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Centralization measures which feature of an organization?
AThe number of departments the firm operates
BThe share of profits retained inside the firm
CThe degree to which formal authority is concentrated
DThe distance between the head office and the plants
Answer & Solution
Correct answer: C. The degree to which formal authority is concentrated
1. The final component in building an effective structure is deciding at what level decisions should be made.
2. Centralization is the degree to which formal authority is concentrated in one area or level of the organization.
3. In a highly centralized structure, top management makes most of the key decisions with very little input from lower-level employees.
4. Department counts, retained profits, and physical distances measure something else.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 7 "Designing Organizational Structures", section 7.5 Degree of Centralization_
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