Concept, needs and factor affecting decentralization

Concept of Decentralization

Decentralization is the process of equal distribution of decision-making power to the operating level of staff for better performance. This philosophy emphasizes that the top level of management should keep minimum right and power and all decision-making powers are to be provided to the operating level of staff, manager or superior. It is optional and suitable for the research-oriented and creative jobs where the employees are disciplined, skilled and trained.

According to Louise A. Allen,” Decentralization is the systematic and consistent delegation of authority to the level where the work is performed.”

Similarly in the word of Dale S. Beach,” Decentralization means placing the authority and decision-making power as close as possible to the level at which the work is done.”

In conclusion, we can say that the decentralization of authority is the process of systematic and scientific delegation of authority to the operating level of staff for better performance.

Needs for Decentralization

1. Motivation:
   The subordinates or managers receive rights, powers, prestige, and status through this decentralization of authority. They feel a greater opportunity for leadership and participation in the organization. This may lead to an increase in their morale and it may motivate them more and more to work honestly.
   
   
2. Environmental adaptation:
   Decentralization helps an organization to adapt to the fast-changing environment because the subordinate’s personal thinking is also given due priority.
   
   
3. Permits quicker and better decisions:
   The superior, who is close to the work, are most knowledgeable about the specific details and circumstances of problems that arise in their respective department or work units. Due to the decentralization of authority, they are involved in decision making and appropriate decisions are taken by the managers very quickly.
   
   
4. Reduce the burden of the top executive:
   Decentralization is the distribution of power and authority. It relieves top executives from routine and day-to-day time-consuming works and helps them to devote greater attention to other important organizational issues such as planning, policymaking, strategy formulation, and decision making.
   
   
5. Facilitate diversification:
   Decentralization facilitates the diversification of products, activities, and markets. Alfred D. Chandler opines that it is the decentralization of authority which contributed a lot to the large American enterprises such as DuPont, General Motors, Standard Oil and Sears Roebuck, which were initially very small and had a centralized organizational structure.
   
   
6. Management development:
   Decentralization encourages managers to exercise freedom in decision making. They learn to exercise judgment. This develops managerial competency. This also promotes innovation and creativity.
   
   
7. Improved teamwork:
   Both managers and employees share the decision-making authority which integrates the employees as one team and develops team spirit among them.
   
   
8. Effective supervision and control:
   It is said and accepted in many cases and circumstance that greater the degree of decentralization, the more effective is the supervision and control. Supervision and control can be made effective by evaluating the performance of each unit, plant, department or branch office in the light of predetermined standards.

Factors Affecting Decentralization of Authority

The decentralization of authority is a blessing to organizational success. While designing or determining the organization structure, one should be clear about the degree of concentration and dispersion of authority in the organization i.e. centralization and decentralization of authority. While determining decentralization of authority, the following factors should be considered as they affect much in determining the amount of decentralization appropriate for an organization:

1. Nature of decision:
   Organizational decisions are broadly classified into two types i.e. repetitive and non-repetitive. If the decisions are repetitive in nature, then the rights and power are to be centralized. If the decisions are not- repetitive or unique in nature then the rights and power are to be decentralized.
   
   
2. Philosophy of management:
   Some managers have low self-confidence, conservative attitude, and traditional faith. Such types of managers centralize the rights and power but some managers have the modern concept and consider the democratic system. Such type of manager decentralizes rights and power.
   
   
3. Organization history:
   Decentralization depends upon the organization's history that how it was organized and grew. If the organization is established or grown-up by a large number of people or reputed person then the rights and powers are to be decentralized. If the organization is established by a small group of people then the rights and power are to be centralized.
   
   
4. The size of the organization:
   It is observed that the speed and adequacy of decision making, flexibility, and efficiency are enhanced through decentralized operations in the case of a very large, multi-product diverse and complex organization. Thus, the larger the size of an organization, the larger will be the decentralization of authority. Smaller the size of an organization, the smaller will be the decentralization of authority.
   
   
5. The cost of decentralization:
   If the cost of decentralization is high, then the manager or superior centralizes the rights and power. If the cost of decentralization is minimum or low then the right and power are to be decentralized.
   
   
6. Control technique:
   If the organization has an effective control system then the manager or superior decentralize the rights and power because subordinately is self-controlled. If the organization has an ineffective control system, then the manager or superior centralizes the rights and power.
   
   
7. Competencies of a subordinate:
   If more competent and experienced personnel are available at a lower level, the organizations can adopt and implement a policy of decentralization. Without having competent personnel without facilitating efficient training and management development programs to the staff members, the decentralization process cannot be followed.

Differences between delegation and decentralization of authority

References:

Pokhrel, Dhurb Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu

Poudyal, Santosh Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu

Bhandari, Kedar Prasad, Business Studies-XII, Bundipuran Prakashan, Kathmandu