Why Is There Centralization?

Centralization lets top managers develop a broad view of operations and exercise tight financial controls. In a highly decentralized organization, decision-making authority is pushed down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions.

What is the purpose of the centralization?

Centralization allows an organization, or at least the upper levels of the organization, to control lower level employees' behaviors so that they are consistent with organizational goals.

Why is centralization a bad thing?

Centralization would reduce commercial flexibility. Moreover, it could make managers in the businesses less motivated, since they would lose authority over an activity they considered important. And if done badly, centralized product management could lead to delays, additional costs, and uncompetitive products.