Consider the following statements about centralisation and decentralisation:
(A) Centralisation and decentralisation are relative terms.
(B) Complete centralisation would remove the need for a management hierarchy.
(C) Complete decentralisation would remove the need for lower managerial positions.
(D) As an organisation grows in size and complexity, there is a tendency to move towards centralised decision making.
(E) Every organisation will be characterised by both centralisation and decentralisation.
How many of the above statements are correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Three
(A) Centralisation and decentralisation are relative terms. — Correct. No organisation is fully centralised or fully decentralised. Each is only more or less of one or the other.
(B) Complete centralisation would remove the need for a management hierarchy. — Correct. Complete centralisation means all decisions are taken at the top. Then no lower level decides anything, so there is no need for a management hierarchy.
(C) Complete decentralisation would remove the need for lower managerial positions. — Incorrect. Complete decentralisation means all decisions are passed to the lower levels. Then the higher managerial positions would not be needed. The statement changes ‘higher’ to ‘lower’.
(D) As an organisation grows in size and complexity, there is a tendency to move towards centralised decision making. — Incorrect. A growing organisation tends to move towards decentralised decision making. In a large firm, people close to the operations know more about them than the top management.
(E) Every organisation will be characterised by both centralisation and decentralisation. — Correct. Both complete forms are unrealistic. So every organisation keeps a balance and shows both centralisation and decentralisation.
NCERT (2026-27 Edition): “Centralisation and Decentralisation Centralisation and decentralisation are relative terms, as seen from the existing status of various business enterprises. An organisation is centralised when decision-making authority is retained by higher management levels whereas it is decentralised when such authority is delegated. Complete centralisation would imply concentration of all decision making functions at the apex of the management hierarchy. Such a scenario would obviate the need for a management hierarchy. On the other hand, complete decentralisation would imply the delegation of all decision making functions to the lower level of the hierarchy and this would obviate the need for higher managerial positions. Both the scenarios are unrealistic. An organisation can never be completely centralised or decentralised. As it grows in size and complexity , there is a tendency to move towards decentralised decision making. This is because in large organisations those employees who are directly and closely involved with certain operations tend to have more knowledge about them than the top management which may only be indirectly associated with individual operations. Hence, there is a need for a balance between these co-existing forces. Thus, it can be said that every organisation will be characterised by both centralisation and decentralisation.” |