Commerce · Ch 10 — Organising
Decentralisation
Decentralisation
Decentralisation is about where decisions are made in an organisation. In some companies the top management takes all the decisions itself; in others this power is deliberately shared with even the lower levels of management. Those organisations in which decision-making authority lies with the top management are called centralised organisations, while those in which such authority is shared with lower levels are decentralised organisations.
Decentralisation explains the manner in which decision-making responsibilities are divided among hierarchical levels. Put simply, decentralisation refers to the delegation of authority throughout all the levels of the organisation — decision-making authority is placed nearest to the points of action and is pushed down the chain of command. When the decisions taken by the lower levels are numerous as well as important, an organisation can be regarded as greatly decentralised.
Louis Allen defined decentralisation as "a systematic effort to delegate to the lowest level all authority except that which can be exercised at central points." Henri Fayol put it as: "everything which goes to increase the importance of a subordinate's role is decentralisation; everything that goes to reduce it is centralisation."
Centralisation and Decentralisation are relative terms
No organisation is ever completely centralised or decentralised. Complete centralisation would mean all decision-making is concentrated at the very apex of the hierarchy — which would obviate the need for a management hierarchy at all. Complete decentralisation would mean delegating every decision to the lowest level — which would make higher managerial positions unnecessary. Both extremes are unrealistic. …
Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points.
— Louis Allen …