Decentralisation of authority / Distinguish between delegation and decentralisation
Meaning and Definition of Decentralisation
The term ‘Decentralisation’ is open to a number of interpretation. It may sometimes refer to departmentation of activities, division of responsibility or dispersal of the centers of authority, etc. In simple words decentralisation is simply a matter of dividing up the managerial work and assigning specific duties to the various executive levels.
Decentralisation is an extension of delegation. The term Decentralisation has been defined by various experts as follows
(1) “Decentralisation is the systematic effort to delegate to lowest levels authority except that which can only be exercised at central point.” -Koontz and O’Donnell
(2) “Decentralisation means the division of a group of function and activities into relatively autonomous units with overall authority and responsibility for their operation delegated to a head of each unit.”
-Earl P. Strong
Therefore, effective decentralisation requires a proper balance between dispersal of authority among lower levels and adequate control over them.
Degree of Decentralisation
According to Allen, the extent of decentralisation is determined by
PLORE
VENTURE
(i) What kind of authority is delegated;
(ii) How far down in the organisation is it delegated; and (iii) How consistently it is delegated. Factors Affecting the Degree of Decentralization
The nature and extent of decentralisation in any organisation will be generally influenced by the following factors
1. History of the organisation and management philosophy- If a company has grown-up from a small group of persons, there is a tendency to centralise further, if the philosophy of the top management is not to decentralise authority, centralisation will prevail.
2. Size and complexity of the organisation: In a large and complex organisation there is greater need for decentralisation. But in a relatively small and simple organisation, top management can make most of the decisions himself.
3. Dispersal of operations- When the production and sales of an enterprise are geographically scattered, centralised control becomes very difficult and there is greater pressure for decentralisation of authority. But if all the activities are located in one building centralised control is much easier.
4. Large-sized flat topped organisation- Decentralisation is unavoidable in a large enterprise with numerous managers having a long chain of command. In a flat topped organisation, the man at the top have number of deputies each of whom is put in charge of distinct activity on a department.
5. Degree of diversification- In a company having several diverse prouduct lines, decentralisation is not only necessary but beneficial. High degree of standardisation, on the other hand, results in centralisation.
6. Availability of competent subordinate managers- Decentralisation necessitates the services of competent subordinate managers; hence, efficient training for management development becomes a must to provide many managers under decentralisation.
7. Nature of functions- Generally, basic functions like production and sales are more decentralised than staff functions such as personnel, finance, research and development.
8. Communication system-An effective communication system is required to co-ordinate and control the activities operational units. In case communication system is ineffective, centralisation should be advocated. However, computerised management information system has enabled centralised decision-making.
9. Costliness and significance of decisions-Strategic decision involving higher cost of mistake are always made by top management and do not encourage decentralisation of authority.
10. Uniformity of policy- Only centralized authority can ensure uniformity of policies (e.g., policy regarding price, quality, service, etc.).
11. Complexities of the situation- Environmental factors exercise significant influence on the degree of decentralisation. For example, where business conditions are highly uncertain, high degree of freedom to operating units may endanger the very existence of the enterprise.
12. Dynamic conditions- In a static organisation centralisation will work successfully, but under conditions of uncertainty or when technology and markets are in a constant state of change. decentralisation would be preferred.
13. Dispersal of Operations- If the different operations of the organisation are mostly concentrated at one place or in a region, centralisation would be feasible; but if they are dispersed over different territories, decentralisation would be a must.
Distinction between Delegation and Decentralisation Decentralisation is much more than delegation. Delegation means transfer of authority from one individual to another. But decentralisation implies diffusion of authority thoughout the organisation.
The main points of distinction between delegation and decentralisation are as follows
1. Delegation is the process of devolution of authority whereas decentralisation is the end result which is achieved when delegation is systematically repeated up to the lowest level.
2. Delegation takes place between a superior and a subordinate and is a complete process. It may consist of certain tasks alone. But decentralisation involves spreading out the total decision making power.
3. In delegation control rests entirely with the superior. But in decentralisation the top management exercises only overall control and delegates the authority for control to the departmental managers.
4. Delegation create authority-responsibility relationship between a superior and his subordinate manager, whereas, decentralisation is diffusion of decision-making authority throughout the multiple layers of the organisation.
5. Delegation is a must for management. Subordinates must be given sufficient authority to perform their assignments otherwise they will come to the superior time and again even for minor decisions. However, decentralisation is optional in the sense that the top management may or may not decide to disperse authority.
6. Delegation is a technique of management used to get things done through others. However, decentralisation is a philosophy of management.
7. Delegation create superior-subordinate relations while decentralisation results in diffusion of decision-making authority throughout the organisation.
8. Delegation of authority can take place without decentralisation but there cannot be decentralisation without delegation.
9. In case of delegation of authority, the delegator has still some directive responsibility in relation to his subordinates. But in a decentralised setting, direction is to a large extent substituted by control by the top management. In a decentralised organisation, the control mechanism is rather elaborate so as to ensure that the dispersal of authority strengthens the entire organisation.
