Every business identity has a management system of its own which helps it maintain its daily operational processes and procedures in a streamlined manner. While few companies prefer to work in a centralized organizational structure, others prefer to operate in a decentralized manner.
In this article, let us find out what a centralized system is and what a decentralized system is before we compare the benefits of each.
Centralized vs decentralized systems
Here, before we know about a decentralized system and what is centralized system comparison, let us know the meaning of each.
What is a centralized system?
A centralized organizational structure is where decision-making takes place from the top down. At the top of the management pyramid, a senior person approves all responsibilities and makes crucial decisions. The same is communicated to the following hierarchy level of management. Those who do not hold such a senior position usually convey concerns from team members to supervisors.
Where is a centralized system beneficial?
Such an arrangement works best in those companies that prioritize the manufacturing strategy and reduces costs of operation. It helps in streamlining practices and coordinating with third-party vendors and stakeholders. It is a traditional organizational structure.
What is a decentralized system?
In this organizational structure, decision-making is dispersed among multiple employees, departments, and teams. Employees at the lower level approve certain decisions and report them to the upper-level management. This type of management is prevalent in emerging industries. One of the advantages of the decentralized management system is that it helps the management shift employees between departments and responsibilities.
Centralized vs decentralized
Check out the benefits and limitations
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Decision making
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- Smaller and emerging businesses can derive benefits from a centralized system.
- This system can sometimes obstruct inputs from other members
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Connecting with customers
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- If you believe in contacting the customers directly, a decentralized system works better.
- In a centralized system, there are policies that you must abide by to connect with the public.
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Deployment of talent
- While deploying talent, in the case of a centralized system, there is an organized procedure with the help of which projects are assigned and responsibilities distributed.
- In a decentralized system, it assigns and re-assigning work on an ad-hoc basis. There might be a change in priorities due to which employee deployment may differ from one project to another.
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Job stability
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- Since a specific organizational structure is in place, employees enjoy greater job security in a centralized system.
- In a decentralized system, employees enjoy greater professional exposure in a decentralized system due to fluctuating priorities. Employees are permitted to explore various career options and for that these companies that follow the decentralized system also arrange for training and skill development programs from time to time.
In a nutshell, which is better and not is a very relative issue that depends on the type of industry you are employed in. It depends essentially on individual preferences. And if you find that a centralized system is best suited for your temperament, it may not be appealing to someone else.
