Advantage & Limitation of Decentralization

Principle & Practice of Management

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Advantage & Limitation of Decentralization

Decentralization Advantages

Decentralization Advantages

The decentralization advantages are discussed hereunder:
1. Reduction in the burden of chief executive: When there is centralisation of authority in an enterprise the chief executive has to bear the entire burden of decision-making. This diminishes the time at his disposal to concentrate on important managerial functions. Decentralisation of authority reduces his burden as he delegates a part of his authority to the
subordinates and thus enabling to devote more time to important functions. [ decentralization advantages ]
2. Diversification of activities: With the addition of new activities or product lines, an organisation tends to grow complex and may pose a challenge to the top executives, which can be met by decentralisation under the overall co-ordinating purview of the top management. [ decentralization advantages ]
3. Quick decisions: Decentralisation avoids red-tapism in making decisions as it places responsibility for decision-making as near as possible to the place where action takes place. Those close to the work situation can make reasonably quick and accurate decisions because they are well aware of the realities of the situation. [ decentralization advantages ]
4. Development of managerial personnel: When authority is decentralised, the subordinates get opportunity of taking initiative to develop their talents, to enable themselves to develop qualities for managerial positions. They learn how to decide and depend on their own judgement and how to manage. [ decentralization advantages ]
5. Improvement of motivation: Decentralisation promotes the improvement of morale and motivation of subordinates which is reflected in better work performance. With greater opportunities of communication and leadership, the local executive can foster team spirit and group cohesion among his subordinates. [ decentralization advantages ]
6. Effective control and supervision: The greater the degree of decentralisation, the more effective becomes the span of control. It leads to effective supervision as the managers at the lower levels have complete authority to make changes in work assignment, to change production schedules, to recommend promotions and to take disciplinary actions.
7. Miscellaneous economies: In addition to the above advantages, decentralisation also achieves several internal and external economies. Internal economies include speedier communication, better utilisation of lower level and middle level executives, greater incentive to work and greater opportunities for training. These make it possible for the management
to reduce the cost of production and meet competition effectively. [ decentralization advantages ]

Limitations of Decentralisation

1. Inconsistency: Decentralisation may bring about inconsistencies in the organisation. For instance, uniform procedures may not be followed for the same type of work in various divisions.
2. Increased administrative expenses: Decentralisation increases the administrative expenses because it requires the employment of trained personnel to accept authority. The services of such highly paid personnel may not be fully utilised particularly in small organisations.
3. Difficult autonomation: Decentralisation requires the product lines of the concern to be broad enough to allow creation of autonomous units which is not possible in small concerns.
4. Difficult co-ordination: Decentralisation of authority may create problems in co-ordination among the various units.
5. Uncertainties are difficult to deal with: Decentralisation may not be possible because of external factors. If a company is subject to uncertainties, it will not be able to meet these under decentralisation of authority.