What Is Centralised Management? (With Features And Benefits)

By Indeed Editorial Team

Published 7 September 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Management structures help define processes and establish authority within an organisation. In a centralised management structure, a leader or group of leaders decides and relies on mid-level managers to implement their decisions. Learning the features of centralised management can help you define the management at your workplace and enhance your understanding of how you can use this to become more successful. In this article, we answer the question, 'What is centralised management?', list its key features and share the differences between centralised and decentralised management.

What Is Centralised Management?

The answer to the question 'What is centralised management?' is that it is a management structure in which only the executives of an organisation manage the planning and decision-making responsibilities. The top management professionals instruct all other levels of management at the organisation to implement their decisions and strategies. These executives are experts in critical thinking and strategic planning so that they can define the goals of an organisation and guide operations according to these objectives effectively.

Related: Centralisation Vs. Decentralisation: Differences And Benefits

Features Of Centralised Management

Below are the four key features of centralised management:

Decision-making from top management

A centralised organisation has multiple levels of management to help run the business operations, but the onus of making the final decisions is on top management. All levels below the executives implement these decisions through the completion of tasks according to the instructions they receive from the top-level professionals. Often the top management is most knowledgeable, which reduces the risks involved with decision-making. This structure helps implement a strategy quickly and reduces cost because lower-level employees can focus on their tasks and become more efficient.

Presence of top management

Top management is an important part of an organisation. These are professionals working at the executive levels of the company, such as the chief financial officer. The primary job duties of top management are to make important decisions about business operations and develop business strategies. In a centralised organisation, top management is also responsible for addressing employee complaints and resolving issues.

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Definite structure

Centralised management provides a robust structure within an organisation. By developing a uniform information-sharing procedure for all executives to follow, the employees of the organisation can learn new information more efficiently, which allows them to spend the time they require to remain productive. There is also a clear chain of command which helps employees find instructions or report issues to more senior-level employees and managers.

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Designed for small organisations

Centralised management is suitable for smaller organisations because of its top-level decision-making process. Though it can be effective in large organisations too, the decision-making process may be slower and may take longer to implement as it involves more employees. In smaller organisations, top management can decide and send their decision through each level of the organisation to where employees can implement it. With fewer members, communication is likely easier and the right match for the top-down approach.

What Skills Are Necessary For Those In Centralised Management?

The following are skills management professionals can benefit from in an organisation with centralised management:

Active listening

Strong listening skills are essential in an organisation with a vertical flow of communication. This means that the top level of the organisation shares instructions and information with employees who communicate the message from one level to the next. Even though executives share information and handle decisions, it is important to consider employees at every level, as decisions affect them. One way to do this is by listening to employees' concerns and soliciting feedback, which can help employees feel the company values their contributions. This feedback can also improve their working environment.

Critical thinking

Critical thinking skills involve the ability to observe, collect and interpret data to make conclusions. This is important for decision-making, as it helps top management make well-informed decisions. Critical thinking also enables you to be objective, which means you can make decisions that benefit the organisation in fulfilling its goals successfully.

Analytical skills

Analytical skills help executives assess their decisions and ensure that they are furthering the company vision while making a positive impact on employees. Through analysis, executives identify the strengths and weaknesses of decisions, strategies and procedures they develop. Being analytical also means that these professionals can give themselves critique, which leads to improvement, as they may be more willing to evaluate their work and the work of others.

Problem resolution

The ability to assess an issue, develop solutions and choose the optimum resolution is important for those in management, especially in centralised management, because they make decisions that affect an entire organisation. Executives use the company's values and mission statement to guide their process of evaluating solutions and making decisions. This can help these executives overcome any sudden issues effectively and ensure the workflow can maintain its productivity levels.

Advantages Of Centralised Management

Here are some advantages of centralised management:

Improved quality of work

Centralised management often provides the workforce with standardised procedures and strong supervision, which can improve the quality of work. For instance, for a manufacturing company, managers in each department may be responsible for quality control and ensuring that the company produces excellent products. It is usually easy to repeat the results clients or executives desire in an organisation with centralised management because one person or group of persons develops a vision and expectations for the organisation or a particular project.

Developed vision

The centralised management structure helps an organisation focus on the company's vision. With clear and effective communication, executives can share the company's vision with employees and provide guides with detail to convey and achieve the vision. The established authority of a centralised management structure can eliminate inconsistencies in communicating goals or setting expectations. Executing a vision from the top down in an organisation allows a smooth implementation and frequently ensures a uniform message.

A clear chain of command

Having a clear chain of command is a significant benefit to an organisation. This provides each employee with the direction of whom to report to and where to go for additional assistance or to address their concerns. The delegation of authority enables multiple leaders to manage smaller groups of employees and helps them address concerns or issues more quickly than if an employee has to direct issues through different people until the message reaches the intended person.

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Prompt decision-making

In a centralised organisation, one person or one small group of persons ensures the decision-making process. This often makes it an efficient process because fewer people give input to the decision. Executives can communicate their decisions to the lower levels of the organisation whose employees implement the strategy or execute an idea. Adjusting plans and making improvements to the procedures is also the responsibility of a group of decision-makers, rather than relying on multiple managers and employees to brainstorm ideas, which can be a lengthy process.

Reduced costs

Centralised management creates standard procedures and automates repetitive tasks which can reduce labour costs for a manufacturing company. The main decision-makers in a centralised organisation can also develop guides for business operations. For instance, they may create a hiring guide that, when implemented correctly, can save on administrative costs. A clear chain of command helps prevent duplication of responsibilities and tasks that may cause additional costs to the organisation.

Related: What Is SAP And What Are The Advantages Of Using It?

Differences Between Centralised And Decentralised Management

Here are a few differences between centralised and decentralised management:

Communication

In centralised management, information and directives come from top management, so all employees follow instructions that the executives provide. In decentralised management, departments communicate with each other more freely. It is not uncommon for goals to originate with mid-level managers, rather than executives. This is because of the shared responsibility for making organisational decisions.

Decision-making process

Another difference between centralised and decentralised management is the process each uses to make decisions. There is one body of management to decide procedures and develop strategies for business operations in centralised management. In a decentralised organisation, management at every level decides for their department and teams.

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Size of organisation

A centralised management structure may be suitable for small organisations because there are fewer employees for management to oversee. When one person or a group of persons decides for all employees, like in centralised management, it can be more appropriate for this executive group to decide for a smaller number of people. This is because, in a smaller organisation, executives are likely to have first-hand knowledge of what employees are working on and their individual goals than if they were a part of a larger organisation.

When decisions affect a larger number of people, it may be advisable to disperse decision-making responsibilities to those who understand how the results can affect employees. Multiple decision-makers can represent employees at different levels and make informed decisions because they can observe the effects of the strategies or decisions on the workforce and business distinctly. Decentralised management often works well for large organisations.

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