DECENTRALIZATION

MeaningDecentralization is the policy of

delegating decision making authority through out an organization, relatively away from a central authority.

Definition

According to Allen:According to Allen:

““Decentralization refers to the Decentralization refers to the systematic effort to delegate to the systematic effort to delegate to the lowest levels all authority except that lowest levels all authority except that which can only be exercised at which can only be exercised at central points.”central points.”

Reasons for Decentralization

Decentralization is preferred because of Decentralization is preferred because of following reasons:following reasons:

Reduction in the burden of top Reduction in the burden of top management.management.

Facilitates growth and diversification.Facilitates growth and diversification. Philosophy to motivate managers.Philosophy to motivate managers. Encourage Development.Encourage Development.

When Organizations should move for Decentralization. When organization is large.When organization is large. When operations are geographical When operations are geographical

dispersed.dispersed. Top managers cannot keep up with Top managers cannot keep up with

complex technology.complex technology. Increasingly uncertain environment.Increasingly uncertain environment.

Types of Decentralization

Political Decentralization: Aims to give managers or elected

representatives more power in decision-making.

Administrative Decentralization: Seeks to redistribute authority,

responsibility and financial resources for providing resources for providing services among different levels of organization.

Types of Decentralization Continue………

Fiscal Decentralization: Can take forms like a) Self financing or cost recovery

through user charges, b) co-financing or co-production , c) expansion of local revenues. Economic or Market Decentralization: Shifting responsibility for functions

from the organizations to another one.

Types of Decentralization

Factors Amounting More Decentralization

Environment (complex, uncertain) Lower-level managers (capable and experienced at making

decisions) Relatively minor decisions. Corporate culture Geographical dispersion Effective implementation of company

strategies.

Advantages of Decentralization

Saving of time. Greater efficiency and output. Maintenance of secrecy. Departmental loyalty. Faster decisions can be made. Top managers can concentrate on

major issues. Challenge of decision-making enriches

the job of lower-level employees.

Disadvantages of Decentralization

No proper division of work. Duplication of work. No standardization. Heavy expenditure.

Created and Presented By: Sayad Rashid Parrey Mudasir Gulzar Avinash kumar

At: IIBS, Bangalore.