What are some advantages and some disadvantages of a centralized operation?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The advantages and disadvantages of a centralized organization are essentially the mirror image of the advantages and disadvantages of a decentralized organization.

The major advantage of centralization is that it makes it more likely that everyone in a firm will be on the same page.  If the firm is centralized, orders from the top will easily make their way down to the lowest levels.  There will not be a great deal of delay as the heads of the various departments consider the orders and think about whether they like them.  The centralization means that the various bureaucrats in the organization will simply carry out whatever the higher-ups order.  This makes a firm more responsive to the wishes of leadership.

The major disadvantage of centralization is that it can stifle initiative and reduce morale.  Employees often like to feel as if they are more than simple cogs in a machine.  They like to feel that they have some control over how their firm or their department runs.  If you have a centralized organization, it is harder to let them feel this way.  They will not feel like they have any autonomy because the central organization runs everything.

Thus, a centralized organization is more responsive to the central leadership but is less likely to make its employees feel that they are important.

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