Chapter 1 Centralization
1.1What
is Centralization?
Centralization is an extant to which decision making is retained by upper level
management in an organization. It means all the key decisions of organization
are made by top management without or with a little participation from lower
level managers.
In the centralized
decision making authority is retained by top managers and middle and lower
level managers have a little authority. All strategic decisions are taken by
the managers higher in hierarchy and below from them just serve as a link to
carry out the implementation of those decision; they can’t alter the decisions
without the prior permission of their superiors, no matter how much necessary
it is.
Centralized
decision making was much more popular in the past. But now a days trends are
changing quickly; organizations are traveling from centralization towards
decentralization (we will discuss decentralization later). Centralization is
however; still popular in some countries-not in case of multinational
organizations doing business in these countries. Specially, Asian countries,
like
1.2 Researchers think of Centralization
in term of: decision making and control. But despite of apparent
simplicity of concept, it can be complex. The complexity of concepts derives
from three sources: First, people at the same level can have decision making
authority. Second, not all decisions are of equal importance in
organization-some are strategic and some are operational, strategic decisions making
authority is retained by top level of management that is called centralization.
Third, individuals may not perceive that they really
Have
authority even though their job descriptions include it. Thus objectively they
have authority, but subjectively they don’t.
The relationship
between centralization and four design decisions are generally as follows:
1.
The
higher the specialization of labor, the greater the centralization. This
relationship holds because highly specialized jobs do not require the
discretion which authority provides.
2.
The
greater the use of functional departments, the greater the centralization. The
use of Functional departments requires that the activities of the several
interrelated departments be coordinated.
Consequently,
authority to coordinate them will be retained in top management.
3.
The
wider the span of control, the greater the centralization. Wide spans of
control are associated with relatively specialized jobs which as we seen have
little need for authority.
4.
The less
the authority is delegated, the greater the centralization. By definition of
terms, centralization involves retaining authority in the top management jobs,
rather than delegating it to lower levels in the organization.
We
can say that high centralization is the result of: high specialization, functional departments,
wide span of control, centralized authority.
1.3 Important advantages of Centralization:
1. Power and prestige are provided the chief
executive.
2. Uniformity of policies, practices, and
decisions are fostered.
3. Full utilization of the main office
specialties is promoted, due in larger part to their proximity to the top
management level.
4. High qualified specialists can be utilized
because the scope and volume of their work are sufficient to support and to
support and to challenge topnotch managers.
5. Duplication of functions is maintained at
minimum.
6. The danger of action drifting and getting off
course is minimized.
7. Elaborate and extensive controlling
procedures and practices are not required.
8. A strong coordinated top-management team is
developed.
1.4 Disadvantages of
Centralization: As in
centralization all authority is retained by top management, and lower levels
have a very little authority, this situation sometimes turns into chaos for the
operation of organizations. Following are some disadvantages of centralization:
1. Sometimes some decisions are to be taken
immediately at the spot, but due to centralization, none of the decisions can
be made without permission of top level managers and it results in financial
loss of organization.
2. Participation from lower levels can be used
as motivating tools, in centralization there is a little participation from
lower levels, those who are at lower levels, when feel that they are not directly
responsible for the operation they might not take their work seriously and show
a poor performance.
3. In centralized environment middle level
managers just serve as a link to carry out decisions of top level managers from
lower level managers. Middle level managers might not work efficiently due to
less authority.
4. In centralized environment the credit of work
of junior employees sometimes is taken by Officers and gain promotion and
rewards, that demoralizes the employees and next time they will not give their
best to their work.
1.5 Factors that influence the amount of
centralization:
I.
Environment is stable.
II.
Lower level managers are not as capable or
experienced at making decisions as upper level managers.
III.
Lower level managers don’t want to have a say
in decisions.
IV.
Decisions are significant.
V.
Organization is facing a crisis or the risk
of company failure.
VI.
Company is Large.
VII.
Effective implementation of company
strategies depends on managers’ retaining say over what happens.
Fig
1.1 A formal organizational Chart of an organization
This
chart shows the hierarchy of a Formal (centralized) organization. This
hierarchy in fact shows the chain of
command –an unbroken line of authority that extends from the
upper level of the organization to the lowest level and clarifies who report to
whom.
Chapter 2 Decentralization
2.1 What is
Decentralization? Decentralization
is a process of handing down the decision making authority to lower level of
the organization. The concept of centralization-decentralization is a relative
one but not an absolute one. What we mean is that an organization can never
centralized or decentralized completely. Few organizations could function effectively
if all major decisions were made by only a selected group of top managers; nor
could they function effectively if all decisions were delegated to lower
employee levels.
Decentralization is the delegation of authority for making managerial
decisions to subordinates at lower level in organization. The degree of
decentralization in an organization is not measured by the quantity of
decisions that are passed down the managerial hierarchy, but rather by the
importance and scope of the decisions and their impact on entire organization.
2.2 Decentralization and
Physical Dispersion: The
position is sometimes taken that a firm is decentralized when its management is
physically dispersed. Physical dispersion or physical decentralization occurs
when central managers are geographically separated from division or branch
managers. This viewpoint is not entirely correct, as authority to making
managerial decisions is may be delegated by a manager to subordinate sitting at
an adjacent desk. Likewise, centralized management occurs when a central
manager is heavily involved in the decisions that are made in distant
divisions, although decentralization management usually goes hand in hand with
physical dispersions.
In
decentralized decision making the authority of decision making is delegated-delegation is a
process of assigning responsibility along with necessary authority- to the
lower level employees in the organization. It means employees in lower levels
can take decision on their own responsibility. Some decisions are to be taken
immediately at the spot, as any delay in decision making can result in a great
financial loss. There are some limitations in decentralized decision making,
only operational or short term decisions can be taken by employees at lower
levels and top level management is authorized for all strategic and long term
decision making. It means lower level employees can take decisions in case of
day to day problems during operation of an organization.
2.3 Degree of Decentralization
The
degree of decentralization in an organization is not measured by the quantity
of decisions that are passed down the managerial hierarchy, but rather by the
importance and scope of the decisions and their Impact on the entire
organization. As one management write has explained, the degree of
decentralization is greater:
1.
The
greater the number of decision made lower down the management hierarchy.
2.
The more
important the decisions made lower down the management hierarchy. For example,
the greater the sum of capital expenditure that can be approved by the plant
manager without consulting anyone else, the greater the degree of
decentralization in this field.
3.
The more
function affected by decisions made at lower levels. Thus companies which
permit only operational decisions to be made at separate branch plants are less
decentralized than those which also permit financial and personnel decisions at
branch plants.
4.
The less
checking required on decision. Decentralization is greater when no check at all
must be made; less when superiors have to be informed of the decision after it
has been made; still less if superiors have to be consulted before the decision
is made. The fewer people to be consulted, and the lower they are the
management hierarchy, the greater the degree of decentralization.
2.4 Factors in
Decentralization
There
are no simple formulas to indicate the extent to which authority should be
decentralized. The following factors are often considered when making this
decision:
1.
Are the
persons at lower levels capable of making sound decisions?
2.
Which
person down the line has the necessary facts to make a given type of decision?
3.
Will
changing conditions in the field require that speedy, flexible decision be made
at the local level?
4.
How
important is the decision in term of dollars, its impact on other decisions in
the organization, and the morale of the manager down the line?
In
decentralization, as decision making authority is delegated to lower level
managers it means that that lower level managers can take decision at their own
risk. The decentralization in organization boosts the morale of employees.
Feeling their importance in organization they try to work hard and give their
full efforts to the organization. Decentralization is emerging as the most
popular trend. Recently many organizations change their style- from centralized
authority to decentralized authority-. Decentralization gain popularity with
the increasing globalization, now days many organizations turn into
multinational or global. Organizations are doing business in more then one
country in this case, as we have discussed the concept of physical dispersion,
decentralization is the best solution.
Consistent with the recent
management efforts to make organizations more flexible and responsive, there’s
been a distinct trend towards decentralized decision making. In large companies
especially, lower level managers are “closer to action“ and typically more detailed
knowledge about problems and how best to solve them than do top managers.
2.5 As decentralization is delegation of authority there are
some PRINCIPLES OF DELIGATION.
These principles are guides to delegation of authority; delegation may be
ineffective, organization may fail and the managerial process may be seriously
impeded. Following are some delegation principles:
1. Principle
of delegation by result expected.
Since authority is intended to furnish managers with a tool for so managing as
to gain contribution to enterprise objectives, authority delegated to an
individual manager should be adequate to assure the ability to accomplish
results expected.
2. Principle
of functional definition. The
more a position or department a clear definition of results expected,
activities to be under taken, organizational authority delegated, and authority
and informational relationships with other positions understood, the more
adequately the individuals responsible can contribute toward accomplishment of
organizational objectives.
3. Scalar
Principle. The scalar
principle refers to the chain of direct authority relationships from superior
to subordinate throughout the organization.
4. Authority
level Principle.
Functional definition plus the scalar principle gives rise to the
authority-level principle. According to which maintenance of intended
delegation requires that decisions within the authority competence of
individuals be made by them and not be referred upward in the organization
structure.
5. Principle
of unity of command. Principle
of unity of command is that one subordinate should have only one superior to
whom he is directly responsible.
6. Principle
of absoluteness of responsibly.
The responsibility of subordinate to their superiors for performance is
absolute, once they have accepted an assignment and the right to carry it out;
superior can’t escape responsibility for the organization activity of their
subordinates.
7. Principle
of parity of authority and responsibility. Principle that the responsibility for actions
cannot be greater than that implied authority delegated, nor it
Should be less.
2.6 The Art of Delegation. Most failures in effective delegation or
decentralization occur not because
of lack of understanding of nature of principle of delegation but because of
inability or unwillingness to apply them in practice. Delegation is, in a way, an
elementary act of management. In most of cases reasons of failure of delegation
lies in personal attitude toward delegation following are some personnel
attitudes helpful in the process of delegation.
1. Receptiveness
2. Willingness to let go
3. Willingness to let other make mistakes
4. Willingness to trust subordinates
5. Willingness to establish and use broad
controls
2.7 Factors that Influence
Decentralization
I.
Environment
is complex and uncertain.
II.
Lower
level managers are capable and experienced at decision making.
III.
Lower
level managers want a voice in decisions.
IV.
Decisions
are relatively minor.
V.
Corporate
culture is open to allowing managers to have a say in what happens.
VI.
Company
is geographically dispersed.
VII.
Effective
implementation of company strategies depends on managers’ having involvement
and flexibility to make decisions.
2.8 Advantages of
Decentralization:
1.
Some
experts believe that decentralization encourages the development of
professional managers. As decision making authority is pushed down in the organization,
manager must adapt and prove themselves if they are to advance.
2.
In
decentralized pattern, managers can exercise more autonomy and satisfy their
desires to participate in problem solving. This freedom can lead to managerial
creativity and ingenuity, which contribute to the flexibility and profitability
of the organization.
3.
In
decentralization mangers or employees from lower level participate in decision
making, that participation increases their loyalty and dedication for their
organization. In other words this can be use as the motivation tool for
organizational success.
4.
As in
decentralization employees at lower level can take decisions without prior
permission of their seniors,
therefore some decisions that have to be
taken immediately can be taken by employees at the spot and that may results in
increase of organization monitory profit and reputation.
2.9 Disadvantages of
Decentralization:
Decentralization
has disadvantages that must weighed against the advantages. The advantages are
not without drawbacks, and most advocates of decentralization recognize that if
an organization shifts from centralized to decentralized authority, certain
costs may be incurred. These are some of the costs:
1.
Managers
must be trained to handle decision making, and this may require expensive
formal training program.
2.
Since
many managers have worked in centralized organizations, it is uncomfortable for
them to delegate authority in a decentralized management. Their attitudes are
difficult to alter, and attempts often lead to resistance.
3.
Accounting
and performance appraisal system must be made compatible with the decentralized
management, and this can be costly. Administrative costs are incurred because
new or altered accounting and performance appraisal systems must be tested,
implemented, and evaluated.
4.
Another
problem that comes with the decentralization is complexity of organization
structure. In centralization organization structure is simple, whereas in
decentralization this structure is rather complex.
These
are only some disadvantages of decentralization and for the perception that
only decentralization is better for an organization has not got any definite
and clear-cut answer. But one prerequisite for successful decentralization is
through consideration of each organization factors (e.g., work force, size, and
control mechanism.
Under
A more decentralized arrangement, the organization structure of the enterprise
would appear like as shown in fig 2.1
Each plant is now
set up operate more as a self-contained unit. For example, the manager of plat
1 has his own purchasing, engineering, cost, and standards departments
reporting to him as well as his departmental operating units. But note that the
unit’s decentralization is not the same for each plant manager. This decision
will depend in part upon the plant managers themselves and also how efficiently
it is believed these activities can be performed at end for the particular
plant. Plant 1 has a standards organizational unit, whereas plant 2 does not
such a unit, but plat 2 has a research unit which 1 (or plant 1) does not have
plant 3 has both standards and research units.
Fig.2.1Hierarchy of a Decentralized organization.
Chapter 3 Counter-balancing
Centralization and Decentralization in various aspects of management
As
we already have discussed the centralization and decentralization, it is now
relatively easier for us to understand the concept of Centralization versus
Decentralization in management. In any organization there is always a need for
decision making, why? because management is responsible for defining the goals
and establishing the plans to accomplish these goals. From the definition of
goal to the accomplishment of the goal, for all the process included, it is
necessary to make decisions. Right decisions turn in company’s favor whereas
wrong decision turn against.
3.1 Centralized .vs.
Decentralized decision making:
If
we compare centralization and decentralization from the decision making point
of view, we can easily find out that both have different affect on decision
making. In Centralized environment only the top level managers are authorized
for decision making and middle level managers may have a little authority while
the lower level managers are liable to act in the way or work in the direction
that is being specified by their seniors. Decision required for any sort of
action will be taken at the top level; no matter it is about lower level,
middle level, or higher level. As in centralized decision making all authority
is retained by high level and up to some extent middle level managers and there
is no participation from lower level employees.
The new
concept of decentralized decision making has gained much popularity in few days.
In this type of decision making the employees at lower level also participate
actively in decision making as well as middle and higher level managers. The
new concept about the lower level employees is that they are “men in action” or
“very close to-operations” therefore they have got much knowledge about the
operations and can decide and implement the best solution. These employees work
in the field and have got a good knowledge about the problem encountered and
can decide the best solution. Unlike centralization employees can take
decisions on the spot as they are authorized to do so and that is a time saving
factor.
Management
is a process undertaken by one person to coordinate the activities of other
persons to achieve results not attainable by any one person working alone. The
person who integrates and coordinates the work activities of other is called
manager. Managers manage their tasks with the powers or authority given to them
by their position. Mangers may also use some of their personal powers like
expert power and referent power powers given by the position are legitimate,
reward and coercive power. The concept of centralization and decentralization
go side by side with the assignment of authority. Major authority of a manager
is decision making, decide what to do, how to do, what plan are required to
complete the task, and when the task should
be completed. That decision making authority has a great impact on all
management functions. Centralization or decentralization is method of
distribution of authority, who is authorized to do what?
All management
functions are affected with distribution of authority. Basic management functions
are:
1.
Planning
2.
Organizing
3.
Leading
4.
controlling
We
will discuss centralization and decentralization for each of the function
separately.
3.2 Centralization .vs.
Decentralization in Planning
The
planning function is capstone activity of management planning is process that
involves defining of goals or objectives establishing an overall strategy for
achieving these goals, and developing a comprehensive hierarchy of plans to
integrate and coordinate the work activities. Planning is the phase in which
game plane of organization is defined the objectives, for the accomplishment of
which the organization is came into being, are defined. It is really very
important that before starting efforts to achieve something you must know what you
really want to achieve, what is your primary objective and what is your
secondary. You can set your priorities, and these priorities will direct your
efforts in the achievement of goal. After the definition of goals there comes
the development of sub plans or a complete hierarchy of plans in order to find
out that what tasks are necessary to complete a task.
3.2.1How Distribution of
authority affects Planning?
Distribution
of authority has a great affect on planning, as in centralized authority only
the top level management is authorized for planning (defining goals and
establish sub-plans to achieve goals). Lower level employees just serve as
tools to implement these plans. In decentralized authority lower level
employees as well as upper level are authorized for planning. In case of
decentralization the situation could be complex as many people are
participating in the goal defining, different people have different prospects therefore
each person come with a new idea and it’s become really hard to decide the goal
and this situation leads toward conflicts; whereas in centralization top level
managers have to decide the goal and all lower level employees have to agree
with him.
None of the organizations can’t centralized or decentralized completely
sometimes the balance of centralization is heavier and sometimes that of
decentralization. In planning phase although participation of lower level
employees is important but for decision making and establishing sub plans to
achieve goals it is really important that only a very limited no. of persons
take a part because that reduces the chances of confusion and ambiguity
In
this phase lower level employee should participate and give their suggestions
and top level managers should consider their suggestions seriously, if these suggestions
are reasonable and practicable then should be selected that means that the
upper levels must have the tolerance for the negotiations- before making any
decision or choosing any solution top level manager communicate with lower
levels and take them in confidence, and tell them that they are the part of
decision.
As we have discuss that the
large extent of decentralization could result in complexity because every one
in the organization wants his solution or decisions to be implemented and that
is not possible and that situation can be more serious if different groups,
rather then individuals are participating in planning. If you choose and
implement the plans of one group then other group might take it as rejection or
insulting and that situation may prove be the starting point of a cold war
within the organization.
3.2.2
Which one is more effective-centralization or Decentralization?
As we already have discussed that if variety
of people is participating in this phase, they all come with a variety of ideas
and this situation creates trouble. From this point of view we can say that in
this phase authority should be centralized i.e. only a limited no. of people
should be allowed to make or alter the plans. For successful implementation it
is necessary that selected group of people should be from top level of
management. This phase can be decentralized in a manner that the people from
top should communicate and negotiate with lower level employee. As a matter of
fact no organization can be completely centralized or decentralized.
3.3 Centralization .vs.
Decentralization in Organizing
Organizing
is an important function of management, organizing is process of creating organization’s
structure. Centralization and decentralization has no impact on organizing.
Infect in organizing phase managers decide the structure of organization- the
structure of organization is the formal frame work in which job tasks are
divided, grouped and coordinated. In organizing phase a manger has to decide
the organizational structure that whether it is centralized, decentralized and
also define the extent of formalization- formalization is the degree to which
jobs within the organization are standardized and the extent to which
employees’ behavior is guided by rules and procedures. In this phase
requirements of organization are analyzed and then decision is taken that what
structure organization have? And from centralization and decentralization which
one is dominant and which one is dominated?
Size and structure has a great effect on the
structure of organization. An organization structure is a mean to help the
managers achieve their objectives. The initial research on the
strategy-structure relationship was a study by Alfred Chandler of several large
In order to have a clear view of centralization
and decentralization regarding organizing point of view we will discuss two forms
of organizations:
1.
Mechanistic
organization.
2.
Organic
organization.
Mechanistic Organization
An
organization structure that is characterized by high specialization, extensive
departmentalization, narrow span of control, high formalization, a limited
information network , and a little participation in decision making by lower
level employees.
Organic organization
An organization structure that’s highly
adaptive and flexible with little work specialization, minimal formalization,
and a little direct supervision of employees.
In
mechanistic organization there is high specialization, rigid
departmentalization, clear chain of command, narrow span of control,
centralization and high formalization. Whereas organic organization includes
cross functional team, cross hierarchical teams, free flow of information, wide
span of control, decentralization, and low formalization.
3.4 Centralization .vs.
Decentralization in Leading.
Leaders
are the persons who are able to influence others and who possess managerial
authority. Leadership is the ability to influence a group toward the goal
achievement of goals. Leading is not all management but it is an important part
of management. What is the difference between leaders and managers? Managerial
position in an organization gives authority and managers use this authority. In
order to clarify this concept we should first out the types of power that
differs mangers from leaders. Same amount of power is given to both manager and
leader but leader has some other powers along with this power that a manager
doesn’t have. There are two types of power:
1.
Positional power. The power
that comes from managerial position is called positional power. There are three
types of positional powers:
II. Reward power.
III. Coercive power.
3.
Personal power. This is the power a leader got due to his
personal characteristics and an ordinary manager can’t have this type of power.
There are two types personal power:
II. Referent power
These
powers distinguish an ordinary manager from a leader manager. Ordinary managers
tend to use positional power to get their job done whereas leaders relay on
their personal power.
3.4.1 How centralization and
decentralization affect Leading?
We
can measure centralization or decentralization in planning phase by checking
the flexibility of leadership. Flexible planning is the planning featuring
participation from the lower levels of the organization and in inflexible
planning there is no participation or very little participation from lower
level employees, we can say that flexible planning features decentralization
whereas inflexible planning features centralization.
All the studies made on behavioral
approach of leadership have concluded that there are two behavioral types of
leader: Employee-centered and job-centered. Employee centered leaders are those
who focused the employees as well as goal achievement of organization.
Job
centered leaders are those who much focused on achievement rather than
employees. Employee centered leaders used decentralized approach of leader ship
and job centered leader tend to use centralized approach. Regarding to
centralization and decentralization there are two styles of leadership:
Autocratic style-describes a leader who typically tends to centralize
authority, dictate work methods, make unilateral decisions, and limit
subordinate participation.
Democratic
style-describes a leader who tends involve subordinates in decision making,
delegates authority, encourage participation in deciding work methods, and use
feed backs as opportunity for coaching.
3.4.2 Which one is more
effective in this phase centralization or decentralization?
In
order to measure the effectiveness the contemporary theories of leadership
could serve as best tool. We discuss the first contingency model developed by
Fred Fiedler called Fiedler contingency model. This is the theory that
effective groups depend upon a proper match between a leader style of
interacting with subordinates and the degree to which the situation gives
control and influence to the leader.
For
this model we can easily derive the result that decentralization is relatively more effective in this phase.
When subordinates participate in organization activities and take a part in
deciding work methods then feel themselves motivated and they dedicate all of
their efforts for the achievement of organization goals and they also obey the
manager more when they consider him as their leader who respects their ideas.
3.5 Centralization .vs.
Decentralization in controlling
Controlling
is the process of monitoring activities to ensure that they are being
accomplished as planned and of correcting any significant deviation.
Controlling is the most important activity that a manager performs. Management
starts with the process of planning and attains its peak on controlling.
Although managers perform some other activities other than planning,
organizing, leading, and controlling like motivating etc, but the control phase
is of utmost importance in process of
management.
Controlling
is not just the activity of correcting any problem, but it is the process to
prevent the problems-problem is a state discrepancy between the real and
desired outcome. A manager has to lookout many problems, internal and external.
For controlling the most important thing is authority, what extent of authority?
If manager has got high authority or low, it means that manager can control by
using power or not. Centralized authority gives more power to a manger, more
than, the decentralized authority.
3.5.1Which one is more
effective Centralization or Decentralization?
In
controlling phase a manager with more power and authority is suitable because
in this phase all activities that are performed by the organization members are
monitored
And
for the coercion of any flaw it is necessary that manager is more powerful then
other employees, means that the distribution of authority is centralized, if
one person is responsible to control, he can control more effectively and if
there is more than one person the conflict may occur.
3.6 Centralization and
Decentralization which one is more effective in general?
An
organization can’t centralized or decentralized completely, in some phases
centralization is more effective but there are some conditions in which
decentralization is more useful. We can say that organizations use both
centralization and decentralization in their operations.
As
we have discussed that both centralization and decentralization have some
advantages and disadvantages.
The
latest trend in managements is the decentralization of authority and various
studies have made on this issue and after monitoring the activities of both
centralized and decentralized organizations it is found out that organization
featuring decentralization to a certain extent are performing very well, their
employees are self-confident and creative.
Whereas
in centralized organization employees usually seek to avoid hard work and as
they are not getting the proper credit of their work they don’t dedicate their
maximum efforts for achievement of organization’s goal. We can conclude that a organization should use both centralization and
decentralization but the degree of decentralization should be greater than that
of centralization.
Centralized
.vs. Decentralized Management of Public Information Systems: A Core-Periphery Solution
By: Richard Heeks
Focusing
points:
CENTRALISED AND DECENTRALISED APPROACHES: Review
of Experience
1.
The Centralized Approach to Public Sector IS Responsibilities
Constraints
to centralized approaches
Disadvantages
of centralized approaches
2. The Decentralized Approach to Public Sector IS
Responsibilities
Constraints
to decentralized approaches
Disadvantages
of decentralized approaches
Centralized and Decentralized Approaches: Review of Experience
This
section of the paper will now review the first two approaches described above:
the centralized and the decentralized.
The
Centralized Approach to Public Sector IS Responsibilities
Many
public sector organizations began their ‘computing careers’ by adopting a
centralized approach, and there are continuing drives to maintain
centralization. These drives include particularly the desire of senior public
managers to control the costs, pervasive impacts, and potential failures
associated with information systems. Managers are also driven by the desire to
achieve the potential benefits of centralized approach, including those listed
below.
Sharing resources
A
well-planned centralized system holds data used across the organization in one
place, allowing all staff to access it. This makes it both faster and easier to
undertake organization-wide activities. Central
Planning
and operation also allows compatible technology and Skills to be introduced.
Exchange of hardware, software and staff between organizational systems and
units therefore becomes much easier.
Avoidance of
duplication
One main intention of centralized approaches is to have a single
version of any particular information system for the whole organization, and to
store any item of data once and only once. As a result, there is no wasted
effort, no wasted storage capacity, and no inconsistency of data.
Learning and
control
A centralized approach to information systems provides an
organizational focus for learning and for control. This is likely to produce
higher quality information systems and can also reduce costs by:
·
avoiding the decentralization problems of
non-functioning or malfunctioning systems,
·
avoiding the decentralization problems of
inadequate security, maintenance and documentation, and by
·
Allowing technology purchases and system
developments that are not organizational priorities to be blocked.
Constraints to centralized approaches
However,
centralized approaches are beset by problems, some of which are outlined in
this and the following section. First, there are constraints: most public
sector organizations encounter considerable barriers if they attempt to develop
a centralized approach to information systems, as described below.
Technical
constraints
Where
decentralized information systems, manual or computerized, are already in
place, technical barriers to centralization may be immense. Indeed,
computerization may create ‘electronic concrete’ that increases these barriers
(Belay & Taylor 1994). The barriers include differences between existing
decentralized IS in everything from data definitions to software to computing
and network systems. Technical barriers also include the need to create some
form of interconnection – typically a computer network – between the different
organizational units whose systems are to be centrally controlled.
Resource
constraints
Centralized
approaches require the commitment of four key resources: money, time, people,
and skills. For many public organizations, a centralized approach may not be
possible because of financial constraints; because staff are too busy on other
things; or because no one has the confidence or capabilities to undertake the
necessary planning and co-ordination tasks.
Cultural
constraints
Barriers
and antagonisms between decentralized units can undermine any hope of drawing
them together for a centralized approach to information systems. At times,
these barriers seem to derive from a ‘them and us’ attitude that is akin to
modern-day tribalism. These cultural barriers are seen in the different
mindsets that create quite different views of the world between groups; in the
different jargon they use in communication; and in the different issues and
people they value (de Kadt 1994). This makes it hard
to centralize.
Lack of trust deriving from
such barriers is seen to prevent the type of co-operation required for
centralized approaches to information systems. It is, indeed, the IT business,
which has helped to spread NIH: the not invented here mentality that rejects
information systems for the simple reasons that someone else developed them.
Structural
constraints
Structural
barriers to centralized approaches in the public sector are found both within
and between public sector organizations. One can perceive a three-way gap, as
described by Knight& Silk (1990).
Disadvantages of centralized approaches
Even
if the listed constraints were to be overcome, centralized approaches can
produce some disadvantageous outcomes. One obvious disadvantage of a
centralized approach – as already noted above – is the high level of overt
resource costs. Other disadvantages are described below.
Heavy
time consumption
Centralized
decisions and actions are more time-consuming than a decentralized approach
because of: the additional time it takes for information to flow up the organization
as an input to centralized decisions; the additional time it takes to collate
information from a variety of different decentralized locations as an input to
centralized decisions; and the additional time it takes for implementation
information to flow down the organization. The result can be inordinate delays
in the process of information systems development (Wolfe 1999).
Limited
ability to meet user needs
Centralized
approaches necessarily mean that priority goes to those systems, which are
seen, as important by some select and centralized staff group. The priorities
of the periphery – both individuals and individual work units – may not be
addressed (
·
a backlog of user applications awaiting
development,
·
limited use or even total failure of
centrally-planned information systems, and
·
Poor quality of data within these systems,
since users will not be motivated to maintain data quality.
The Decentralized Approach to Public Sector IS Responsibilities
It would seem that centralized approaches to public information
systems are highly problematic. What, then, of decentralized approaches? As
technology has become smaller, cheaper, easier-to-use, more reliable, and more
powerful, so decentralized approaches seem to be an increasing possibility.
Decentralization may also
be driven by a desire to remove control from central IT units, or by its
perceived advantages, which include those listed below.
Greater
fit between systems and local needs
The
closer the proximity of user and developer, the less the communication gap and
the more likely it is that the developed system meets the users’ real needs.
Higher
usage of computerized systems
This
flexibility to fit local needs helps to explain the dramatic growth in computer
use associated with decentralized approaches, such as end-user computing. Users
are better motivated by such approaches and are far keener to take up computing
when it directly supports their own interests and work.
Faster system
development
The
less the organizational distance between system user and system developer, the
faster development of that system is likely to be. Again taking the extreme of
end-user development, there will be no delay for the development of mutual
understanding and no clash with higher priority information systems
developments. This can help to the less the organizational distance between
system user and system developer, the faster development of that system is
likely to be. Again taking the extreme of end-user development, there will be
no delay for the development of mutual understanding and no clash with higher
priority information systems developments. This can help to overcome the
staffing constraints and systems development backlog that often afflicts
centralized IS units. Other aspects of system use such as implementation,
operation, troubleshooting and maintenance are also likely to occur more
quickly under a decentralized regime.
Constraints to decentralized approaches
However,
just like their centralized counterparts, decentralized approaches are also
beset by problems, some of which are outlined below and in the following
section.
As
already noted, many of the constraints to centralized approaches described
above are, in fact, constraints to change in general. They are therefore also
constraints to a decentralized approach and will not be reiterated in detail.
Examples include (Warner 1992, Braa 1996, Computing
1996):
·
Technical constraints, such as heavy existing investments in a
centralized system.
·
Resource constraints, such as a lack of skills to support
decentralized decision making and action on information systems.
·
Political constraints, such as the unwillingness of those at the
center to change information flows, resource flow and associated organizational
power.
Disadvantages of
decentralized approaches
Even
if the listed constraints are overcome, decentralized approaches can produce
some disadvantageous outcomes.
Duplication of
effort
Apart
from constraining what public organizations can do, decentralized approaches
also tend to be very costly because units will often duplicate what others are
doing (Computing 1996, Computing 1998a). Duplication may cover:
·
analysis, design and implementation of
information systems,
·
gathering and administration of data, and
·
System operation, support and maintenance.
In
addition, computer input, output, storage and processing capacity would all
have to be duplicated.
The
unnecessary duplication of data (known as data
redundancy) tends to be particularly problematic, yet it is quite common.
For example, public organizations often store basic details of their employees
many times over:
·
on paper and on computer, and
·
For personnel, for payroll, for training, and
for other records.
Lack of learning and control
In
addition to the extra direct costs that duplication imposes, there is an
indirect cost of lost learning opportunities and limited cross-fertilization of
ideas. Decentralized approaches also necessarily mean limited central ability
to plan and control, leading to a tendency for some decentralized systems to be
developed and used without due care (Wolfe 1999). The result may be a system
that never works or does not work properly, with compromised data quality or
system security.
NOTES
1. “Business Its
Nature and Environment-An Introduction”
Eighth Edition by:
RAYMOND E. GLOS
RICHARD D. STEADE
JAMES R. LOWERY
Pages: 103,109, 110, 122, 126, 130, 470
2. “Management-Principles
and Functions”
Fourth Edition by:
John M. Ivancevich
James H. Donnelly, Jr.
James L. Gibson
Pages: 32-33, 168-72, 199,
211-13,217-18, 304-6
3. “Management”
Sixth Edition by:
Stephen P. Robbins
Mary Coulter
Pages: 13-15, 23-25, 56-57, 300, 305-8,520
4. “Management-A
System And Contingency Analysis of
Managerial Functions”
By:
Harold Koontz
Cyril O’ Donnell
Pages: 374-85
Websites: www.
LewRockwell.com
www.prenhall.com
www.mhhe.com