What are the advantages and disadvantages of decentralization?

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Some of the advantages of decentralization can be described as follows:-

1. Quick decisions: In case of a decentralized system, the decision-making powers are delegated at the level of actual execution. Therefore, when the need arises to take a decision, the particular executive can decide immediately. Such executive is not required to make a reference to the top-level management for most of the decisions. Therefore it returns the process of taking decisions.

2. Reduces the burden of top management: In a centralized system of authority, the top-level executives are overburdened. Therefore they do not have any time to involve in activities like planning etc. On the other hand in case of decentralized decision-making, the power is delegated to the lower level of management, which relieves the top executives from some of the burden. In case of decentralized system, the top executives only deal with the work that needs their personal attention and every other word is assigned to the persons at the appropriate level. This significantly reduces the burden of the top-level executives and they can effectively deal with their other responsibilities like planning etc.

3. Motivation of subordinates: In case of decentralization, the subordinates have an opportunity to take the decisions independently. Such a situation fulfills the human need for power, status and independence. At the same time, the subordinate managers also realize the significance in the organization. Consequently, they make efforts to put in their maximum in order to improve their performance. In such a situation, the subordinates also get a chance to take initiative and they can also try new ideas. Hence, in a decentralized set up, the subordinates also feel motivated.

4. Sense of competition: In a decentralized system, the various departments or units of the organization are considered as separate profit centers. The workers of different departments compete with each other in order to exhibit better results. In this way, this sense of competition improves the performance of all the departments of the organization.


5. Provides product/market emphasis: As in case of decentralization, the decision-making is scattered throughout the organization and to the lower level of management, there is more product on the market emphasis. The changes that take place in the tastes and fashion needs prompt decisions. A decentralized system is able to respond quickly to such changes in the situation. The persons who are related marketing can take quick decisions as required by the situation.

6. Effective control and supervision: In case of delegation of authority, the span of control is also effective. As the executives at the lower level will have the complete authority to take significant decisions, they will recommend awards or punishments according to the performance. This in turn will improve supervision and the control.

7. Division of risk: The organization is separated into various departments under decentralization. The management can experiment with new ideas in one department of the organization and therefore without disturbing the other departments. Such a situation will reduce the risk in case things go wrong. If the experiment proves to be successful, it can be implemented in the other departments also. Therefore, in case of a decentralized, the risk element can also be limited.

Disadvantages of Decentralization
There are certain disadvantages associated with the process of decentralization. This can be described as follows:-

1. Difficulty in control: As the different departments of the organization were independently, it becomes difficult to control the activities of these departments. The top-level management is not in a position to exercise effective control of these departments due to the reason that it is not in touch with the routine activities of the different departments of the organization.

2. Lack of coordination: In case of decentralization, different departments, units of the sections of the organization had significant powers. These powers are provided so that they can formulate their own policies and programs. But in such a case, it becomes difficult to coordinate the activities of different segments of the organization. Moreover, each department of the organization lays stress on its own work and does not care for the other departments. This results in creating more problems in coordinating the activities of different departments.


3. Decentralization is costly: In the process of decentralization, heavy overhead expenses are involved. Every decentralized unit of the organization needs to be self-sufficient concerning its activities like marketing, production, personnel, etc. Therefore, a number of employees will be required to deal with different activities. High salaries have to be paid to these employees which results in huge cost for the organization. Therefore, it can be said that the process of decentralization is suitable for large organizations. On the other hand, the small-scale organizations cannot afford to spend such high amount on overhead expenses.

4. Lack of able managers: The process of decentralization can become successful only if competence persons are available to manage different jobs in different departments of the organization. However, sometimes, competence persons are not available as per the requirements of the organization. Therefore the decentralization system may fail in the absence of competent personnel.

This article has been written by KJ Singh a MBA Graduate from a prestigious Business School In India
Article Published:July 31, 2017
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