Decentralization Of Authority

Decentralization of authority refers to

systematic delegation of authority at all levels
of management and in all departments of the
organization for taking decisions and actions
appropriate at the respective levels.

“Everything that goes to increase the

importance of subordinate’s role is
decentralization; everything that goes to reduce
it is centralization.” ------HENRY FAYOL

“Decentralization refers to systematic effort to

delegate to the lowest levels all authority
except that which can only be exercised at
central point”. ------LUIS A.ALLEN
Factors Affecting the Degree of Decentralization:
• Nature of Growth: If the enterprise has growth through
internal expansion, it continue to retain its original structure
unit it becomes unmanageable.

• Outlook to the Top Management: If the top management belie

Managements in uniformity , or if seeks unified control, it will prefer
strong centralized planning and control.

• Size and Dispersal of Operations: Dividing a small enterprise into

a no. of divisions may be a costly affair.

• Extent of Diversification: If the enterprise is dealing in a no. of

diverse products, it cannot retain its efficiency through functional
division of work because the production or sale department would not
be able to give equal attention to each of the different products
manufactured by it.
 An Organization Structure Featuring Decentralization
President

Vice Vice
Vice
President President
President
Production Finance
Sales

Manager Manager Manager Manager

Plant 1 Plant 2 Plant 3 Plant 4

Purchasing Purchasing Purchasing Purchasing

Purchasing Research Research Engineering

Purchasing Engineering Cost Cost

Purchasing Cost Standards Standards

Public
Relations
Departments Departments Departments Departments
Advantages Of Decentralization:
• Top Management Free from Operational Responsibilities: Top
management is free from operational responsibilities
which become the domain of divisional managers.

•Manager Development: Decentralization enables a company

not only to utilize its managerial personnel more
effectively but also forces the development of managerial
abilities by giving them full responsibility and
corresponding authority to run their divisions.

•Better and Speedier Decisions: Decentralization results into

speedier and better decisions as the decision making
authority is delegated nearest to the levels of operation.

•Permits Management by Objectives and Self-Control: Divisions

function on the basis of predetermined objectives set in
mutual consultation between the top management and
divisional managers.
Disadvantages of Decentralization:
•Lack of Coordination: Under decentralization, each
division or department of the enterprise enjoys substantial
freedom in the formulation of policies and action plans.

•Costly: Only a very large enterprise can effort the high

operating costs of maintaining a decentralized setup.

•Lack of Able Managers: A decentralized enterprise has to

depend on divisional managers but it is difficult to find
persons who are adequately equipped to run a division
independently.

•Narrow Outlook of Executives: The executives at the

lower level may develop a narrow outlook as their main
focus is only their divisions or units. This outlook may be
detrimental to the overall interest of the organisation.
THANK YOU