Decentralization refers to transfer of authority and power from top management to middle and lower level of management. There are several benefits of this structure such as promotion of specialization, quick decision, better supervision and control etc. It has some drawbacks such as complexity, possibility of conflict, expensive structure etc. In this post we discuss pros and cons of decentralization in detail.
Benefits Or Advantages Of Decentralization
The main advantages of decentralization can be highlighted as follows:
1. Less Burden To Higher Management
In decentralization, authority and responsibilities are dispersed among the middle level and bottom level managers according to their role and nature of the job. It helps to reduce the work load of top authorities and they can get enough time to solve other important issues.
2. Scope Of Specialization
Middle and lower level managers are selected according to the requirement of different departments and units. Competent and capable people are hired to manage and control different departments such as finance department, HR department, marketing department etc. So, decentralization promotes specialization in the organization.
3. Suitability
Decentralization is appropriate for large and complex type of firms having several units, departments, large number of employees and large scale production.
4. Better Decision
Decision making power remains with departmental managers. It helps to make quick and wise decision.
5. Management Development
Decentralization provides opportunities to middle and lower level managers to enhance their skills and talent. So, it is also helpful for management development.
6. Better Supervision
In decentralization, departmental heads supervise immediate subordinates. So, it is easy to maintain better supervision, discipline and control.
Drawbacks Or Disadvantages Of Decentralization
The main disadvantages of decentralization can be highlighted as follows:
1. Costly Process
Because of several departments, units and managers, decentralization requires huge amount of capital to meet administrative and operating overheads.
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2. Unsuitable
It is costly and complex process. Therefore, it is not appropriate for newly established and small organizations with limited operational activities.
3. Conflict And Misunderstanding
It may lack proper delegation of authority and responsibilities among different departments. So, there exists a chance of misunderstanding and conflict between different departments and sections due to the lack of clarity.
4. Coordination Problem
In large organizations, there will be a problem of proper coordination between the activities of different departments, units and sections.
