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Decentralisation

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And Disadvantages Of
Decentralisation

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.

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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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Delegation

Decentralisation
 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.

Efficient Communication

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.

External Factors

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.

Expensive
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.

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