[Commerce Class Notes] on Advantages and Disadvantages of Decentralization Pdf for Exam

Delegation of authority and responsibilities is commonly referred to as decentralization, in which the organization is divided into different sections and departments to help the organization grow scientifically and with a purpose of direction, resulting in harmony in relationships and a healthy environment, which is typically absent in centralized systems of organization. The term “decentralization” refers to the dispersal of power, and it is the process of assigning specific responsibilities to subordinates. When such a responsibility is delegated to subordinates, it is always accompanied by an appropriate authority, which is also empowered to the executive and other lower-level assistants. As a result, decentralization refers to the assignment of responsibility and delegation of management to various executives and other subordinates at lower levels to make the lower level more accountable and capable of doing the task committed to them.

Advantages of Decentralization

1. Distribution of the Executive’s Burden

The decentralized setup allows the executive to share his burden with others at a lower level, freeing him to focus on more pressing and critical tasks that require his full attention. This smoothens the job, speeds it up, provides a friendly atmosphere, improves comprehension, and fosters team spirit among all individuals who work for the company.

2. Greater efficiency and output

Because the responsibility comes with authority and power, everyone entrusted with it takes great care to fulfill it to the best of his ability. This level of attention and caution and the enthusiasm they approach their work to ensure greater efficiency and productivity.

3. Expansion Facility

It allows for further corporate expansion because the decentralized setup frees up top management personnel from routine and other responsibilities, focusing on fresh thinking and ideas. This provides for plane expansion to be achieved with little difficulty. The development of modern business houses directly results from the decentralized organizational framework.

4. It breeds innovation and flexibility.

More creative individuals can make their thoughts and be encouraged to develop and develop out-of-the-box solutions because there is less bureaucracy and obstacles to the open flow of ideas. Aside from that, those in specialized or local departments have a greater awareness of their work and the market’s unique needs and challenges, allowing them to deliver appropriate solutions to react to changes in their area or market more quickly.

Disadvantages of Decentralization

Despite the benefits of decentralization, there are specific difficulties in applying it to all circumstances and under all conditions. The actual hurdles to decentralization are as follows:

1. Issues with Coordination

Decentralization allows for the management of highly competent individuals to be carried out by highly skilled individuals. Because of the fragility of their financial holdings, it is probable that such individuals will be unable to come to an agreement.

2. Factors from Outside

Decentralization exacerbates the problem of inter-unit coordination.

3. Increase the cost of administration

Decentralization isn’t always possible. External forces, such as widespread strikes, make this difficult.

4. Operational costs are high

It computes the authoritative expenses on the basis of the assumption that well-paid administrators must be selected for the position.