Decentralization

Decentralization
Decentralization means delegation of authority at every level. It is the even and systematic distribution of decision making authority to the lowest level of management. Under decentralization every employee working at different levels gets some share in the authority. Decentralization is a policy matter and managers plan in advance whether to go for centralized or decentralized policy.

Relation between delegation and decentralization
Decentralisation is the extension of delegation. In delegation, we multiply the authority by two whereas in decentralization, the authority is multiplied by many because systematic delegation taking place at every level will result in evenly distribution of authority and responsibility at every level and result in decentralistion. If delegation is restricted to certain levels only then there will be no complete decentralization also.

For example if the director gives the responsibility to production head to complete the target of 50,000 units per annum, and authorize him to hire the required workers, decide their salaries and working conditions.
The production head further shares his authority and responsibility with production manager to achieve the target and select the workers.
The production manager in turn shares with the supervisor to select the workers.
This sharing of authority and responsibility between the director, production head, production manager and the supervisor will result in systematic distribution of authority at every level automatically. Thus we say that delegation leads to decentralization.


Relation between centralization and decentralisation

An organization is centralized when decision making authority is retained by higher management whereas it is decnetralised when the authority is delegated.
Complete centralization means concentration of all decision making authority at the top level in the management hierarchy. On the other hand complete decentralisation implies the delegation of all decision making authority to the lower level of the hierarchy. Both these situations are unrealistic. An organization can never be completely centralized or decentralized. As it grows in size and competency, there is a tendency to move towards decentralisation. This is because in large organizations, those employees who are closely involved with the operations tend to have more knowledge about them than the top management. Hence there is a need for a balance between these co-existing forces.