust - "A trust is . . . simply the case of one person holding the title of property, whether land or chattels, for the benefit of another, termed a beneficiary. Nothing can be more common or more useful. But the word is now loosely applied to a certain class, of commercial agreements and, by reason of a popular and unreasoning dread of their effect, the term itself has become contaminated. "(Theodore, 1888)
Centralisation in business studies
Where decision-making power resides in the structure is an organisational issue that a business ought to address.
Decision-making is the reveal of authority. The key question is either whether 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 is various. Many large businesses necessarily involve a e of extension of centralisation and some extent of centralisation when it begins to operate from several places or any new units and markets added.(Riley, 2014)
Features of centralisation in management
- Top level managers concentrate and reserve the decision-making power.
- Execution decided by the top level management with the help from the other levels of management.
- Lower levels management do the jobs which directed and controlled by the top managers.(BMS Team, 2013)
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- ^ Ancientmilitary.com, (2012). Ancient China Government. [online] Available at: http://www.ancientmilitary.com/ancient-china-government.htm [Accessed 5 Nov. 2015].
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- ^ Jin, G. and Liu, Q. (1992). The Cycle of Growth and Decline - On the Ultrastable Structure of Chinese Society: Chapter 7. 2nd ed. Hong Kong: The Chinese University Press.
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- ^ a b Lenin, V. (1939). Imperialism, the highest stage of capitalism. New York: International Publishers, pp.12-54.
- ^ O'Sullivan, A. and Sheffrin, S. (2003). Economics. Needham, Mass.: Prentice Hall, p.171.
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- ^ Riley, J. (2014). Centralised versus decentralised structures | Business | tutor2u. [online] Beta.tutor2u.net. Available at: http://beta.tutor2u.net/business/reference/centralised-versus-decentralised-structures [Accessed 5 Nov. 2015].
- ^ BMS Team, (2013). Important Features of centralization | BMS.co.in. [online] BMS.co.in : Bachelor of Management Studies. Available at: http://www.bms.co.in/important-features-of-centralization/ [Accessed 5 Nov. 2015].