The paper considers a model that allows a university to choose the degree of centralization in administration to fit their needs. It also considers some ways in which to diminish the possible negative impact caused by the choice of degree of centralization. These methods were proved to be effective in the practice of Russian institutions of higher education. The work was carried out in the framework of the project Analysis and Improvement of the Management Mechanism of Higher Education Institutions that was conducted in 2004 by the Department of Management at the Saint-Petersburg University in co-operation with experts from SU-HSE (The State University — High School of Economics). The research is based on the investigation of six stable and successfully developing institutes. The project was funded by the Russian Ministry of Education and by the Russian Ministry of Economical Development and Trade.