Concept 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. Top level management can delegate only substantial power to the lower level management. Therefore, every organization has to decide how much authority should be centralized and how much should be decentralized. Decentralization depends on the size and nature of the organization and responsibility vested on the lower level. The top level management has to delegate such degree of authority to the lower level so that quick decisions and their implementation are possible.
The degree of decentralization is determined by:
(a) Nature of the authority delegated,
(b) How far down in the organization it is delegated,
(c) How consistently it is delegated.
So, the degree of decentralization is determined by the authority given. For example, manager A in a company is given the authority to buy certain material worth Rs. 1500 whereas manager B is allowed to do similar type of work to the extent of Rs. 4500.
It is clear that the degree of decentralization is less in case of A. Similarly decisions about the matters referred, measure the degree of decentralization depending upon the power to take decisions vested in an officer without the need of getting consent of somebody else.
Therefore, decentralization may be known as the philosophy of scientific and systematic delegation of managerial authority to the middle and lower level managers in accordance with their responsibility. This philosophy states that the top level management should keep limited authority and delegate maximum authority to operating levels. Top management has to play the role of supervisor.
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