What is Decentralization?
What is decentralization? Decentralization refers to a specific form of organizational structure where the top management delegates decision-making responsibilities and daily operations to middle and lower subordinates. The top management can thus concentrate on taking major decisions with greater time abundance. Business houses often feel the requirement of decentralization to continue efficiency in their operation. Today, we are going to take a look at the basic advantages and disadvantages of decentralization from an organizational point of view.
Advantages and Disadvantages Of Decentralisation
Advantages of Decentralisation
Motivation of Subordinates
Decentralization improves the level of job satisfaction as well as employee morale, especially amongst the lower level managers.
Furthermore, it strives to satisfy the varying requirements for participation, independence, and status. Decentralization also promotes a spirit of group cohesiveness and spirit.
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Learn more about Factors determining Decentralization here in detail
Growth and Diversification
Under decentralization, every single product division attains sufficient autonomy to exercise their creative flair. In this way, the top-level management can create healthy competition amongst different divisions.
While carrying out a discussion on the advantages and disadvantages of decentralization, it is imperative to note that it aids subordinates in exercising their own judgment.
They even develop managerial skills and help in solving the succession problem which ultimately ensures the growth and continuity of an organization.
Quick Decision Making
Another important pointer in the advantages and disadvantages of decentralization is that decisions are taken and executed by authorized personnel. This, in turn, results in faster and accurate decisions which are well aware of the real scenario.
The wider span of management under decentralization leads to fewer hierarchical level. This makes the communication system more efficient as intimate relationships develop between superiors and subordinates.
Ease of Expansion
Decentralization can add inertia to the expansion process of a growing business. This might often result in the opening of new business units in varying geographical locations.
Decentralization unleashes the fullest potential of the organization and can react easily to area-specific requirements.
Better Supervision And Control
Lower level managers can alter production schedules and work assignments with adequate authority. They can even take disciplinary actions and recommend the promotion of their peers.
This, in turn, leads to greater efficiency in supervision. Performance evaluation of each decentralized unit helps in exercising adequate control.
Satisfaction of Human needs
Decentralization serves as an important tool for satisfying our basic need of independence, power, prestige, and status. A cadre of satisfied manager is build up by this satisfaction as they feel responsible towards the company’s betterment.
Relief to top executives
Top executives can focus more on more on the executive level work like planning and decision making if the lower level employees take all the responsibilities on their own. This relieves their workload which eventually is for the greater good of the organisation.
Disadvantages of Decentralization
Difficult To Co-Ordinate
While talking about the advantages and disadvantages of decentralization, it is imperative to note that substantial autonomy is enjoyed by every single division. This, in turn, makes it difficult to coordinate the overall activity.
The trade union movement, market uncertainties, and government intervention might make it impossible to benefit the most out of decentralization.
Narrow Product Lines
Decentralized product lines need to be adequately broad so that autonomous units can flourish within the same. This might not be of much help in small business houses having narrow product lines. Lower levels in the organization also lack competent managers thus adding to the difficulty quotient.
In decentralisation, every employee takes responsibility for the better of the organisation so they work harder to achieve all the organisational objective. In return, they have to be paid more which sometimes proves to be very expensive for the company.
Solved Questions For You
Q. Why is decentralization treated as an expensive process?
Ans. Administration expenses tend to rise in decentralized enterprises. When it comes to the employment of trained personnel and availability of physical facilities, every separate department tries to be self-sufficient. This, in turn, leads to underutilization of facilities and duplication of functions. Such attributes make decentralization tailor-made only for large organizations.