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Management Concepts & Organisational Behaviour - Delegation Of Authority And Decentralization

Factors Influencing Decentralization - Delegation Of Authority And Decentralization

   Posted On :  18.05.2018 12:02 am

The leadership style, attitudes, values and beliefs of the top management team have a bearing on the degree of decentralization.

Factors Influencing Decentralization
 
 
Philosophy of Top Management: The leadership style, attitudes, values and beliefs of the top management team have a bearing on the degree of decentralization. Some firms are highly centralized, whereas others are highly decentralized because of the character and philosophy of the top management. For instance, if Tata Group Companies have registered a phenomenal growth over the years, it is partly because of the operational freedom and autonomy the various units in the group enjoy. TATAs provide only the direction and spell out the major policies.
 
Attitude of Subordinate Managers: The Attitude of subordinate managers is another important factor that influences decentralization because they can both encourage or discourage decentralization. If subordinates want decentralization, top management can not hold every thing in their hands for too long a period. The desire by subordinates for independence and the willingness to assume increased responsibilities may make them think of decentralization. As against this, shortage of lower level managers who are willing to assume responsibility may encourage top management to maintain a centralized structure.
 
Now-a-days, in most large-scale organization, the trend is towards decentralization. This is in line with greater employee empowerment. Pushing authority down the line to lower levels in an organization results in an environment of freedom and experimentation. Employee empowerment helps in fostering an entrepreneurial spirit in the organization, by encouraging employees at lower levels to accept responsibility, to unleash their full potential, and most important, to think and innovate. The benefits of decentralization are clear. However, the extent of decentralization depends on the unique requirements of an organization. It normally varies from organization to organization.
 
The cost and Impact of the Decisions: Managers may not be willing for decentralization where the commitment involved in the decisions is very high. As a rule of thumb, the greater the cost involved, the more likely it is that the decision will be made at the upper levels. We often find situation in organizations where managers seek the approval of superiors when the expenditure involved exceeds a certain limit.
 
Company Size and Rate of Growth: It is very difficult to manage a large organization efficiently with decision-making authority concentrated in one or few people/levels at the top. Further, as an organization grows in size and complexity, the need for decentralization is obviously felt. Top management cannot continue to hold a tight grip over the several aspects of the growing organization. This is the principal reason why organizations often engage in reorganizing their units and operations as they grow in size. The necessary autonomy is given to the units or departments so that top management can concentrate itself with more important tasks such as strategic planning and policy formulation.

 

 

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