A type of organizational structure known as decentralization occurs when upper management transfers authority to middle and lower management. Under this system, middle and lower levels of the organization are given regular tasks and restricted decision-making abilities, freeing up top-level management to focus on important choices like diversification and market expansion.
Decentralization’s advantages
- Top executives are relieved of a number of responsibilities through decentralization. A single executive and his immediate team bear the entire weight of duty due to the concentration of authority.
- For instance, decentralization makes it possible for economies, activities, and goods to diversify. A centralized firm with a concentration of power at its core would find it difficult and complex to diversify its activities and launch new production or delivery lines.
- Because authority is distributed, executives in the company will be able to develop their abilities by exercising initiative, which will also position them for leadership positions.
- Professional executives play a major role in the company’s success.
- Decentralization ensures more oversight and monitoring because lower-level supervisors will have the authority to act unilaterally. They can therefore make adjustments and fix mistakes since they have a thorough understanding of the task they are overseeing.
- The decision-making process is brought closer to the operation through decentralization. Lower-level judgments can be made more quickly because they don’t need to be referred up the hierarchy.
