Decentralization or decentralisation (see spelling differences) is the process of dispersing decision-making governance closer to the people and/or citizens.

It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy, sociology and economics. Decentralization is also possible in the dispersal of population and employment. Law, science and technological advancements lead to highly decentralized human endeavours. "While frequently left undefined (Pollitt, 2005), decentralization has also been assigned many different meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen & Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general contexts (Conyers, 1984), fields of research, and specific scholars and studies." (Dubois and Fattore 2009) A central theme in decentralization is the difference between:

a hierarchy, based on authority: two players in an unequal-power relationship; and an interface: a lateral relationship between two players of roughly equal power.

The more decentralized a system is, the more it relies on lateral relationships, and the less it can rely on command or force. In most branches of engineering and economics, decentralization is narrowly defined as the study of markets and interfaces between parts of a system. This is most highly developed as general systems theory and neoclassical political economy.

Organizational Theory
Decentralization is the policy of delegating decision-making authority down to the lower levels in an organization, relatively away from and lower in a central authority. A decentralized organization shows fewer tiers in the organizational structure, wider span of control, and a bottom-to-top flow of decision-making and flow of ideas. In a centralized organization, the decisions are made by top executives or on the basis of pre-set policies. These decisions or policies are then enforced through several tiers of the organization after gradually broadening the span of control until it reaches the bottom tier. In a more decentralized organization, the top executives delegate much of their decision-making authority to lower tiers of the organizational structure. As a correlation, the organization is likely to run on less rigid policies and wider spans of control among each officer of the organization. The wider spans of control also reduces the number of tiers within the organization, giving its structure a flat appearance. One advantage of this structure, if the correct controls are in place, will be the bottom-to-top flow of information, allowing decisions by officials of the organization to be well informed about lower tier operations. For example, if an experienced technician at the lowest tier of an organization knows how to increase the efficiency of the production, the bottom-to-top flow of information can allow this knowledge to pass up to the executive officers..
Decentralisation of authority means conscious/systematic effort to bring dispersal (spreading) of decision making power to the lower levels of the Organisation. In decentralisation, only broad powers will be reserved at the top level.

Such powers include power to plan, organise, direct and control and maximum powers will delegated to the authority at the lower level. Decentralisation is just opposite to centralisation. Under centralisation, authority is mostly concentrated at the top level management. Centralisation and decentralisation are mutually dependent. In a large Organisation, the process of centralisation and decentralisation co-exist and reinforce each other. Decentralisation is a natural development when the Organisation grows large and complex. Here, centralisation of management is neither possible nor desirable. The only practical solution is to divide the Organisation into decisionmaking units and giving the powers to take routine types of decisions in regard to the functioning of those units. This is decentralisation in practice. In decentralisation, systematic efforts are being made to delegate to the lowest levels all authority except that which can only be exercised at the central points. Decentralisation is delegation not from one individual to another but delegation to all units in an Organisation. A company is said to be highly decentralized, when the delegation is company-wide in all functions and divisions of the company and also for a wide range of authorities and responsibilities. Decentralisation is different from centralisation as in centralisation, the decision making power is in the hands of one person only. We observe such centralisation in sole trading concerns. It is also noted that centralisation is one feature of traditional management in India while decentralisation is a normal practice under professional management.

Definitions of Decentralisation

According to Henry Fayol, "Everything that goes to increase the importance of the subordinates role is decentralisation, everything that goes to reduce it is centralisation." According to Louis Allen, "decentralisation refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central point." This definition makes it clear that even in decentralisation, delegation to the lowest levels is not complete as the basic functions in the management process are centralized.

Advantages / Importance of Decentralization

1.

Decentralisation helps to improve the quality of decisions/decision-making at the top level management : Decentralisation of authority among other executives at all levels in the Organisation relieves the top executive of

the excessive burden saving his valuable time, which he can devote to more important and long-term problems. This is bound to improve the quality of his decisions regarding such problems. 2. Decentralisation facilitates diversification of activities : It is a matter of common experience that an Organisation with departmentation on the basis of products facilitates diversification of products or market even when the authority is centralized. Decentralisation takes this process a step further. Managers of semi-autonomous product divisions are able to utilise their skills and experienced judgment. This has a bearing on their products and the market. The enterprise also attains maximum possible growth. Decentralisation is beneficial when new product lines or new activities are introduced in an Organisation. Such policy creates self sufficient units under overall coordination of top level management. 3. Decentralisation encourages development of managerial personnel : Most companies find lack of managerial talent as a limiting factor in their growth. A company cannot expand effectively beyond the scope and abilities of its managerial personnel. Capable managers, however, can be developed only by giving managerial jobs to suitable persons and delegating them the authority to make important decisions. Such wide exposure gives them opportunity to grow and to have self development for higher positions. The more talented and capable persons will learn and improve and qualify themselves for higher managerial positions. Only a decentralized Organisation can offer such opportunities to future managers without involving additional expenditure. A decentralized Organisation also allows its managers adequate freedom to try new ideas, methods or techniques. In brief, decentralisation creates a team of competent managers at the disposal of the company. 4. Decentralisation improves motivation : Research conducted by social scientists has proved that the Organisation structure itself exercises some influence on the motivation of the people working within it. An Organisation structure which facilitates delegation, communication and participation also provides greater motivation to its managers for higher productivity. Decentralized Organisation structure is most favorable for raising the morale and motivation of subordinates which is visible through better work performance. 5. Decentralisation makes decision-making quicker and better : Since decisions do not have to be referred up through the hierarchy, quicker and better decisions at lower levels can be taken. Divisional heads are motivated to make such decisions that will create the maximum profit because they are held responsible for the effect of their decisions on profits. Thus decentralisation facilitates quick and result-oriented decisions by concerned persons. 6. Decentralisation provides opportunity to learn by doing : Decentralisation provides a positive climate where there is freedom to make decisions, freedom to use judgment and freedom to act. It gives practical training to middle level managers and facilitates management development at the enterprise level.

Limitations of Decentralization

1. 2. 3.

Decentralisation may lead to the problem of co-ordination at the level of an enterprise as the decision-making authority is not concentrated. Decentralisation may lead to inconsistencies (i.e. absence of uniformity) at the Organisation level. For example, uniform policies or procedures may not be followed for the same type of work in different divisions. Decentralisation is costly as it raises administrative expenses on account of requirement of trained personnel to accept authority at lower levels. Even the services of such highly paid manpower may not be utilised fully, particularly in small organisations.

4. 5.

Introduction of decentralisation may be difficult or may not be practicable in small concerns where product lines are not broad enough for the creation of autonomous units for administrative purposes. Decentralisation creates special problems particularly when the enterprise is facing number of uncertainties or emergency situations. The decision-making process gets delayed and even correct decisions as per the changing situations may not be possible.

Decentralization Is Not An Unmixed Blessing

The advantages of decentralisation are more significant as compared to its limitations. The limitations suggest possible problems relating to decentralisation. Efforts should be made to solve these problems. It is certainly not desirable to have centralisation (in place of decentralisation) only because of certain limitations. However, to what extent the organisation should be decentralized is a delicate issue. Here, certain factors such as size of the organisation and the abilities of lower level managers need careful consideration.

According to Allen
Centralisation is systematic and consistent reservation of authority at central points within an organisation. Decentralisation applies to the systematic organisation context. delegation of authority in an

Advantages of Decentralisation

Decentralisation reduces the workload of top executives. It improves job satisfaction and morale of lower level managers by satisfying their needs for independence, participation and status. Decision making is quicker. It facilitates growth and innovation and creativity. It gives opportunity to subordinates to exercise their own judgment. They develop managerial skills which will be useful to the organisation in the longer run. Decentralisation requires wider span of control and fewer levels of organisation. It speeds up communication. Decentralisation increases the administrative expenses and each division or department has to be sufficient in terms of physical facilities and trained personnel. As each department or division enjoys substantial autonomy it might lead to co-ordination problems. There might be lack of uniformity and inconsistent procedures as each department might have the authority to formulate its own policies and procedures. diversification. As each product division is given sufficient autonomy for

Disadvantages of Decentralisation

Decentralisation increases the administrative expenses and each division or department has to be sufficient in terms of physical facilities and trained personnel. As each department or division enjoys substantial autonomy it might lead to co-ordination problems. There might be lack of uniformity and inconsistent procedures as each department might have the authority to formulate its own policies and procedures.

Advantages of Centralisation

Effective utilisation of talents of the top management. It reduces co-ordination problems as a unifying force integrates all operations. It allows the development of a strong co-ordinates top management team. There is uniformity of policies and plans across the organisation. Centralisation organisations are best suited where resources and information has to move swiftly, especially in emergencies. Duplication of functions and facilities is minimised which in turn reduces costs. Due to the fact that all decisions are made at the top it might result in delays in decision-making and communication. Centralised power and authority might be abused. Doesnt give an opportunity to lower level managers/supervisors to develop their managerial skills. Centralised organisation faces the problem of lower motivation levels among workforce. The success of organisation depends on the competence of top executives which might be quite risky.

Disadvantages of Centralisation

Due to the fact that all decisions are made at the top it might result in delays in decision-making and communication. Centralised power and authority might be abused. Doesnt give an opportunity to lower level managers/supervisors to develop their managerial skills. Centralised organisation faces the problem of lower motivation levels among workforce. The success of organisation depends on the competence of top executives which might be quite risky.

Delegation:

A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the manager should delegate authority. Delegation of Authority means division of authority and powers downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job. Delegation of authority can be defined as subdivision and sub-allocation of powers to the subordinates in order to achieve effective results.
Elements of Delegation

1. Authority - in context of a business organization, authority can be defined as the power and
right of a person to use and allocate the resources efficiently, to take decisions and to give orders so as to achieve the organizational objectives. Authority must be well- defined. All people who have the authority should know what is the scope of their authority is and they shouldnt misutilize it. Authority is the right to give commands, orders and get the things done. The top level management has greatest authority. Authority always flows from top to bottom. It explains how a superior gets work done from his subordinate by clearly explaining what is expected of him and how he should go about it. Authority should be accompanied with an equal amount of responsibility. Delegating the authority to someone else doesnt imply escaping from accountability. Accountability still rest with the person having the utmost authority.

2. Responsibility - is the duty of the person to complete the task assigned to him. A person who is given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for which he was held responsible are not completed, then he should not give explanations or excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among the person. Responsibility flows from bottom to top. The middle level and lower level management holds more responsibility. The person held responsible for a job is answerable for it. If he performs the tasks assigned as expected, he is bound for praises. While if he doesnt accomplish tasks assigned as expected, then also he is answerable for that. 3. Accountability - means giving explanations for any variance in the actual performance from the expectations set. Accountability can not be delegated. For example, if A is given a task with sufficient authority, and A delegates this task to B and asks him to ensure that task is done well, responsibility rest with B, but accountability still rest with A. The top level management is most accountable. Being accountable means being innovative as the person will think beyond his scope of job. Accountability, in short, means being answerable for the end result. Accountability cant be escaped. It arises from responsibility.

For achieving delegation, a manager has to work in a system and has to perform following steps : 1. Assignment of tasks and duties 2. Granting of authority 3. Creating responsibility and accountability

Delegation of authority is the base of superior-subordinate relationship, it involves following steps:-

1. Assignment of Duties - The delegator first tries to define the task and duties to the subordinate. He also has to define the result expected from the subordinates. Clarity of duty as well as result expected has to be the first step in delegation. 2. Granting of authority - Subdivision of authority takes place when a superior divides and shares his authority with the subordinate. It is for this reason, every subordinate should be given enough independence to carry the task given to him by his superiors. The managers at all levels delegate authority and power which is attached to their job positions. The subdivision of powers is very important to get effective results. 3. Creating Responsibility and Accountability - The delegation process does not end once powers are granted to the subordinates. They at the same time have to be obligatory towards the duties assigned to them. Responsibility is said to be the factor or obligation of an individual to carry out his duties in best of his ability as per the directions of superior. Responsibility is very important. Therefore, it is that which gives effectiveness to authority. At the same time, responsibility is absolute and cannot be shifted. Accountability, on the others hand, is the obligation of the individual to carry out his duties as per the standards of performance. Therefore, it is said that authority is delegated, responsibility is created and accountability is imposed. Accountability arises out of responsibility and responsibility arises out of authority. Therefore, it becomes important that with every authority position an equal and opposite responsibility should be attached.

Therefore every manager,i.e.,the delegator has to follow a system to finish up the delegation process. Equally important is the delegatees role which means his responsibility and accountability is attached with the authority over to here.

Relationship between Authority and Responsibility

Authority is the legal right of person or superior to command his subordinates while accountability is the obligation of individual to carry out his duties as per standards of performance Authority flows from the superiors to subordinates,in which orders and instructions are given to subordinates to complete the task. It is only through authority, a manager exercises control. In a way through exercising the control the superior is demanding accountability from subordinates. If the marketing manager directs the sales supervisor for 50 units of sale to be undertaken in a month. If the above standards are not accomplished, it is the marketing manager who will be accountable to the chief executive officer. Therefore, we can say that authority flows from top to bottom and responsibility flows from bottom to top. Accountability is a result of responsibility and responsibility is result of authority. Therefore, for every authority an equal accountability is attached.
Features:
1. Delegation is the authorization to a manager to act in a certain way independently. The degree of delegation puts a manager to act within the limits prescribed by his superior. Moreover, withing the limits he is not free to act arbitrarily but subject to provisions of organisational policy, rules and regulation. 2. Delegation has a dual characteristic. A superior delegates authority to subordinates, however a superior at the same time still retains authority. As Terry has observed, 'it is something like imparting knowledge. You share with others who then possess the knowledge, but you still retain the knowledge too.

3. Authority once delegated can be enhanced, reduced or withdrawn depending upon the requirement. The changes in organ9ization structure, organisation climate, policy, procedure, and method require modifications in delegation of authority. Since, authority is delegated to an individual, the authority can be recovered back fully in the case of his exit from the organisation. 4. A manager cannot delegate authority which he himself does not process. Moreover, he does not delegate the entire authority to his subordinates because if he delegates all his authority he cannot work. 5. Delegation may be specific or general. Similarly, it can be written or unwritten. Delegation is specific when course of action for specific objectives are specified; it is general when these are not specified, though objectives are specified.