The leadership style, attitudes, values and beliefs of the top management team have a bearing on the degree of 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
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
Tags : Management Concepts & Organisational Behaviour - Delegation Of Authority And Decentralization
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