Benefits of Centralization

Benefits of Centralization

Centralization, also called consolidation, refers to combining several departments within a company into one department. For instance, several individual IT functions can be shut down to pave way for one IT department that deals with the computing needs of the whole organization . Centralization helps to remove redundancy and increase profits.

1. Lowers cost of real estate

Consolidation can lower the costs of real estate significantly. Individual agencies can be located all over the country or state, with some of them located in regions with high living costs. In this case, one centralized department can be created in an isolated region where the real estate cost is lower. For instance, a company can construct a support center in an isolated location where workers offer support for many varieties of products.

2. Easy staff monitoring

Centralization offers great monitoring benefits. A manager can be given the task of creating a budget for several agencies. Hence, the manager requires contacting every agency individually for tasks like hiring workers so as to find out what resources they need. However, having a centralized HR department that is accountable for all the employees is sufficient to estimate the hiring cost and create a fitting budget. In fact, fewer managers are necessary when a company centralizes human resources function.

3. Eliminates redundancy

Having several payroll systems within a firm can be very hard to manage. It also increases the chances for error. Centralization ensures that there is only one accounting department that deals with the issues related to money. Hence, the centralized accounting department maintains data for each agency and this makes it simpler to comply with any state regulations.

Centralization also results in lesser costs for the company. The large company can buy things like computers, chairs and tables in bulk and thus enjoy the discounts. Furthermore, the company may end up using less equipment in general since devices like wireless routers can service more users simultaneously.

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