Decentralisation explains the manner in which the decision making resonsibilities are divided among hierarchical levels . It refers to delegation of authority throughout the levels of organisation. Decentralisation is a natural development when the Organisation grows large and complex.The only practical solution is to divide the Organisation into decision-making units and giving the powers to take routine types of decisions in regard to the functioning of those units.
Advantages of Decentralisation:
- Decentralisation helps to improve the quality of decisions/decision-making at the top level management.
- 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.
- Facilitates diversification: Under decentralization, the diversification of products, activites and markets etc., is facilitated. A centralised 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.
- 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.