Business Studies Part I
Business Studies Part II

Decentralisation: Meaning and Its Importance

Decentralisation: Definition
Decentralisation refers to systematic dispersal of authority to the lowest level, except that which can be exercised at central points.

Caution in Implementing a Decentralisation Policy:

  • Decentralisation must always be balanced with centralisation in areas of major policy decisions.
  • Complete centralisation would imply concentration of all decision making functions at the apex of the management hierarchy find would eliminate the need fora management hierarchy.
  • Complete decentralisation can lead to organisational disintegration as the departments may start operating on their own guidelines which may be contrary to the interest of the organisation.

Need for Decentralisation:
As an organisation grows in size and complexity, the departmental or branch heads are directly and closely involved with certain operations and are likely to have more knowledge about them as compared to the top management which may be associated with individual operations only indirectly.

Importance of Decentralisation:

  • It seeks to develop initiative in the subordinates by promoting self-reliance and confidence amongst them and also helps to identify those executives who have the necessary potential to become dynamic leaders.
  • It provides relief to top management as
    the subordinates are allowed to operate independently within their area of jurisdiction. Consequently, the need for direct supervision is reduced.
  • It facilitates quick decision making as the employees are allowed to act independently within their are a of jurisdiction without consulting others.
  • It develops managerial talent for the
    future by providing the employees with the necessary training and experience through exposure to varied challenging jobs and also facilitates identification of those employees who may and those who may not be successful in assuming greater responsibility.
  • It facilitates growth of the organisation by
    increasing its productivity and profitability through assigning greater autonomy to the lower levels of management as well as divisional or departmental heads.
  • It facilitates better control by ensuring continuous evaluation of performance at each level and the contribution of each department so that they can be individually held accountable for their results.



Delegation of authority




It is a compulsory act because no individual can perform all tasks on his own.

It is an optional policy decision and is only implemented at the discretion of the top management.


Freedom of action

The subordinates have less freedom to take own decisions as there is more control is exercised by the superiors.

The control over executives is less hence they have a greater freedom of action.



It is a process followed to share tasks.

It is the result of the policy decision of the top management.



It has narrow scope as it is limited to superior and his immediate subordinate.

It has wide scope as it implies extension of delegation to the lowest level of management.



To lessen the burden of the manager.

To increase the role of the subordinates in the organisation by giving them more autonomy.


Withdrawal of authority

Easy, as only two persons are involved in the process.

Difficult, as it involves the extension of delegation to the lowest level of management.

  1. Rakesh has used the concept of decentralisation keeping in mind the competence and experience of the other librarians.
  2. The three advantages of using decentralisation are as follows:
    • Decentralisation helps to promote self-reliance and confidence amongst the subordinates: When the subordinates are given freedom to take their own decisions, they learn to depend on their own judgment and develop solutions for the various problems they encounter. Moreover, a decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.
    • Relief to top management: Decentralisation reduces the need of direct supervision and helps to save the time of top management for persuing other important work.
    • Quick decision making: In a decentralised organisation managers at all levels are allowed to take such decisions independently which lie within their area of jurisdiction. This makes the process of decision making much faster.