Centralization is known as the systematic reservation of decision making authority at the top level management. Centralization reduces the roles of subordinates and the top level assumes full authority of running business activities. Top managers have direct control over each and every activity of the organization while the decision making authority is also vested on them.
Centralizes facilitates a manager to keep in touch with all the activities of the organization and facilitates quicker decisions. This system is highly appropriate in small organizations performing business in a competitive environment. However, expansion of the size of the business creates complexities in business activities of the organization and in such a situation centralization becomes impractical. Top management needs to form departments and branches on the basis of nature of work and decision making authority should be delegated to the departmental heads.
