MEANING OF DECENTRALIZATION AND ITS IMPORTANCE
Decentralization means diffusion of authority. The dispersal of the authority of decision-making to the lower level management is termed as decentralization. Decentralization of authority is a fundamental phase of delegation and the extent to which authority is not delegated is called centralization.
“Decentralisation refers to tire systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.”
Delegation of authority and responsibilities is commonly referred to as decentralization, in which the organization is divided into different sections and departments to help the organization grow scientifically and with a purpose of direction, resulting in harmony in relationships and a healthy environment, which is typically absent in centralized systems of organization. The term “decentralization” refers to the dispersal of power, and it is the process of assigning specific responsibilities to subordinates.
When such a responsibility is delegated to subordinates, it is always accompanied by an appropriate authority, which is also empowered to the executive and other lower-level assistants.
As a result, decentralization refers to the assignment of responsibility and delegation of management to various executives and other subordinates at lower levels to make the lower level more accountable and capable of doing the task committed to them.
Importance of Decentralization
The major importance of decentralization include:
1. Reduces the burden on top executives
Decentralization of authority relieves top executives from operating details or routine work so that they can concentrate on more important functions of policy-making, coordination, and control.
As a company grows beyond the reach of the chief executive, decentralization becomes necessary. By delegating authority for operating decisions, top management can extend its lead over a giant enterprise.
2. Quick and better decisions
Decentralization permits prompt and more accurate decisions because decisions are made by those who are fully aware of the realities of the situation. Decisions can be made near the point of action without consulting higher levels and without waiting for the approval of top executives.
3. Growth and diversification
Decentralization facilitates the growth and diversification of products and markets. Under decentralization, each product line is treated as a separate division so that it can respond quickly to the changing demands of its special market.
The self-contained product divisions enjoy considerable independence and proper emphasis can be put on each product line under the overall coordination and control of top management.
4. Better communication
Decentralization improves organizational communication and efficiency because there are fewer levels of authority. The problems of red-tape and bureaucratic delays are reduced.
5. Improvement in motivation and morale
Decentralization improves job satisfaction, motivation, and morale of subordinates. The opportunity to make decisions provides a sense of belonging and satisfies the needs for power, prestige, status, and independence.
A climate of competition is generated. High motivation and morale help in improving productivity and working relationships. Better utilization of talents at lower levels can be made.
6. Effective supervision and control
Decentralization results in effective supervision because managers at the lower levels have complete authority to make changes in work assignments, to take disciplinary action, to recommend promotions, and change production schedules.
Decentralization also promotes effective control through a comparative evaluation of performance and clear-cut accountability for results.
7. Democratic management
Decentralization makes for democratic management and flexibility of operations. People at lower levels do not feel alienated from the top and there is little danger of administration becoming top-heavy or monolithic.