INTRODUCTION TO MANAGEMENT-PART4

Decentralization

Decentralization is a systematic delegation of authority at all level of management and in all of the organization. In a decentralization concern, authority in retained by top level management for taking major decision and formality policy concerning the whole organization. Rest of the authority may be delegate to the middle level and lower level management.

The degree of decentralization will depend upon amount of authority delegated to lower level.

According to Allen – “Decentralization refers to the systematic effort to delegate to the lowest level of authority except that which can be controlled and exercised at central point.

Decentralization is a technique where everything that increases the role of subordinates is decentralization and that decreases the role of centralization. Decentralization is wider in scope and the subordinates respectively.

Decentralization is not the same as delegation. In fact, decentralization is an extension of delegation of authority.  Decentralization pattern is wider in scope and the authorities are diffused to the lowest level management.

Types of decentralization:-

1.     Geographical decentralization

2.     Administrative decentralization

Factors affecting the decentralization:

·        Management philosophy

·        Organization’s size

·        Organization’s history

·        Cost of decentralization

·        Dispersal of operating work

·        Capacity of lower workers

·        Organizational environment

·        Planning and control

Merits of decentralization:

·        Quicker and better decentralization

·        Diversification

·        Competitive organization climate

·        Easy environmental adaptation

·        Less burden of top level

·        Higher motivation and moral

Demerits:

·        Problems of coordination and control

·        High cost

·        Unstable for specialization services

·        Handicap for emergency

·        Lack of managerial capacity

·        Managerial desire and fear

Q. Different between centralization and decentralization. (Homework)

Centralization	Decentralization
1. Decision making is in a few hands	1. Decision making is in a more hands
2. Delegates authority is by top levels of management.	2. Delegates authority throughout the organization and to all levels of management.
3.Faster decision making	3.  Faster decision making
4.Is able to keep tight grip on all aspect of business	4. Is not able to keep tight grip on all aspect of business
5. More stress is imposed upon the top level of management	5. Less stress is imposed upon the top level of management
6. Lower implementation cost	6. Higher implementation cost
7. Is suitable for emergency condition.	7. Is not suitable for emergency condition.
8. Higher the centralization greater is the job specialization.	8. Higher the decentralization lesser is the job specialization.
9. Less job opportunity	9. More job opportunity