An exciting day for me, specially because I am going to present a management topic in college and I am going to wear a business suit which I have been dreaming about! :-)
Our group has three members and we were supposed to present Delegation, Decentralization and Span of Management. Uncertainty is always certain, Delegation could not happen today because my friend is sick. I got to know this couple of hours before presentation. So job in my hand is to teach De-centralization to those people who have not finished there delegation model. I got to know that this is my day, there are going to be lot of questions, as my tag line for presentation reads " Decentralization: The End result of Delegation Process ...".
What is Delegation?
Manager allowing subordinate to exercise those authority which he/she possess. Delegation involves manager getting work done by subordinates, however the responsibility is completely with the manager. Manager guides subordinate regarding what is the task? How to do it? and subordinate is expected to do so. If subordinate goes wrong manager is responsible because subordinate failure means manager failed to choose the right person for the job.
What is Decentralization?
Is the end result of delegation process: sharing both work and responsibility. In case of a decentralized system, the middle level manager/subordinate possess the authority and responsibility. No longer shield of manager is available for subordinate. Here just the job requirements are conveyed to the middle level manager and he is expected to formulate the plan, make right decisions and be responsible for results.
Decentralization vs Departmentalization
Decentralization is process oriented. Decentralization stream lines how we do our business. Departmentalization is functional units oriented. Departmentalization divides organizations into different units, with each unit serving a unique and significant purpose, like production department, sales department etc.
Decentralization involves delegating both authority and responsibility to lower levels except that which can only be executed by top management.
As an Entrepreneur, individual will have to work as an admintrator, production department worker, sales man and so on .. however once the organization grows, we need to hire more and more people for each of the functions and this leads to departmentalization of the business organization and it is important for each of these department heads to work independently with minimal supervision, triggering the need for at least partial decentralization if not a full decentralized system.
Even with our advanced video conferencing system, all of us must has to except that talking to subordinate in person is always preferable and better. Hence if the organization is spread across geographical boundaries, normally there is fare amount of decentralization in the system, to allow regional heads of organization to function independently.
If the business environment is uncertain, it is difficult to take decisions in board room and hence there has to be fare amount of decentralization to make on the field decisions such that when the time arises subordinates does not have to call his manager and seek permission, making customer to wait, which means possibly loosing the business opportunity.
If the business is spread across many technologies, like GE, it is difficult for top management to keep up with all these technological complexities. Hence there needs to be decentralization allowing technical experts to make decisions which are non-trivial.
Both centralization and decentralization have there advantages and disadvantages.
In a centralized system, there is lot of pressure on top management as every single decision has to go through the core team. Decentralization allows top management to delegate non trivial decision making authority to lower levels allowing management to concentrate on important aspects of business.
decentralization enriches lower management with sense of being contributing to the decision making process, in the process organization is grooming future leaders.
Because lower level managers are working at ground zero level, it is perceived that they are in better position to make quick decisions.
An effective coordination between each of these decentralized units is very important for the organization to run smoothly.
Decentralization requires more and more talented managers, who can take decisions that are as effective as decisions taken by management, which means a significant increase in HR budget!
