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Organising — Business Studies STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceBusiness StudiesOrganising6 Marks
Question
Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
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Answer

Decentralisation is much more than mere transfer of authority to the lower levels of management hierarchy. Its importance can be understood from the following points.
  1. Develops Initiative Among Subordinates: When lower managerial levels are given freedom to take their own decisions they learn to depend on their judgement. A decentralised policy helps to identify those executives, who have the necessary potential to become dynamic leaders.
  2. Develops Managerial Talent for the Future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation, but equally important is the experience gained by handling assignments independently. It gives them a chance to prove their abilities and creates a reservoir of qualified manpower.
  3. Quick Decision Making: In a decentralised organisation, however, since decisions are taken at levels, which are nearest to the points of action and there is no requirement for approval from many levels the process is much faster.
  4. Relief to Top Management: Decentralisation leaves the top management with more time, which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions.
  5. Facilitates Growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and develops a sense of competition amongst the departments.
Consequently, the productivity levels increase and the organisation is able to generate more returns, which can be used for expansion purposes.
  1. Better Control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results. The extent of achievement of organisational objectives as well as the contribution of each department in meeting, the over all objectives can be ascertained.

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