Technology
Technology can have a strong centralizing effect. For example, a banking algorithm that makes all credit approval decisions for a bank where this was previously assigned to bank managers in each community.Hierarchies
A hierarchy is an organizational structure whereby an individual has authority over other individuals who have authority over other individuals thus creating layers of authority. This results in complete control by a single individual or small team that is typically delegated to varying degrees. Hierarchies are a practical way for an organization to follow a single strategy but can also be inefficient where all decisions are made in a top-down manner whereby people closest to each situation are powerless.Central Planning
All current forms of government represent a form of centralized control. At the far extreme of this are communist governments that completely control all economic decisions in a system known as central planning. Under this system, a bureaucratic elite decides what will be produced, how it will be produced, how labor will be assigned to work and how goods will be distributed. This is extremely inefficient and tends to produce waste, decline and low quality of life.Regulations & Standards
Regulations and similar rules such as standards serve to centralize design, decision making and policy. For example, a city with strict and detailed building codes such that houses end up looking much the same with little possibility of innovation or creative expression. Such codes may also have a great number of advantages such as making buildings safer and reducing conflict between neighbors.Broadcast Media
Broadcast media is media that originates from a single source that is transmitted to a large audience. Communication in the 20th century was dominated by broadcast media such as television, radio and newspapers such that a small number of media companies exercised large scale influence.Globalization
Organizations can be established at the international level in an attempt to apply centralized controls to all nations. Alternatively, large nations with a great deal of hard and soft power can apply controls to all nations that want to engage with that nation in trade or to avoid punitive measures.Advantages
Centralization has several potential benefits:
Standardization
Allows experts to design reasonable standards that are then followed by all.
Consistency
Provides consistency such as decisions that are always made according to the same criteria.
Strategy at Scale
Allows large societies, organizations and cities to pursue strategy at great scale. This can produce efficiencies known as economies of scale.
Pursuit of Common Interests
Allows a large group to pursue common interests such as solving an environmental problem with a unified strategy.
Disadvantages
Centralization has several potential disadvantages:
Decision Distance
Top-down decision makers are often far from the nuances of each situation such that they may make suboptimal decisions. For example, an airline customer service policy set in a head office that fails to anticipate thousands of unique service scenarios that occur in the field such that the airline ends up with regulatory, reputational, customer satisfaction and legal issues.
Diseconomies of Scale
Large centralized structures suffer from inefficiencies known as diseconomies of scale. For example, large bureaucracies may take 5 years to do something that a small company could do in 5 days due to the inherent costs of moving a large organization such as communication complexity.
Creativity & Innovation
The bureaucratic elite that hold centralized power aren't often very creative, imaginative or innovative. The skills required to rise to the top of a bureaucracy tend to run contrary to the talents required for creativity.
Diversity
Centralization can be harmful to intellectual and cultural diversity. As a counterexample, giving power to cities as opposed to central governments allows those cities to pursue their own unique culture, economic opportunities and quality of life initiatives.
Elite Capture
By placing power in a small elite, there is a chance that they will become corrupt or unduly influenced by special interests.
Intelligence Shortfall
Centralization often can't compete with decentralized intelligence whereby millions of individuals compete to produce optimal strategies and decisions. For example, a free market for goods and labor is several orders of magnitude more efficient than central planning of an economy.
Participation
Centralization can represent an oppressive system whereby people have no participation in the decisions that impact their lives. For example, an international organization that creates rules that impact people who have no influence whatsoever over such rules. This is a recipe for instability, revolt and revolution.
| Overview: Centralization | ||
Type | ||
Definition | The concentration of control in a single organization, team, location or structure. | |
Also Known As | Centralisation | |
Related Concepts | ||
