Final answer:
When top management centralizes an activity accessed by many other units, it creates a monopoly within the organization, leading to a hierarchy of authority with potential for work overload and conflict.
Step-by-step explanation:
The lateral role relationship that exists when top management centralizes an activity to which a large number of other units must gain access is typically known as a monopoly within an organization. In this centralized system, other departments or units within the company must go through the single centralized department to obtain certain services or resources. This arrangement can help in reducing transaction costs but may also lead to increased conformity costs and potential work overload, conflict, or ambiguity in defining managerial roles due to the centralized nature of the control over the activity.
Despite the trend towards flatter organizational structures and more collegial relationships between managers and employees, a centralized function within an organization creates a hierarchy of authority where the centralized department holds significant power over access to the specific activity or resource. This has similarities to how a chain of command works, where lower-level employees must follow orders from their direct superiors, who in turn are accountable to their own superiors up to the top executives and stakeholders.