Advantages of Decentralization
Decentralization can be viewed as an extension of delegation. It is the systematic delegation of managerial authority to middle and lower level management according to their weight age of responsibility. In practical, it is not possible to delegate absolute authority to the lower level management.
Decentralization has the following advantages:
- Decentralization Facilitates Managers’ Development
In decentralization, appropriate responsibility and authority is delegated to subordinate level managers. When the authority is decentralised, executives in the organisation will get the opportunity to develop their talents by taking initiative which will also make them ready for managerial positions. It gives them an opportunity to hone their skills and efficiency so as to get promotions. Therefore, decentralization creates the reserve of talency. The growth of the company greatly depends on the talented executives.
- Reduces the burden on top executives:
Decentralization relieves the top executives of the burden of performing various functions. In decentralization, most of the routine managerial responsibilities are delegated to middle and lower level managers. Centralization of authority puts the whole responsibility on the shoulders of an executive and his immediate group. It minimizes the excessive workload of the top managers. It gives sufficient time to the top managers to concentrate on non-programed decisions like planning, policy making, strategy formulation etc.
- Effective Control
In decentralization, it is convenient to set standards of performance. This helps to compare actual performance with standard performance more quickly. This helps in taking prompt decisions to correct deviations. As a result they have thorough knowledge of every assignment under their control and are in a position to make amendments and take corrective action. This leads to maintaining effective control.
- Possibility of Better Decision
Decentralization delegates the decision making authority to the managers nearest to the level of operation. It brings decision making process closer to the scene of action. The managers working nearest to the operation are in a better position to understand the complexity of problems. This helps in taking a better decision to solve the problems. This leads to quicker decision-making of lower level since decisions do not have to be referred up through the hierarchy.
- Decentralization Facilitates Diversification
Under decentralization, the diversification of products, activites and markets etc., is facilitated. The addition of new product lines or expansion of existing lines of business develops complexity in an organization. This also develops a challenge to the top management. A centralized enterprise with the concentration of authority at the top will find it difficult and complex to diversify its activities and start the additional lines of manufacture or distribution. The top managers can meet such challenges by delegating authority to their subordinates. Top managers can only play the role of coordinators.
- High Morale and Motivation
Decentralization is highly motivational as it gives the subordinates the freedom to act and take decisions. This develops among the subordinates a feeling of status and recognition and ultimately a feeling of dedication and commitment. To quote Louis A. Allen, “Decentralisation stimulates the formation of small cohesive groups. Since local managers are given a large degree of authority and local autonomy, they tend to weld their people into closely knit integrated groups.” This helps in maintaining high motivation and morale of subordinates.