In brief, Decentralisation can be defined as the organisational structure. In such a structure, the top management of a firm entrusts the middle and lower-level management with the responsibility to take decisions pertaining to the firm’s daily operations.
To elaborate, they are responsible for planning, crafting suitable strategies and taking necessary decisions to boost the proficiency at each level and in turn, optimising the overall productivity of the company.
Owing to its numerous benefits and positive influence on the company’s performance, business owners tend to prioritise the structure of power delegation. Resultantly, they can make the most of the time and opportunity to focus on the major concerns of their business and also to plan its expansion.
Now that we have gained a basic idea about decentralisation let’s glance through its vital role in a commercial set-up mentioned below –
Accelerates Decision Making
Since middle and lower-level management is in charge of everyday operations, it accelerates the process of decision making. The freedom to take prompt decisions further enables them to execute their decision quickly and effectively.
Improves Leadership Skills
As employees have the freedom to perform tasks individually, it offers them substantial exposure. In turn, it helps to create a work environment; wherein, employees can hone their executive skills significantly. As they learn to improve their skills and take responsibility for various tasks, it enhances the overall productivity of the firm.
As the manager at each level is allowed to take decisions pertaining to their department, it offers them more room to bring necessary adjustments through the course of operation. In turn, it not only helps to improve the quality of the department’s performance as and when required but also allows them to come up with suitable solutions to tackle departmental challenges. All of this helps to improve the quality of administration at each level significantly.
Facilitates greater control
With the help of decentralisation, top management can evaluate the performance of different departments more effectively. Further, it helps them to review and identify the prevailing shortcomings and helps to bring necessary changes to the same. This not just helps to lower the occurrence of operational shortcomings but also offers greater control over each area of operation.
Test Your Knowledge: In what other ways do you think decentralisation is essential for a firm?
Advantages of Decentralisation
Moving on, let’s quickly check out how a firm benefits through decentralisation –
Facilitates Smooth Communication
With the presence of fewer hierarchical levels, there is a smooth flow of communication between the superiors and subordinates in each department. In turn, such a set-up comes in handy for the top management and keeps them informed about the grievances and functioning of each department.
Additionally, it allows them to reach out to their subordinates as and when required and implement decisions more effectively.
With the middle and lower-level management being more involved with the everyday operation, the top management seeks the opportunity to focus on expansion and sustenance of profitability.
Further, with decentralisation management is more adept at identifying areas that require more attention or reforms to emerge as more productive. This helps management to make necessary changes quickly and with more effect, thus facilitating expansion and profitability in real sense.
Decentralisation is an effective way to boost the morale and feeling of job satisfaction among employees. Being entrusted with responsibilities around the department offers them a sense of belonging and further inculcates a team spirit in them.
Although decentralisation lays a positive impact on the productivity of a firm, it brings forth specific challenges as well.
Take note of these common challenges of a decentralised firm –
Factors like market fluctuations, government policies and intervention and trade union movement often present a challenge to optimise the productivity of a company through decentralisation.
Lack of coordination
Each department is given due powers to delegate their operations adequately. However, different departments may not be eager to cooperate, which defeats the purpose of a decentralised structure altogether.
Give your opinion: Imagine yourself as an owner of a company. How would you overcome the shortcomings of a decentralised firm?
Check out the table below to find out the difference between centralisation and decentralisation –
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1. What do you mean by Decentralisation? Explain Decentralisation Meaning in detail.
Decentralisation is a structural set-up, wherein, the power to make a decision is delegated across all levels in an organisation. It is mostly suitable for large scale companies and follows a free and open flow of communication pattern.
2. What are the Advantages and Disadvantages of Decentralisation?
Advantages – Facilitates diversification promotes growth and motivation and helps expansion.
Disadvantages – Lack of coordination and exposure to internal and external conflict.