Decentralization and Devolution of Authority

Meaning of Decentralization and Devolution of Authority

Decentralization is increasingly important as the organization gets bigger and more complicated. As an organization grows in size, there is a greater demand for decentralization or devolution. The top management is unable to handle the entire additional task. It must therefore be distributed among the lower level managers. The organization is said to be decentralized when the workers at the middle and lower levels are given significant responsibility and power in decision-making.

The distribution of decision-making authority to lower levels of the organization is referred to as decentralization. The division of decision-making tasks among hierarchical levels is explained by decentralization. Decentralization is the process of distributing power among various organizational levels. Because decision-making power is shared with lower levels, those levels are positioned close to the action. In other words, authority and decision-making are dispersed across the business. An organization can be considered to be highly decentralized when the decisions made at the lowest levels are both significant and vital.

Forms of Decentralization

The linkages between the core administration and the entities to which the distribution of authority, responsibilities, and resources is made involve a wide range of relationships. The type of decentralization depends on these relationships' characteristics as well as the dispersion's objectives. Deconcentration, delegation, devolution, strategic partnerships, and privatization or outsourcing are the five main kinds that should be distinguished. Here, we'll focus on the three types of decentralization listed below:

• Deconcentration: Deconcentration reassigns certain duties and responsibilities carried out by corporate headquarters staff to employees working in regional and branch offices. These units receive staff, supplies, vehicles, and financial resources. Managers of these units have the power to independently decide on operations that were previously decided at headquarters or required approval from headquarters.

• Delegation: The organization's lower level workforce receives authority, responsibility, and resources for carrying out organizational responsibilities. Decentralization in this situation takes the shape of delegation.

• Devolution: Devolution entails alterations to an organization's structural components. Regional and local organizational units that get authority and resources are given the power to take autonomous initiative and make decisions on the establishment of their own rules and regulations, goals, and objectives. Additionally, they gain the authority to develop and carry out their own plans, programs, and strategies as well as to allocate any kind of resource to any activity that falls under their purview. They are also given the power to raise money in a similar way. In these situations, substantial modifications to the corporate governance system are made, and decentralization takes the form of devolution. Depending on how much accountability (control) the corporate headquarters retains over the regional and local divisions, devolution can be implemented to varied degrees. Inadequate devolution occurs when the accountability mechanism, or the control of the headquarters, interferes with the independence of the decisions made by the local units or when the transfer of organizational resources is insufficient to adequately handle the duties transferred.

Advantages of Decentralization and Devolution

Devolution and decentralization have several benefits. According to Terry and Franklin (2005), some of these benefits include:

• Delegating decision-making and authority is prioritized in a decentralized or devolved organizational structure, which also lightens the burden on top management.
• It is encouraged to enhance generalists and lower level managers' skills.
• The promotion and development of intimate and close personal links and relationships increases employee motivation and morale and fosters coordination among the tasks at the same level of management.
• Knowledge of significant facets of specialized employment is easily learned.
• Since managers are close to the tasks for which they are accountable, efficiency is boosted.
• Managers of a company with dispersed units can take full advantage of regional conditions.
• Risks regarding potential losses of workers, property, tools, etc. are dispersed.

Disadvantages of Decentralization and Devolution

Devolution or decentralization is not always easy. A decentralized and devolved organization has various limitations and obstacles to overcome. Some of the difficulties brought on by decentralization and devolution include the following:

• Effective decentralization or devolution requires improved education and training for the employee. Their capacity for making decisions needs to be improved. Decentralization is therefore a time- and money-consuming process.
• Devolution or decentralization calls for more expenses and personnel. It is necessary to create the new system. A new information processing system with greater networking must be installed because of the distributed nature of decision-making.
• The cost and risk associated with making a decision rise as it is distributed. Any poor choice made by the subordinates has broad ramifications for the company.
• The cost of decentralized locations is also increased by the requirement to establish coordination, monitoring, and performance appraisal processes in the decentralized or devolved organization.
• Under the decentralized or devolved system, there is duplication of work due to the disparate locations where the tasks are carried out.

Difference between Delegation and Decentralization

Decentralization of authority within the organizational structure is the central concept in both delegation and decentralization. However, this does not imply that they are the same ideas. Decentralization is a state brought on by the systematic dispersal of power within an organization. These powers are granted to job holders through the work system and job design. Decentralized power is therefore more or less permanent in nature. In contrast, delegation means that the superior temporarily transfers some of their authority to the subordinate. The delegated authority can be readily revoked by the superior. Decentralization cannot occur without delegation, while vice versa may not be true. It is important to keep in mind that delegating does not imply passing along responsibilities. However, when an organization is decentralized, authority and responsibility are distributed equally. Therefore, the following table summarizes the main variations between them:

Reference

(Pant, P.R. (2006). Principles of Management, Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd.)