In case of your home if your father takes all the decisions and your mother and you have no or very little say in your father decision making than this is an example of centralization. In case of companies also similar thing happens where all decisions relating to important company matters are taken by the top management and all other employees have to abide by the decision of the top management. In order to understand this concept better one should look at some of the important features of centralization –
Centralization Features
Top Management makes Decision
The first and foremost feature of centralization is that it is the top management which makes all the important decisions thus middle level and lower level management have no or little say when it comes to the decision-making process of the company. In simple words, middle and lower management become more or less like robots as they have to follow the orders from top management without saying anything.
Flow of Communication
The flow of communication under centralization is from top to down that top management give orders to middle-level management who in turn pass those orders to lower level management which leaves no scope for lower and middle management to say or challenge any decision of the superior even if that decision is not in favor of the company.
Ideal for Small Companies
This type of decision-making process is ideal for those companies which are small in size because as far as big sized companies are concerned this type of decision-making process will make things more complicated and it is not possible for top management to take all the decision.
Slow Decision Making Process
Another feature of centralization is that due to top management making all the decisions the decision-making process become slow as for every decision lower and middle-level managers have to wait for confirmation from top management and hence this decision making process may not suitable for those companies where quick decision making is needed.
Less Flexible
It is less flexible because since all decisions are taken by top management and sometimes ground reality is completely different and in case of centralization since lower and middle management people have no power to challenge the decisions it makes the whole decision-making process less flexible as compared to a decentralized decision-making process.
As one can see from the above characteristics of centralization that it is not suited to all types of companies and that is the reason why any company thinking of adopting this method of decision making in the company should carefully read above points and then take the decision whether to implement centralization in the company or not.