What is Decentralization?
Decentralization refers to a specific form of organizational structure where the top management delegates decision-making responsibilities and daily operations to middle and lower subordinates. The top management can thus concentrate on making major decisions with greater time abundance. Businesses often feel the requirement of decentralization to continue efficiency in their operation.
Decentralization in management can be understood as the orderly assignment of authority, throughout the levels of management, in an organisation. It describes the way in which power to take decisions is allocated among various levels in the organisational hierarchy. In other words, it refers to the dissemination of powers, functions and responsibility, away from the central location.
What are the benefits of decentralization in management?
1. Quick decision making:
Decision making becomes quicker and better at the same time, by pushing down the power to make a decision to the operational level, which is nearest to the situation.
2. Executive development:
It encourages self-sufficiency and confidence amongst subordinates, as when the authority is delegated to lower levels, they have to rely on their judgement. By such delegation the executives are constantly challenged, and they have to find solutions, for the problems they face in the day to day operations.
3. Development of managerial skills:
In a decentralised structure, subordinates get an opportunity to prove their abilities. Management also gets a pool of competent manpower, which can be placed at situations that are challenging and breeds responsibility, by way of promotions.
4. Relieves top management:
It reduces the extent of direct supervision over subordinates by the supervisor, as they are given the liberty to decide and act accordingly, within limits set by the superior. As a result, the top management gets more time to take policy decisions.
5. Facilitates growth:
It confers greater independence to the lower management levels as it let them perform functions in the way that is most appropriate for their department or division. It propagates a sense of competition among various departments, to outperform others. This ultimately results in the increased productivity level and generates more return to the enterprise.
6. Better control:
The performance of each level can be measured, and the departments are also held accountable separately for their results. The extent to which organisation goals are achieved and the contribution of each department is determined.
7. Effective communication:
The communication system of the organisation becomes more effective, through decentralization. It also builds a strong relationship between superior and subordinates. Decentralization lessens the burden of top-level management and gives actual work experiences to some middle and lower level executives, which improves their morale.