Organisations and management accounting
Organisations and management accounting

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Organisations and management accounting

5 Decentralisation and centralisation

Centralisation describes a situation where decision making authority is held predominantly by senior managers within an organisation. Such a situation is common within smaller businesses where the owner/manager takes all the important decisions. Centralisation, however, is not only found in such organisations, as a number of very large organisations, such as banks and some large retailers, are also highly centralised. Little, if any, discretion is given to branch managers, who must simply run their branches in accordance with the procedures established by Head Office.

Decentralisation describes the situation where the authority to make decisions is delegated to people at lower levels of the organisation. This often occurs where growth in size and increased complexity make the delegation of significant decision making authority necessary. Decentralisation is a matter of degree and is usually present to varying degrees in most organisations.

Effective delegation has benefits for managers, staff and the organisation as a whole.

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