Centralization & Decentralization

Centralization, decentralization, and formalization

• Centralization - The location of decision making authority near top organizational levels.
• Decentralization - The location of decision making authority near lower organizational levels.
• Formalization - The written documentation used to direct and control employees.

Centralisation, or centralization (see spelling differences), is the process by which the activities of an organisation, particularly those regarding planning decision-making, become concentrated within a particular location and/or group.

In political science, this refers to the concentration of a government's power - both geographically and politically, into a centralised government.

In neuroscience, centralization refers to the evolutionary trend of the nervous system to be partitioned into a central nervous system and peripheral nervous system.

In business studies centralisation and decentralisation is about where decisions are taken in the chain of command.

Decentralization or Decentralisation (see spelling differences) is the process of dispersing decision-making governance closer to the people and/or citizen. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy, sociology and economics. Decentralization is also possible in the dispersal of population and employment. Law, science and technological advancements lead to highly decentralized human endeavours.

"While frequently left undefined (Pollitt, 2005), decentralization has also been assigned many different meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen & Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general contexts (Conyers, 1984), fields of research, and specific scholars and studies." (Dubois and Fattore 2009)

A central theme in decentralization is the difference between a hierarchy, based on:

• authority: two players in an unequal-power relationship; and
• an interface: a lateral relationship between two players of roughly equal power.

The more decentralized a system is, the more it relies on lateral relationships, and the less it can rely on command or force. In most branches of engineering and economics, decentralization is narrowly defined as the study of markets and interfaces between parts of a system. This is most highly developed as general systems theory and neoclassical political economy.