Chapter 4 » Factors affecting decentralization | Business Studies – XII


Factors affecting decentralization of authority

1. Size– size of the organization, terms of sales number, plans, number of employees affects the decentralization of authority. It is observes that the speed and adequacy of decision making, flexibility and efficiency are enhanced through decentralization of authority in case of very large multi product, diverse and complex organization. Therefore in larger size of organization, there will be more dispersion of authority

2. History and age– the size of organization, the degree of decentralization depends upon history and ages of organization. If it is organized by an individual then in such kind of organization, there will be centralization of authority. But in case of business activities when there is merging being done there is decentralization of authority. In any organization, relatively high degree of centralized authority may be needed when new values and viewpoint are establishes by the executives

3. Philosophy of top management– decentralization of authority depends upon philosophy of top management. it is seen that in the owners managed enterprise there is delegation of authority but in professionally managed enterprise decentralization of authority is seen

4. Competent personnel– competent personnel affect decentralization of authority. more personnel at lower level more policy of decentralization of authority,

5. Strategy and organization environment– strategy and organization environment influences market, technological environment, competition. It is the basis of determining decentralization of authority and centralization of authority.

6. Nature and management function– the degree of decentralization of authority is influenced by nature and management functions. Generally functions like production and sales are more decentralized and finance, personnel, research and development are highly centralized.

7. Control techniques– decentralization of authority is more when control technique is good. When control system is reliable, there is better and higher decentralization of authority to the lower level.

8. Dispersion of organizational plans– decentralization of authority also depends upon dispersion of organizational plans of the organization. Organization has officer of different types located at different places. That’s why decentralization of authority becomes necessary.

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