centralization and decentralization of authority

This ppt will have to gain basic knowledge about centralization and decentralization of authority and principle of delegation of responsibilities

1. CENTRALIZATION In centralization, control and decision-making reside at the top levels of management. In centralization most of the authority is held at the hand of a few people only. “Centralization is the systematic and consistent reservation of authority at central points within an organization”. Louis A.Allen

2. The circumstance varying centralization are:

3. Benefits of Centralization Reduced cost : the standardized procedure and method helps in the reduction of office cost. Office cost is reduced as it does not emphasize on more specialists, and more departmental machines and equipment. Uniformity in action : Uniformity in action is established throughout the organization because of central administrative control. The same executive supervises the work and same types of office equipment are used which ensures uniform performance of activities.

4. CONT… 3 . Personal leadership: centralization encourages and permits personal leadership. The introduction of personal leadership facilitates quick action, aggressive marketing and attainment of pin-pointed objective or purpose. 4. Flexibility : centralization permits flexibility and adaptability of the organization to the changed circumstances.

5. CONT… 5. Better co-ordination : centralization facilitates better coordination among various operations. Direct control and supervision are facilitated which results in less likelihood of conflict of authority and duplication of work.

6. Decentralization “ Decentralization refers to the systematic efforts to delegate to lowest levels of authority except that which can only be exercised at central points”. Louis A.Allen Decentralization is not the same thing as delegation.Delegation means entrustment of responsibility and authority from one individual to another. But decentralization means scattering of authority throughout organization. It is diffusion of authority within the entire organization.

7. Benefits of Decentralization Reduces the burden on top executives : decentralization relieves the top executives of the burden of performing various functions. Centralization of authority puts the whole responsibility on the shoulders of an executive and his immediate group. This reduces the time at the disposal of top executives who should concentrate on other important managerial functions. Facilitates diversification : under decentralization, the diversification of products, activities and markets etc., are facilitated. A centralized enterprise with the concentration of authority at the top will find it difficult and complex to diversify its activities and start the additional lines of manufacture or distribution .

8. CONT… 3. Executive Development : when the authority is decentralized, executives in the organization will get the opportunity to develop their talents by taking initiative which will also make them ready for managerial positions. The growth of the company greatly depends on the talented executives. 4. Quick Decision-making : Decentralization brings decision making process closer to the scene of action. This leads to quicker decision-making of lower level since decisions do not have to be referred up through the hierarchy.

9. CONT… 5. Better control and supervision : Decentralization ensures better control and supervision as the subordinates at the lowest levels will have the authority to make independent decisions. As a result they have thorough knowledge of every assignment under their control and are in a position to make amendments and take corrective action.

10. Factors affecting Centralization and Decentralization A. History and Nature of the organization : Centralization or decentralization of authority depends on the manner, in which the organization has built up over time i.e., history of the organization. As organization that has been primarily built by an individuals efforts tends to have a highly centralized structure. Organizations that have grown through a number of mergers, combinations and consolidations tend to stay decentralized .

11. CONT… B. Size of the organization: In a large organization, numerous decisions have to be taken at different places. Therefore, it becomes difficult to coordinate the functions of different departments. To avoid slow decision- making and to bring down the costs associated with managing a large organization, authority should be decentralized. Decentralization enables the organization to operate as a group of small independent units thus reducing the workload of managers, reducing the amount of paperwork and improving the quality of decisions.

12. CONT… C. Availability of competent managers: the degree of decentralization in an organization is influenced by the availability of competent managers. Decentralization of authority may not be possible if the managers of the organization are not talented enough, and if they can’t handle the problems of decentralized units.

13. CONT… D. Time frame of Decisions: In order to survive in a highly competitive environment, every organization has to capitalize on the available opportunities. In a decentralized organization, the authority to make decision lie with the head of that particular unit. Therefore, decisions can be made faster. The decisions are made closer to the scene of action, and are therefore, timely and accurate.

14. CONT… E. The importance of a decision : generally, decisions which involve high risks and costs, are made by the top management, while the decisions involving routine and low-risk activities are delegated o the subordinates. f. Environmental Influence : Government regulation of private business is the most important factor, which affects the extent of decentralization. - Sarmaa , 2017

15. Difference between delegation and decentralization Delegation Delegation is a process of devolution of authority. Superior continues to be responsible and accountable for the work delegated to the subordinates. Decentralization Decentralization is the end result which is achieved when delegation of authority is at more than one level. Superior is no more responsible and accountable for the decentralized tasks.

16. CONT… Delegation 3. Delegation takes place between one superior and one subordinate. 4.It is vital and essential to the process for the effective involvement and efficient performance of subordinates. Decentralization 3. Decentralization involves spreading of the total decision-making power 4. It is optional in the sense that it may not be practice as a systematic policy.

17. Difference between Centralization and Decentralization Centralization Environmental is stable. Lower-level managers are not as capable or experience at making decisions as upper-level managers Lower-level managers do not want to have a say in decisions Decentralization Environment is complex, uncertain Lower-level managers want a voice in decisions Lower-level managers want a voice in decisions

18. CONT… Centralization 4. Decisions are significant 5. Organization is facing a crisis or the risk of company failure 6. Company is large Decentralization 4. Decisions are relatively minor 5. Corporate culture is open to allowing managers to have a say in what happens 6. Organization is geographically dispersed

19. Principle of delegation of responsibility 1. A superior is always responsible for the success or failure of his coordinates. It means the responsibility can never be delegated, though the authority can percolate from upwards to downwards. In any organization, the superior is held responsible for the actions of his subordinates and the subordinates are accountable for the work to their superiors. Delegation implies certain specified functions by the subordinate’s authority. The subordinate’s authority and the supervisor always retains the right to issue direction or revise decisions. When an individual or groups is given some responsibility, the authority necessary to carry out that responsibility should be delegated.

20. 2. Principle of co-extensiveness The authority and responsibility must be co-extensive and coterminous. For the discharge of responsibility, a subordinate must be given adequate authority. Authority without responsibility will make him irresponsible, while responsibility without authority will make him impotent. Responsibility can be carried out effectively only with adequate authority.

21. 3. Principle of balance An organization is made up of different units. All these units should be kept in balance. Each function should be given its proper emphasis with regard to its basic purpose in the organization. Moreover, a good organization must be balanced with respect of centralization and decentralization, authority and responsibility, span of control and line of communication. The object of this principle is that each portion and function of an expertise should operate with equal effectiveness in making its allotted contribution to the total purpose.

22. CONT… The object of this principle is that each portion and function of an expertise should operate with equal effectiveness in making its allotted contribution to the total purpose. The departments or units within the organization must be kept in balance by giving them proper emphasis. The allocations of resources to different departments and units should be equitable and just on the basis of activities to be carried out.

23. 4. Principles of continuity and flexibility . An organization is a continuous process. The organization structure must adopt itself to the environmental changes. As the enterprise grows, its activities become varied and complex. The existing organizational structure must be flexible enough to incorporate such a growth. Reorganization is a sign of a continuous and dynamic organization. The organization structure should be such as to provide not only for the activities immediately necessary to secure the objectives of the enterprise but also for the continuation of such activities in the foreseeable future

24. 5 . Integration versus Disintegration Integration means unification administrative language, integration means connecting one or more of hitherto independent organization with the rest of the organizational structure of the country by placing them under the chief executive directly or through common ultimate subordinates to the chief executive of the country. In such system, the line of authority runs unbroken from the chief executive, through various levels to all parts of the system, so that these are no loose ends anywhere.

25. 6. Centralization versus Decentralization Centralization stands for concentration of authority at or near the top. An organization is said to be centralized if most of the power of decision is vested in the top level so that the lower ones have to refer most problems to the head of the organization or his immediate supervisor for decision.

26. CONT… Decentralization means that the central authority gives certain power to the local authorities. A decentralized organization is one in which the lower levels are allowed the discretion to decide most of the matters which come up, reserving comparatively a few bigger and more important problems only for those higher up.