Degree of Decentralization In Production Planning &

Control.Affan Dabir

Roll No. – 1120717B.E.Mechanical

Mumbai UniversityM.H.S.S.C.O.E.

Semester VIIProduction Planning & Control.

Production Planning & Control.Production Planning is the pre-determination of manufacturing requirementsfor the production of goods :

Of the Right quality In the Right quantities & At the Right time.

Control is to :

Review the work in progress Make corrections wherever required & Ensure that programmed production takes place.

Thus, Planning is forward thinking while Control is a mechanism for Execution.

Organization of P.P.C. :

Setting up of the P.P.C. department necessitates decisions as to its :• status in the company (which depends upon company’s manufacturing processes)

• desirable degree of centralization or decentralization

• the most suitable composition of the internal structure

Centralization“Centralization” is the systematic and consistent reservation (or concentration) of decision making authority at central points (i.e. higher level managers) in an organization.

Decentralization“Decentralization” is

a systematic delegation of decision

making authority throughout the

organization (i.e. to middle & lower level

managers)

History• Henri Fayol (who was a French mining

engineer and director of mines) developed a general theory of business administration. 

• He and his colleagues developed this theory independently of scientific management.

• He was one of the most influential contributors to modern concepts of management.

• Fayol has introduced the 14th principles of management which are very dynamic in nature.

Among those, the 8th principle is

CENTRALIZATION AND DECENTRALIZATION.

Important Points to be considered : Neither centralization nor decentralization is absolute in an

organization.

A single manager cannot make all the decisions even in a highly centralized setting of an organization.

Also, total centralization would end the need for middle and low line managers.

There can never be a total decentralization, since some higher level authorities cannot be delegated to middle or low level managers.

Hence, no organization is ever completely centralized or completely

decentralized Thus, there are only degrees of centralization and decentralization.

Degree of Decentralization

The extent to which an organization wants to decentralize depends upon the degree of

decentralization.

Factors to Determine the Degree of Decentralization :

I. Costliness of Decisions :

The decisions involving heavy cost or investment will most probably be made at the higher levels of management.

Decisions involving risk will not be delegated to lower level managers but in turn will be made at the top managerial positions since they may make fewer mistakes, since they are probably better trained and in possession of more facts.

II. Uniformity of Policy : Uniformity of the organization’s policy determines

the degree of decentralization. If a company intends to keep uniform policies in the organization then policies should be consistent. Uniformity in policy means to ensure that customers

are treated equally in terms of price, quality, credit, delivery and service.

But where there is decentralization, the company will not be in a position to take the advantages of uniformity of policies because of different habits and talents on the part of different persons or managers.

Those who value consistency above all are in favor of centralized authority instead of a decentralized authority.

III. Size of Organization Larger the size of an organization, the greater will

be the number of departments & the more difficult it is to

co-ordinate them and as a result, decentralization would be preferred in large sized organizations. Hence, the burden on the top management will be

much less and they will be in a position to concentrate on crucial matters.

In other words, decentralization of large size organization will yield better results because each departmental head will be able to take better decisions regarding the work allotted to him.

IV. Availability of Competent Managers The shortage of managerial manpower necessarily

restricts the extent of decentralization. The dispersal of decision-making and leadership requires the availability of persons who can discharge their obligations as per the authority delegated.

If lower level managers are well qualified & competent to take high quality decisions then top management can take advantage of their talents by decentralizing.

A real shortage of managerial manpower would limit the extent of decentralization of authority, as delegation of decision-making assumes the availability of trained managers.

V. Management Philosophy

The character of the top leader or manager and the philosophy possessed by him will have an important influence on the extent to which authority in an enterprise is centralized or decentralized.

In a decentralized organization, it is necessary that the leaders or top managers should have broad vision which will have a lasting effect on the organizational structure.

VI. History of Organization

To what extent authority in an organization will be centralized or decentralized depends upon the way the business has been built up in the past.

If an organization has appointed a set of departments with the departmental heads being appointed with the authority to achieve the objectives, then it sets the example of decentralization.

VII. Control Techniques Another factor affecting the degree of

decentralization is the state of development of control techniques.

Even the most successful decentralized organizations insists on controls and procedures to prevent mistakes & to determine whether actual events are meeting expectations.

They have control mechanisms in place which help to analyze and control important aspects of the organization’s operations.

If the organization’s operations don’t fall within certain guidelines then top management may shift to Centralization.

VIII. Decentralization of performance

The nature of operations (like the economics of division of labor, the opportunities for using machines and the nature of the work to be performed)also determine the extent of decentralization.

It determines whether the operations of the organization are concentrated at the one place or in a region or dispersed to different territories.

If the enterprise activities are dispersed over to different territories it will be benefitted by the policy of decentralization.

IX. Environmental Influences Most of the factors determining the extent of

decentralization dealt so far are related to the organization.

But in addition to these factors, there are many other factors which are external to the business yet have an impact on the degree of decentralization, such as, government controls, tax policies and national unionism.

The greater the complexity & uncertainty of the environment, the greater is the tendency of an organization to decentralize.

Summary of Factors to Determine the Degree of Decentralization :

Costliness of Decisions Uniformity of Policy Size of Organization Availability of Competent

Managers Management Philosophy History of Organization Control Techniques Decentralization of

performance Environmental Influences

Conclusion :The organization decides best which

philosophy it needs to adopt; whether to centralize or decentralize on the basis of meeting the key factors while considering the degree of Centralization or degree of

Decentralization.