BCom Notes Part II Management Decentralization of Authority

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Decentralization of Authority

What is meant by Decentralization of Authority? Decentralization of Authority

Decentralization of authority means dispersal of decision – making power to the lower levels of the organization. According to Allen, decentralization refers to the systematic effort to delegate to the lowest level all authority except that which can only be exercised at central points. Thus decentralization means reservation of same authority (power to plan, organize, 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 same thing as delegation. Delegation means entrustment of responsibility and authority from one individual to another. But decentralization means scattering of authority through the organization. It is the diffusion of authority with in the enterprise. Delegation can take place from one person to another and be a complete process. But decentralization is complete 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 place with physical distance between them. Performance of work in dispersed plants and offices does not necessarily lead to decentralization. A company may be highly centralized although its physical facilities and employees are widely dispersed and company may be highly decentralized even through all physical facilities and employees are located in a single building.

Distinction Between Delegation and Decentralization

The points of distinction between and decentralization are given below:

1. Delegation is a process of devolution of authority where as decentralization.

2. Delegation take place between a superior and a subordinate and is a complete process. It may consist of certain tasks alone. But decentralization involves spreading out the total decision – making power.

3. In delegation control rests entirely with the superior or delegator but in decentralization, the top management may exercise control only in a general manager and delegate the authority for control to the departmental manager.

4. Delegation is a must for management. Subordinates must be given sufficient authority to perform their assignments otherwise they will come to the superior time and again even for minor decisions. However, decentralization is optional in the sense that the top management may or may not decide to disperse authority.