‘Decentralization of Authority’ refers to the dispersal of authority for decision-making in various levels of organisational operations throughout the organisation.
In the words of Louis A. Allen:
“Decentralization is the systematic effort to delegate to the lowest levels of authority except that which can be exercised at central points.”
Decentralization is actually an extension of the concept of delegation.
Decentralization of authority means dispersal of decision-making power to the lower levels of the organisation. According to Allen, decentralization refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points. Thus, decentralization means reservation of some authority (power to plan, organise, direct and control) at the top level and delegation of authority to make decision at points as near as possible to where action takes place.
Decentralization is not the same thing as delegation. Delegation means entrustment of responsibility and authority from one individual to another. But decentralization means scattering of authority throughout the organisation. It is the diffusion of authority within the entire enterprise. Delegation can take place from one person to another and be a complete process. But
decentralization is completed only when the fullest possible delegation is made to all or most of the people.
Decentralization is distinct from dispersion. Dispersion occurs when plants and offices are located at different places with physical distance between them. Performance of work in dispersed plants and offices does not necessarily lead to decentralisation. A company may be highly centralised although its physical facilities and employees are widely dispersed and company may be highly decentralised even though all physical facilities and employees are located in a single building.