Firms with multiple responsibility centers choose one of two approaches to manage their diverse and complex activities: centralized decision making or decentralized decision making.
In centralized decision making, decisions are made at the very top level, and lower-level managers are charged with implementing these decisions.
On the other hand, decentralized decision making allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility.
Decentralization is the practice of delegating decision-making authority to the lower levels.