Page 1 - Lesson Note 4

CLASSS XII

SUBJECT: BUSINESS STUDIES

CHAPTER -5

ORGANISING

Topics- Decentralization, importance and differences.

(LESSON note-14)

Decentralization

• Decentralization of authority means dispersal of authority to take

decisions throughout the organization, up to the lower levels.

• It implies reservation of some authority with the top level

management and transferring rest of the authority to the lower levels

of the organization. This empowers lower levels to take decisions
regarding problems faced by them without having to go to the upper

levels.

According to Allen, ‘Decentralization refers to systematic efforts to

delegate to the lowest level, all authority except the one which can be

exercised at central points.‟

Centralization = authority retained at top level and Decentralization =
Systematic delegation of authority at all levels and in all departments of

a firm. Firm needs to balance the two.

• In case of a decentralized firm, Top level retains authority for:

 Policies and decisions w.r.t the whole firm

 Overall control and coordination
• Middle and lower levels have authority to take decisions w.r.t tasks

allocated to them