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Decentralized Plan - Meaning, Importance & Example

Published by MBA Skool Team in Human Resources Terms Last Updated: February 10, 2024Read time:

What is Decentralized Plan?

Decentralized plan are plans formulated as well as executed by local, regional or individual departments. Going by the definition of decentralization, decentralized plan means that each function enjoys certain level of autonomy and the decision making tasks of the department are bestowed on them. Decentralized plan is also referred as panning from below.

If a department, eg marketing department, of the organization has a decentralized mode of operation then each constituent vertical within it determines its operations itself. But, the meaning of autonomy is not that the verticals can do whatever they wish, rather they should act accordingly in line with the mission and vision of the marketing department as a whole.

It is very important in such situations to ensure that the verticals don’t act as silos and transfer information with each other at a constant interval to ensure the department works like clockwork. Especially the marketing communications department needs a sense of autonomy to seamlessly innovate and to come up with attractive marketing campaigns that the marketing department can leverage to improve the sales of its brand.

Decentralized Plan

Importance of Decentralized Plans

With decentralized plan the top management need not concentrate on the daily decision making mostly at the lower levels of management. The certain level of authority bestowed on the line managers makes them more involved in the organization and it also leads to a sense of ownership that they develop towards the product or service they develop. The advantage of decentralized plan that a department draws from this is that the amount of innovation that a vertical within the department can come up with escalates.

Since the verticals are working and making decisions on their own, they need not depend on other departments for further proceedings and can leverage the expertise they have on the subject. Seemingly, if the departments don’t have much interdependencies then they develop specializations on their fields. This leads to considerable competitive advantage and operational excellence.

Decentralized plans also reduce the burden on top management and give them time to foresee the future the brand is looking up to and to exercise better control over the marketing department. But the foremost important work that the top management has is to ensure that the decentralized plans are working in tandem with each other and are in line with the company’s mission and vision.

Advantages and Disadvantages of Decentralized Plans

Some advantages of decentralized plans are:

1. Conducive environment is ensured for all the departments that demand innovation and creativity. Especially the marketing communications department.

2. Some departments apart from the communication department like the marketing research department needs to work alone to come up with exploratory research and find linkages between the communication and the consequent sales targets.

3. Decentralized plan creates a sense of competition between the departments that leads to improved efficiency and collaborative efforts by the team members to attain higher targets.

4. It leads to a growth rate higher than when the teams are working in centralized mode of operations.

5. Decentralized plan easy to implement monitoring and control as the managers of each of the verticals are made accountable for foreseeing their individual departments and the top management is just concerned with the manager’s performance which is very much representative of the vertical’s performance.

Some disadvantages of decentralized plans are:

1. The teams in a competitive environment start to go apart on terms of communication and the overall operational effectiveness of the department. This is the reason the top management needs to continuously restructure and drive for rotation between verticals.

2. The higher growth rate may not be sustainable for some departments as it may lead to discrepancies in the future.

3. The costs associated with decentralization are very high as the overall success of its implementation lies on the managers and the expertise of personnel which comes at a premium.

4. It is very difficult to cope with emergency situations when decentralized plans are at helm as it leads to unequal efforts by different departments to manage their performance and creates an imbalance that is difficult to mitigate through.

Example of Decentralized Plans

If the marketing department as a whole is assigned a task to design a marketing campaign for some upcoming product, then the heads of each vertical would meet up once and get on the same page and after that, in a decentralized planning set up, they are given autonomy to take their own decisions. It is critical for vertical heads to meet and keep each other informed of their progress so that synergy is maintained.

Hence, this concludes the definition of Decentralized Plan along with its overview.

This article has been researched & authored by the Business Concepts Team which comprises of MBA students, management professionals, and industry experts. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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