Page 2 - Lesson Note 4

Centralization and Decentralization: represents the pattern of

authority among managers at different levels. Centralization of

authority means concentration of power of decision making in a few

hands. In such an organization very little authority is delegated to

managers at middle and lower levels. No organization can be
completely centralized or decentralized. They exist together and there

is a need for a balance between the two. As the organization grows in

size, there is tendency to move towards decentralization. Thus, every

organization is characterized by both.

Importance of Decentralization

1. Develops initiative amongst subordinates: It helps to promote

confidence because the subordinates are given freedom to take their

own decisions.
2. Quick and better decisions: The burden of managerial decisions does

not lie in the hands of few individuals but gets divided among various

persons which help them to take better and quick decisions.

3. Relieves the top executives from excess workload: The daily

managerial works are assigned to the subordinates which leave enough
time with the superiors which they can utilize in developing new

strategies.

4. Managerial Development: It means giving authority to the

subordinates up to the lower level to take decisions regarding their

work. In this way the opportunity to take decisions helps in the
development of the organization.