Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.

Decentralisation refers to the dispersal of the decision making power among the middle and lower level managers. It is an optional policy as it depends on the organisation how much power the top level management wants to delegate to the lower levels. An organisation may choose to be centralised or decentralised depending on the objectives and the decisions of the top level managers. Following are a few factors that explain why an organisation would choose to be decentralised.

(i) Initiative: Decentralisation allows a sense of freedom to the lower managerial levels as it lets them take their own decisions. It gives them a higher degree of autonomy to take initiative. Moreover, it promotes a feeling of self-confidence and self-reliance among them. When the power is delegated to lower level managers, they learn to face new challenges and find solutions for the problems themselves. This helps in spotting those potential managers who can take the needed initiative.

(ii) Managerial Competence: Once the authority is delegated to the managers at lower levels, it provides them the needed opportunity to develop themselves. It provides them with the opportunity to gain experience and thereby, develop the skills and knowledge to face new challenges. Decentralisation gives them a chance to prove their talent and get ready for higher positions. It also helps in pre-identification of the future managers who are well-equipped with the necessary talent required to deal with managerial problems.

(iii) Control: Decentralisation helps in evaluating the performance of the organisation in a better manner. Decentralisation helps in analysing and evaluating the performances of each department separately. Thus, the extent of achievement of each department and their contribution to the overall objectives of the organisation can be easily can be easily evaluated.

(iv) Active Decision Making: Since through decentralisation, the authority of making decisions is passed on to lower levels of management, decisions are taken quickly and timely. This is because the decision can be taken at the nearest points of action which thereby, helps in easy adjudication of the problems.

(v) Growth: Managerial efficiency is developed to a large extent with the help of decentralisation. Decentralisation results in greater authority to the lower level managers. It promotes competition among the managers of various departments. In a race to outperform each other, they give their best shot and thereby, increase the overall productivity and efficiency. The organisation gains from the increased overall performance and thereby, grows.

(vi) Reduced Workload of Top Managers: Delegation of authority provides freedom to top level managers. It helps them in shifting the workload to their subordinates and gives them time to concentrate on more important and higher priority work such as policy decisions. Moreover, direct supervision by the top level management is decreased, as the subordinates are given the rights to take the decisions by their own.

Decentralisation is much more than mere transfer of authority to the lower levels of management hierarchy. Its importance can be understood from the following points 

(i) Develops Initiative Among Subordinates: When lower managerial levels are given freedom to take their own decisions they learn to depend on their judgement. A decentralised policy helps to identify those executives, who have the necessary potential to become dynamic leaders. 

(ii) Develops Managerial Talent for the Future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation, but equally important is the experience gained by handling assignments independently. It gives them a chance to prove their abilities and creates a reservoir of qualified manpower. 

(iii) Quick Decision Making: In a decentralised organisation, however, since decisions are taken at levels, which are nearest to the points of action and there is no requirement for approval from many levels the process is much faster. 

(iv) Relief to Top Management: Decentralisation leaves the top management with more time, which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions. 

(v) Facilitates Growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and develops a sense of competition amongst the departments, consequently, the productivity levels increase and the organisation is able to generate more returns, which can be used for expansion purposes. 

(vi) Better Control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results. The extent of achievement of organisational objectives as well as the contribution of each department in meeting, the over all objectives can be ascertained

Decentralisation is much more than mere transfer of authority to the lower levels of management hierarchy. 

Its importance can be understood from the following points:

1. Develops Initiative among subordinates: When lower managerial levels are given freedom to take their own decisions they learn to depend’ on their judgement. A decentralised policy helps to identify those executives, who have the necessary potential to become dynamic leaders.

2. Develops Managerial Talent for the future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation, but equally important is the experience gained by handling assignments independently. It gives them a chance to prove their abilities and creates a reservoir of qualified manpower.

3. Quick decision making: In a decentralised organisation, however, since decisions are taken at levels, which are nearest to the points of action and there is no requirement for approval from many levels the process is much faster.

4. Relief to top Management: Decentralisation leaves the top management with more time, which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions.

5. Facilitates growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and develops a sense of competition amongst the departments. Consequently, the productivity levels increase and the organisation is able to generate more returns, which can be used for expansion purposes.

6. Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results. The extent of achievement of organisational objectives as well as the contribution of each department in meeting the over all objectives can be ascertained.

For an organisation to follow the policy of decentralisation is not compulsory. Even then organisations are following it.

Following are the main reasons of it:

i. Develops Initiative among Subordinates: Under decentralisation, authorities are delegated in large amount. Authority is a kind of power which compels a person to think/contemplate or to do something new. This inculcates in him the ability to take initiative. Decentralisation not only gives authority but also makes it possible to convert great ideas into valuable creative work.

ii. Develops Managerial Talent for Future: Under decentralisation, decision making authority is given even to the lower level managers. In this way, by getting opportunities to take decisions, knowledge and experience of all levels of managers increases. This develops talent in the managers to bear extra responsibility in the future.

iii. Quick Decision Making: The burden of all managerial decisions is no more confined to some limited people but is distributed among many people. This not only leads to quick decision making but also results in better decision making. All the people are well aware of the problems faced by their unit or division and for this reason they are capable of taking the best possible and quick decisions.

iv. Relief to Top Management: Under decentralisation authority related to take monotonous decisions is delegated to the subordinates. As a result, top management relieves itself from trivial affairs and consequently the workload is quite reduced. This saves their valuable time which is then utilized to brighten the future of the organisation and to establish coordination.

v. Facilitates Growth: Under decentralisation full liberty is given to the subordinates to take decisions. This situation inculcates a sense of responsibility among the subordinates. Thus, they make effort to achieve/show better results. This thinking gives origin to departmental competitiveness. In such a situation, everybody tries to perform better than the other. As a result, development of an organisation is made possible.

vi. Better Control: Decentralisation helps to decisively evaluate the work performance at all levels and even makes possible to fix accountability. Contribution of every department for the attainment of an objective can be ascertained. This situation is just like a challenge for every department. Management adopts a good controlling policy to face this challenge.