Decentralization is a systematic delegation of authority at all levels of management and in all of the organization. In a decentralization concern, authority in retained by the top management for taking major decisions and framing policies concerning the whole concern. Rest of the authority may be delegated to the middle level and lower level of management.
Decentralization
is not the same as delegation. In fact, decentralization is all extension of
delegation. Decentralization pattern is wider is scope and the authorities are
diffused to the lowest most level of management. Delegation of authority is a
complete process and takes place from one person to another. While
decentralization is complete only when fullest possible delegation has taken
place. For example, the general manager of a company is responsible for
receiving the leave application for the whole of the concern. The general
manager delegates this work to the personnel manager who is now responsible for
receiving the leave applicants. In this situation delegation of authority has
taken place. On the other hand, on the request of the personnel manager, if the
general manager delegates this power to all the departmental heads at all
level, in this situation decentralization has taken place. There is a saying
that “Everything that increasing the role of subordinates is decentralization
and that decreases the role is centralization”. Decentralization is wider in
scope and the subordinate’s responsibility increase in this case. On the other
hand, in delegation the managers remain answerable even for the acts of
subordinates to their superiors.
Implications of Decentralization
1.
There
is less burden on the Chief Executive as in the case of centralization.
2.
In
decentralization, the subordinates get a chance to decide and act independently
which develops skills and capabilities. This way the organization is able to
process reserve of talents in it.
3.
In
decentralization, diversification and horizontal can be easily implanted.
4.
In
decentralization, concern diversification of activities can place effectively
since there is more scope for creating new departments. Therefore,
diversification growth is of a degree.
5.
In
decentralization structure, operations can be coordinated at divisional level
which is not possible in the centralization set up.