Decentralization in Management: Definition, Meaning, and Pros/Cons

What is Decentralization of Authority?

Decentralization of authority means the delegation of authority by top-level management to subordinate-level management based on their responsibilities. It is a belief in a systematic delegation of managerial authority to subordinate-level managers.

Decentralization is an important management concept that concerns the distribution of decision-making power to the subordinate level management or to those parties of the organization by whom the organizational work is to be done.

This assumes that the top management should keep limited authority and delegate maximum authority to the operating levels. After delegating, the top management has to play the role of supervisor over the operating levels staff.

The best advantage of the decentralization of authority is that it motivates the subordinates, enhances their performance, and ultimately leads to an increase in the productivity of the organization.

Some important definitions of decentralization provided by scholars are as follows:

• Louis A. Allen – Decentralization is the systematic and consistent delegation of authority to the level where the work is performed.
• Koontz and Weihrich – Decentralization is the tendency to disperse the decision-making authority in an organized structure.
• Dale S. Beach – Decentralization means placing the authority and decision-making power as close as possible to the level at which the work is done.

Thus, decentralization is the scientific and systematic delegation of managerial authority to operating levels of staff according to their responsibility.

Delegation of authority is not mandatory but is optional, the top manager may or may not delegate the authority.

In the practical field, it is not possible to delegate absolute authority to the lower level. The top-level manager delegates only limited power to the lower-level managers. Every organization has to decide how much authority should be centralized and how much authority should be decentralized.

Generally, it depends on the nature and size of the organization and the responsibility vested in the lower-level management. The top manager has to delegate such a degree of authority to the lower level so that quick decisions and implementation are possible.

Related: Centralization of Authority: Definition, and Advantages, Disadvantages

Advantages of Decentralization of Authority

The followings are the main advantages of decentralization of authority:

Relief To Top Management

In decentralization, most of the routine managerial responsibilities are delegated to middle and lower-level managers. It minimizes the excessive workload of the top manager. It gives enough time to the top manager to focus on non-programmed decisions like planning, policymaking, strategy formulation, controlling, etc.

Facilitates Manager’s Development

Here, relevant duties and power are delegated to subordinate levels managers. It allows them to hone their skill and efficiency to get promotions. Therefore, decentralization creates a reserve of talent.

Enhance Better Decisions

Decentralization delegates the decision-making authority to the managers nearest to the operation level. The manager working the nearest to the operation is in a better position to understand the complexity of the problems. This helps in making a better decision to solve a problem.

Effective Control

Here, it is convenient to set standards of performance. This helps to compare the actual performance with standard performance more quickly. This helps in taking prompt decisions to correct deviations. This leads to maintaining effective control in the organization.

High Morale and Motivation for Subordinates

Decentralization is very motivational as it provides the juniors the autonomy to act and make decisions. This develops among the subordinates a feeling of status and recognition and ultimately a feeling of dedication, commitment, and belongingness. This helps in maintaining the high motivation and morale of the subordinates.

Facilitates Diversification

The addition of new product lines or expansion of existing lines of business develops complexity in the organization. This also develops challenges for the top manager. The top manager can face such trials by delegating authority to his subordinates. He can only play the role of coordinator.

Also Read: What is Authority Delegation? Definition, Features, Barriers, and Pros/Cons

Environmental Adaptation

A dynamic environment may create problems in different operating units. In decentralization, decision-making right is transferred to the operating-level managers. This facilitates quick and flexible decisions based on the situation.

Disadvantages of Decentralization of Authority

Below are the main disadvantages of decentralization:

Increase in Expenditure

Decentralization needs to be qualified, competent, and skilled manpower at the middle and lower levels. They are to be paid based on their qualification and experience. Besides, there is a possibility of duplication of effort, which unnecessarily may increase the cost of production.

Conflict and Problems in Coordination

In decentralization, the top-level authority puts more force on departmental managers to boost output and revenue. In such a situation, every department lays more emphasis on its own departmental goals instead of corporate goals.

This may rise to interdepartmental conflict and too much fragmentation creates problems in coordination and control.

Related: What is Coordination? Definition, Features, Types, & Importance

Unsuitable For Emergency Situations

The lower and middle-level managers are assigned authority only for routine decisions. Whenever they face complex and non-programmed problems they can not decide due to limited authority.

Maximizes Risk

The decision-making authority is delegated to the subordinate level. If subordinate-level managers are unskilled and incapable, they may take wrong decisions, which may increase the risk and result in losses.

Difficulty In Communication

Different departments are formed in various locations and authority and responsibility are assigned to departmental heads. If the network system to communicate information is unclear, communication will be distorted.

Unsuitable For Specialized Services

The concept of decentralization is not applicable to types of services. It is not suitable for the specialized nature of services like accounting, human resources, engineering surveys, research, etc.

Thus, summing up, decentralization of authority is the dispersion of decision-making authority to operating-level staff in other to increase the performance of the organization and make it possible to take prompt decisions.