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Definition

Centralization and decentralization

Centralization and decentralization refer to a philosophy of organization and management that focuses on either the selective concentration (centralization) or the dispersal (decentralizition) of authority within an organization structure. The application of this philosophy detemines if decision making is in the hands of a few or is forced down the organization structure.

Centralization and decentralization are relative concepts when applied to organizations. The top-level management may decide to centralize all decision making: purchasing, staffing, operations. Or it may decide to set limits on what can be purchased at each level by dollar amounts: decentralize the hiring decisions to first-level managementfor clerical workers (retaining authority for managerial decisions): and let operational decisions be made where appropriate.

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