The terms ‘delegation’ and ‘decentralization’ are often confused.
Decentralization of Authority
The terms ‘delegation’ and ‘decentralization’ are often confused. While in delegation, authority is transferred on one-to-one basis from the superior to the subordinate, decentralization of authority is broader in scope and involves the transfer of authority in the organization context from top to the lower rungs of management in the hierarchy. Thus, the greater the amount of authority delegated throughout the organization, the more decentralized the organization is. Decentralization is much wider in scope reflecting management’s philosophy regarding which decisions to be taken at the top as well as down the line in the organization.
It must also be understood that both absolute centralization and absolute decentralization are undesirable, for, the former refers an autocratic structure/approach while the latter results in a chaotic situation. For this reason, decentralization must be viewed as a relative concept and not as an absolute one. Ernest Dale, a well-known management writer, has described the following conditions where decentralization is greater:
-- The greater the number of decisions made lower down the management hierarchy;
-- The more important the decisions made lower down the management hierarchy. For example, the greater the sum of capital expenditure that can be approved by the plant manager without consulting anyone else, the greater the degree of decentralization in this field;
-- The more functions affected by decisions made at lower levels. Thus, companies which permit only operational decisions to be made at branch/ plant levels are less decentralized than those which permit financial and personnel decisions at branch/ plat level;
-- The less checking required on the decision. Decentralization is greatest when no checks at all are made; less when superiors have to be informed of the decision after it has been made, still less if superiors have to be consulted before the decision is made. The fewer the people to be consulted, and the lower they are on the management hierarchy, the greater the degree of decentralization.
Decentralization results in unburdening of top manager, better decisions because decisions are made closer to the scene of action, better training, morale and initiative at lower levels. More flexibility and faster decision making are some of the advantages of decentralization. These advantages are widely acclaimed so much so that decentralization is often regarded as ‘good’ and centralization as ‘bad’. But total decentralization, as mentioned earlier with no coordination from the top would be undesirable. That is why, the question before a manager is not whether an organization should be decentralized, but to what extent it should be decentralized.
However, the degree of decentralization in an organization will vary with time and circumstances. It will also vary for the different units of the organization. For example, production and sales department, in general, have gained a high degree of decentralization in many organizations, whereas financial related functions have tended to remain relatively centralized.
Tags : Management Concepts & Organisational Behaviour - Delegation Of Authority And Decentralization
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