Understanding Factors Determining Centralization of Authority

Explain : Factors Determining Centralization of Authority

In small organizations, the owner or the top management is responsible for making all the business decision solely. Whereas, the delegation of work among the subordinates takes place; therefore, centralization persists in these business units.

The following factors result in the centralization of the organization:

Nature of Organization: When the organization is generally a sole proprietorship or partnership entity with less number of employees to be managed, it can have a centralized system.

Size of the Organization: The organization which are small in size and operating on a small scale can be efficiently managed by the top management hence following a centralized system.

Nature of Task: The organizations engaged in business operations which does not require much expertise or specialization, can be managed through centralization.

Delegation Ability: The capability of the management to delegate the responsibilities to the subordinates while keeping the charge in their hand is another factor determining the organizational structure.

Employee’s Efficiency: If the employees lack skills and efficiency to take up the responsibility and accountability of the work to be performed, the management will go for centralization of the organization.