One of the questions that needs to be answered when organizing is “At what level are decisions made?” Centralization is the degree to which decision making takes place at upper levels of the organization. Decentralization is the degree to which lower-level managers provide input or actually make decisions. Centralization-decentralization is not an either-or concept. Rather, it’s a matter of degree. What we mean is that no organization is completely centralized or completely decentralized. Few, if any, organizations could effectively function if all their decisions were made by a select few people (centralization) or if all decisions were pushed down to the level closest to the problems (decentralization). Let’s look, then, at how the early management writers viewed centralization as well as at how it exists today.

Early management writers proposed that centralization in an organization depended on the situation.15 Their goal was the optimum and efficient use of employees. Traditional organizations were structured in a pyramid, with power and authority concentrated near the top of the organization. Given this structure, historically centralized decisions were the most prominent, but organizations today have become more complex and responsive to dynamic changes in their environments. As such, many managers believe that decisions need to be made by those individuals closest to the problems, regardless of their organizational level. In fact, the trend over the past several decades—at least in U.S. and Canadian organizations—has been a movement toward more decentralization in organizations.16

Today, managers often choose the amount of centralization or decentralization that will allow them to best implement their decisions and achieve organizational goals.17 What works in one organization, however, won’t necessarily work in another, so managers must determine the amount of decentralization for each organization and work units within it. When managers empower employees and delegate to them the authority to make decisions on those things that affect their work and to change the way that they think about work, that’s decentralization. Notice, however, that it doesn’t imply that top-level managers no longer make decisions.