“Decentralisation refers to tire systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.” —Louis A. Allen
“Decentralisation means the division of a group of functions and activities into relatively autonomous units with overall authority and responsibility for their operation delegate to time of cacti unit.’—Earl. P. Strong
Definition of Decentralisation
Decentralisation is referred to as a form of an organisational structure where there is the delegation of authority by the top management to the middle and lower levels of management in an organisation.
In this type of organisation structure, the duty of daily operations and minor decision-making capabilities are transferred to the middle and lower levels which allow top-level management to focus more on major decisions like business expansion, diversification etc.
Delegation refers to the assigning a portion of work and the associated responsibility by a superior to a subordinate. In simple words, when delegation is expanded on an organisational level, it is called decentralisation.
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Example of Decentralisation
Good examples of decentralised business are Hotels, supermarket, Dress showrooms and etc. Because it is not possible for one person to focus on more than 100 branches which have branches throughout the world, take an example of a hotel. When a particular person holds a chain of hotels as his business, he particularly focuses on using decentralised structures so that local hotel managers and assistants are empowered to make on-the-spot decisions to handle customers – problems, complaints and requirements.
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Importance of Decentralisation
- Rapid decision making – Most of the decisions are taken on the spot, and approval from the higher authority is not required. The ability to make a prompt decision allows an organisation to function its operation quickly and effectively.
- Administrative development – The decentralisation process questions the manager’s judgement and techniques, when responsibility and challenges to develop solutions are given to them. This questioning method grows confidence, encourages self-reliance, and make them a good decision-maker resulting in the development of the organisation.
- Development of executive skills – It allows the employee to perform task individually, giving them invaluable exposure. This individual performance creates an environment where an individual can enhance their expertise, take ownership & more significant responsibilities, and be suitable for promotion.
- Promotes growth – Decentralisation also allows the heads of the department to work independently. This independence helps the department to grow, have a healthy competition between other departments. Ultimately, the competition will lead to an improvement and enhancement in productivity.
- Higher control – It also evaluates and reviews the performances of each department and gives them a comprehensive perspective of their work. However, controlling is the biggest challenge of decentralisation and stabilised management and scorecard are being developed.
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Advantages of Decentralisation
- Reduces the burden on top executives
- Facilitates diversification
- Executive Development
- It promotes motivation
- Better control and supervision
Disadvantages of Decentralisation
- Uniform policies not Followed
- Problem of Co-Ordination