Decentralization is the process by which the authority in an organization is delegated to the lower level managers. With this decentralized authority comes the responsibility to the managers. It is just the opposite of centralization, where the authority lies in the hand of a few people at the helm. In centralization, most of the decisions are made by the top level managers.
But in the case of decentralized authority, lower level managers can take their decisions on matters realizing to their specific area of work with certain freedom as long as the decisions are in sync with the overall goal and strategy of the organization. However the static decisions and policies are made by the top level management in this case also. Authority to coordinate and control also remains with the top level managers.
Factors that decide the degree of decentralization
• Size and scope of operations of an organization
• Degree of control required
• Management by exception required or not
• Nature of the business and the growth
• Quality of top level managers
• Level of diversity in products and services
Implications of Decentralization:
• Less burden on top level executives
• Subordinates get a chance to take decisions independently and learn
• Operations can be coordinated at lower levels
• Ease of expansion
• Increased motivation to work
• Greater efficiency and output
• Diversification of activities
• Maintenance of secrecy
• Lower level mangers get ready for emergencies
• Effective control is there, hence quick decisions can be made
Disadvantages of Decentralization
• Co-ordination becomes slightly difficult to maintain
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