Unit – 7

Delegation of Authority

(Lesson Structure)
7.0 Objectives
7.0 Objectives
7.1 Introduction
7.2 Meaning and Features of Delegation
7.3 Process of Delegation
7.3.1 Forms of Delegation
7.3.2 Importance of Delegation
7.4 Principles of Delegation
7.5 Elements of Delegation
7.5.1 Barriers to Delegation
7.5.2 Ways to Overcome Barriers to Delegation
7.6 Centralisation and Decentralisation
7.6.1 Importance of Decentralisation
7.6.2 Limitations of Decentralisation
7.6.3 Factors Affecting Decentralisation
7.6.4 Process of Decentralisation
7.7 Summary
7.8 Questions for Exercise

7.9 Suggested Readings

7.0 Objective
This lesson deals with delegation of authority. Top management can not cope with all
problems and issues. It is does so more important issues may not get adequate and
concentrated attention. Naturally, delegation of tasks, authority and power becomes imperative.

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However, overall responsibility of delegated tasks rests with the delegators. Delegate can
not be made a scapegoat.
The objectives of this lesson is to focus on the concept, process, forms and importance
of delegation in a business organisation. Principles and elements of delegation also form
part of this lesson. This lesson throws light also on the barriers to delegation and the measures
to overcome those barriers. Students will be able to know about the concept of centralisation
and decentralisation in an organisation as also about the process, importance and limitations
of decentralisation.

7.1 Introduction
Delegation helps in coordinating organisational activities at various organisational
levels. It is important way of increasing efficiency of the organisation. It helps managers
concentrate on important organisational matters and pass the routine matters to subordinates.

7.1 Meaning and Features of Delegation

If all organisational activities, strategic and routine, could be managed by one person,
the need for formal organisation structure with different functional departments, staffed with
people of different calibre, carrying out different activities would not arise. Since it is not
possible, because of physical and mental limitations, for any person to perform all activities
with respect to all functional areas, it becomes essential that he gives part of his workload to
subordinates along with authority to carry out the assigned task. Any type of task cannot be
assigned to subordinates. Managers have to choose between tasks that can be performed
by subordinates and those which have to be carried out by them only. Thus, the entire workload
is divided into various units, a part is assigned to subordinates and authority is given to them
to carry out the assigned task. This concept of division of work and assignment to people
down the scalar chain is called delegation. "Delegation is a process the manager uses in
attributing work to the subordinates."
Management is defined as the art of getting things done through others and managers
can get others to do things only if they delegate them the authority and responsbility. Delegation
is one of the important skills a manager should possess to effectively manage his organisation.
Allen puts it very aptly, "How well a manager delegates determines how well he can manage."
Delegation relieves managers of their burden and creates healthy atmosphere in the
organisation. Companies identify the capabilities of their managers by judging their skills in
how effectively they can get the work done through others by the process of delegation.
Lounsbury Fish observes, "An individual is only one manpower. Single-handed, he
can accomplish only so much in a day. The only way he can achieve more is through delegation
through dividing his load and sharing his responsibilities with others."

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Martin and Bartol define it as "The assignment of part of a manager's work to others
along with both the responsbility and authority necessary to achieve expected results.
According to Pearce and Robinson, "Delegation is the process by which a manager
assigns task and authority to subordinates who accept responsibility for those jobs."

Features of Delegation :
Delegation has the following features:
1. Delegation is a process: Managers delegate tasks to subordinates in a
sequential orders of steps.
2. On-going process: Delegation is a continuous process. Managers continue to
delegate tasks to their subordinates and get them delegated by their superiors
to acheive the organisational goals.
3. It is an art, not science: Delegating tasks to subordinates does not necessarily
mean that subordinates will perform those tasks well. There is no cause and
effect relationship between the task assigned to subordinates and their actual
performance. Delegation is, thus, not a science. It is the art of how well and what
the manager delegates to his subordinates. Delegation is, thus, an art.
4. Delegation of authority and not accountability: Managers can only delegate
work and authority to perform that work to the subordinates. Delegation does not
mean that managers are not accountable to their superiors for the part of task
assigned to subordinates. They remain accountable for the tasks assigned to
subordinates and are answerable to their superiors for its performance.
5. Necessary organisational activity: Managers cannot avoid delegation. They
cannot perform all the tasks themselves. They have to learn the art of delegation,
that is, how to delegate and what to delegate. Companies' performance is judged
by how good their managers are getting the work done through others by the
process of delegation.
6. It has different forms: Delegation can take different forms. It can be downward,
upward or lateral.
What should be Delegated :
Managers exercise great degree of care before initiating the process of delegation. If
routine jobs are retained by them and important matters are delegated, the entire process of
delegation becomes ineffective. The manager, therefore, must determine the authority and
responsibility that must be retained by him and that which should be delegated. The authority
and responsibility which he retains for his own performance is called reserved responsibility.
According to Louis A Allen "a manager cannot effectively delegate responsibility and authority
for initiating and making final decisions for planning, organising, coordinating, motivating
and controlling the activities and positions that report to him."

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Preparing various types of plans; single use or multiple use, strategic plans, policies,
procedures, rules etc. cannot be delegated to subordinates. These are the activities of
supreme importance for the organization and managers cannot delegate them to subordinates.
These are the base which provide meaning and substance to the organisation. Though not
delegated, managers can seek assistance of other line and staff managers in framing these
plans. While organising determines the framework of the organisation structure with well defined
authority-resbonsibility relationships amongst various individuals at various leves, the base
for providing structure to an organisation, whether functional or divisional or matrix, is again
the sole responsibility of managers and cannot be delegated to subordinates.
The kind of people to be recruited, selected, trained, placed on different jobs, the kind
of leadership style to be adopted, the measures of reward or coercion used as motivational
factors are the important business decisions that cannot be delegated to subordinates.
These are, thus, the important areas of management where delegation will not prove
to be effective. What then are the areas where delegation will be effective?
With reference to overall plans and objectives of the organisation, the important
managerial functions of planning, organising, staffing, directing, and controlling are looked by
managers themselves and routine activities with respect to each functional area of production,
finance, personnel and marketing should be delegated to subordinates, i.e, responsibility
entrusted to lower level managers should be handling the routine jobs in the specific functional
area. In the finance department, for example, the sources of raising funds, designing the
capital structure, determining the optimum debt-equity ratio, apportioning funds between fixed
and current assets are determined by the top managers. Once decided, the routine matters
of accepting applications, returning excess funds and issuing share certificates to shareholders
can be delegated to lower level manager (if funds are raised by means of issue of shares).
Launching a new product, planning a market survey, feasibility and project report are done by
top managers but actually conducting the feasibility studies and market surveys is delegated
to lower level managers.
Once responsibilites to be delegated are determined, authority to carry out those
responsibilities must also be delegated. The authority must be commensurate with
responsibilities so that subordinates can effectively discharge their obligations or duties.
The matters which are of routine nature for top managers are of major importance for
subordinates and they need to be delegated authority to carry out those responsibilities.

7.3 Process of Delegation

The process of delegation involves the following steps:
1. Determining the goals: The manager establishes the goal or the objective of
the position/post so that the person concerned knows what is expected of him. If
delegation is to be initiated in the sales department, the objective should be
made clear, say sales promotion or sales retention.

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2. Define responsibility: Once requirement of the job is defined, the responsibility

of individuals is determined in terms of tasks assigned to them. This helps in
knowing who are their bosses and who are the subordinates to whom they can
issue instructions.
3. Define authority: The job having been assigned, authoriy should be given so
that people can efficiently discharge the responsibilities related to that job.
4. Motivation of subordinates: The duty of manager does not end by delegating
the authority and responsibilities to subordinates. He makes sure that
subordinates willingly contribute to the job assigned so that organisational goals
are optimally achieved. Managers motivate the subordinates to do their work
with zeal and enthusiasm. They use financial and non-financial (participative
decision-making, recognition etc.) incentives to motivate the subordinates.
The need for acceptance and recognition are important motivators that boost
employees morale to perform the delegated tasks. As Rensis Likert puts it, "the
desire for recognition or ego satisfaction is central to other incentives in motivating
people."
5. Holding accountability: Whatever the nature and extent of delegation, manager
constantly observes the activities of subordinates to review their progress and
provide guidance whenever necessary. He holds them accountable for the work
assigned but remains ultimately accountable or responsible to his superiors for
completion of each task and its coordination with the overall organisational work.
6. Training of subordinates: Despite giving the authority commensurate with
responsibility subordinates may not be able to effectively carry out the delegated
tasks. Managers, therefore organise training programmes to enhance their
knowledge on the subject.
7. Establishing Control: Specific standards of performance are framed and
communicated to subordinates to enable them to asses their performance against
standards, self-control their activities and coordinate them with overall goals of
the organisation.

7.3.1 Form of Delegation

Delegation can take three forms:
1. Top to bottom delegation: The process of delegation described above where
superiors delegate part of their workload to subordinates is top to bottom
delegation.
2. Bottom t o top delegation: This form of delegation recognises the importance
of informal groups in the formal organisation structures. The force of attraction of
group members is so strong that if it comes to obeving the superior of group

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members, they choose the latter. Managers, in such cases, have to be careful in
issuing orders and directions to subordinates to carry out the delegated tasks.
They motivate subordinates as members of the group and not as individual
members. According to Allen, "to the extent that the manager convinces the
members of the group that their needs, his own, and those of the company
coincide, he can motivate them to produce according to the standards he sets."
3. Lateral delegation: When managers delegate duties to subordinates in the
hierarchy subordinates further delegate the tasks informally to people at the same
level in other units. For example, if general manager of sales department asks
sales managers to compile the figures of sales and sales personnel for the moth
of January, the sales manager will seek the assistance of finance manager and
personnel manager, Thus, authority and responsibility delegated t o the sales
manager is shared by him with managers of other departments working at the
same level. This is a form of lateral delegation. Peer groups in this case come
together and carry out the task as a team.

7.3.2 Importance of Delegation

Delegation is unavoidable. Managers have to be skilled in the art of delegation. It is
because of the following advantages of delegation:
1. Relief to top managers: Delegation relieves top managers of the burden to
carry out every activity on their own. By delegating routine activities to lower levels,
top managers concentrate on important policy matters and increase efficiency
of the organisation.
2. Development of managers: The more the managers delegate authority and
responsibility to subordinates, more are the tasks and responsibilities they accept
from their superiors. By delegating routine jobs down the hierarchy, they can
take more challenging projects and expand their skills and knowledge as
competent managers.
3. Development of subordinat es: When routine and innovative tasks are
delegated to subordinates, their skill in handling the delegated tasks increases.
Training facilities can also be provided to develop them as potential managers.
4. Better decision-making: Through delegation, decisions relating to routine
matters are taken by those who are closest to the decision-making situation.
This increases the quality of decisions.
5. Faster decisions: Not only are the decisions effective, they are also taken quickly
as subordinates have the authority to do the jobs assigned to them without going
to superiors every time they face a problem. They have the authority to solve the
problems on their own.

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6. Specialisation: Division of work into sub-units and delegation of responsibilities

according to skill, knowledge and competence of subordinates enhances
specialisation on the job and results in greater and better output. "Delegation
provides a way to break down the responsibilities of a manager and assign
them across several subordinate managers based on their specialised
capability."
7. Job satisfaction: Delegation provides job satisfaction to subordinates and
motivates them to perform better when they achieve the delegated standards of
performance.
8. Promotes inter-personal relationships: Delegation increases interaction of
managers with their subordinates and promotes healthy relationships amongst
them.

7.4 Principles of Delegation

The following principles make the process of delegation effective:

1. Authority, responsibility and accountability: These are the elements of

delegation that make it effective process.

2. Parity of authority and responsibility: Though authority exactly equal to

responsibility cannot be delegated, it must be commensurate with the responsibility
so that delegates can give instructions to their subordinates for getting the work
done. Authority without resonsibility and responsibility without authority have no
meaning.

3. Scalar chain: Every member should know his position in the scalar chain to
know his superiors who have the power to delegate duties to him and his
subordinates to whom he can delegate the duties. The responsibility can be
assigned if every person knows his position in the hierarchy.

4. Completeness of delegation: No part of the total work (except the one which
is reserved by managers) should be left out from being delegated. If so done,
gaps would arise in respect of the work not so assigned and the work will not be
completed properly.

5. Unit of command: Every individual should have one boss to whom he should
report. If people have more than one boss, they develop the tendency of shifting
the blame of their non-achievements to their bosses. For example, if a person
cannot accomplish the task assigned to him by boss. A, he may say that he was
busy carrying out instructions of boss B and vice versa while it may not actually
be so. He, thus, avoids responsibility of carrying out the assigned tasks.

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6. Absoluteness of responsibility: Though the task and authority to carry out that
task is delegated to subordinates, the delegator continues to remain responsible
for the tasks of his subordinates to his superiors. If the district manager canot
achieve the sales target of say, 1,000 units of product A in one month, the brach
manager (delegator) remains responsible to the General Manager of sales
department.
7. Delegation by results: Managers should first determine the objectives of
delegation, that is what they want their subordinates to do and then delegate the
tasks along with authority to them. If the production manager want to increase
production of Northern Branch by 1,000 units per month he should delegate this
task to his branch manager, Northern Region. The branch manager will carry out
the tasks when things are clear to him.
8. Delegate within defined limits: Managers cannot delegate what they are
themselves not authorised to do. If a manager, for example, does not have authority
to raise funds from financial market without sanction of top managers, he cannot
delegate this task to his subordinates.

7.5 Elements of Delegation

Delegation has three important elements:
1. Resonsibility: Responsibility is the activity or task entrusted by the managers
to subordinates. Though delegated, the ultimate responsibility (accountability)
for completion of the task rests with the manager.
2. Authority: To carry out the responsibility assigned, there is noeed for authority
to hire and fire people, spend resources, command people, issue directions and
make decisions. The authority must, therefore, be delegated to subordinates to
enable them to carry out the responsibility assigned.
3. Accountability: When managers delegate a part of their work-load to
subordinates, they remain accountable for accoplishment of that task. The
responsibility and authority, thus can be delegated but accountability can not.

7.5.1 Barriers to Delegation

Though delegation enhances efficiency of the organisation by dividing work amongst
organisational memebers (according to their capabilities), it is not free from obstacles. Various
barriers to delegation can be grouped in three main headings. These are:
1. Barriers related to superiors or delegator
2. Barriers related to subordinates or delegatee
3. Barriers related to organisation

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1. Barriers Related to Superiors

Despite knowing how important it is to delegate, superiors sometimes do not delegate
work to subordinates. This is because of the following reasons:
1. Wanting to do things personally: Some managers do not delegate because
they feel they can do the work better than others. Since ultimate responsibility is
that of the delegator, they prefer doing the work themselves rather than getting it
done through others.
2. Insecurity: If managers feel that subordinates perform better than them, they
avoid delegation. The exposure of their inabilities to take decisions creates a
feeling of insecurity and, therefore, they fear to delegate.
3. Retention of power: Some managers like to take added responsibility, make
their importance felt by everyone in the organisation and want the subordinates
to come to them to get their problems solved. Their desire to retain power and
dominate is a hindrance to the effective delegation process.
4. Lack of confidence in subordinates: The reward for risk is return. Unless
managers assume risk of subordinates not performing well, they cannot contribute
to the development of skilled managers in future. A manager who does not take
risk in his subordinates and lacks confidence in them will not be able to delegate
effectively.
5. Unwillingness to set standards of control: Having delegated the duties,
managers remain accountable for overall performance of the work. They supervise
the activities of subordinates and ensure that actual performance is according to
planned performance. A manager who fails to establish standards of control
will not be able to effectively delegate duties to subordinates.

2. Barriers Related to Subordinates

Subordinates may also present the following barriers to effective delegation:
1. Lack of confidence: Some subordinates do not want to take responsibility for
the fear of not being able to perform well. They lack confidence and do not want
to take any risk. They prefer to depend on thier bosses to make decisions.
2. Fear of making mistakes: Some subordinates fear that if they make mistakes
in carrying out the delegated responsibilities, their superiors will criticise and
insult them in front of others. This fear dissuades them from taking added
responsibility.
3. Lack of incentives: Motivation, through financial and non-financial incentives,
makes delegation effective. Subordinates are reluctant to accept delegation in
the absence of incentives.

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4. Absence of access to various resources: If subordinates do not have access

to resources (financial and non-financial) to carry out their work, they will not
accept delegation of resonsibilities. This happens wheh there is delegation of
responsibility without commensurate authority.
5. Convenience: Sometimes subordinates prefer the work done by superiors rather
than assuming responsibility for the same, for the sake of convenience. They
simply want their bosses to make the decisions.

3. Barrier Related to Organisation

The barriers related to organisation structure are as follows:
1. Size of the organisation: A small-sized organisation will not have too many
jobs to delegate to subordinates.
2. No precedence of delegation: Merely because organisations have not earlier
been following the practice of delegation sometimes makes them continue with
the practice of not delegating the jobs.
3. Degree of centralisation or decentralisation: Efficient delegation is affected
by the degree to which organisation distributes the decision-making power to
various organisational units. A highly centralised organisation is obstructive to
the process of effective delegation.

7.5.2 Ways to Overcome Barriers to Delegation

Barriers to delegation can be overcome through the following measures:
1. Accept the need for delegation: When superiors are reluctant to delegate
because they want to do everything themselves rather than allowing subordinates
to do, they should realise the need for delegation. In fact, more the delegation,
more successful will be an organisation.
2. Develop confidence in subordinates: Rather than feeling that subordinates
are not capable of accepting responsibilities so that delegator does not take the
risk of delegation, the delegator should unerstand that a man lear ns through
mistakes and if he commits mistakes, he shall try to find out solutions to the
problem also. If subordinates make mistakes, superiors should guide them rather
than not delegating at all.
3. Communication: Where delegation becomes ineffective because subordinates
do not have the information for making decisions, an effective system of
communication should be developed so that information flows freely from superiors
to subordinates.
4. Motivation: Subordinates should be motivated to accept the responsibilities by
providing financial and non-financial rewards like recognition, status etc.

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5. Develop an effective system of control: Since ultimate responsibility for the

work assigned is that of the delegator, he must ensure that subordinates perform
well by setting reasonable standards of dividing the workload into sub-units and
assigning each sub-unit to person most suitable for performing them.
6. Choose the right person for the right job: Lack of confidence in subordinates
should be overcome by dividing the workload into sub-units and assigning each
sub-unit to person most suitable for performing them.
7. Freedom to subordinates: When managers accept the need for delegation to
subordinates they must also give freedom to make decisions with respect to the
delegated tasks. Rather than not delegating at all or delegating less responsibility,
for the fear of subordinates making mistakes, managers must give the
subordinates authority to find solutions to their problems and learn not to make
mistakes in future.
8. Clarity of tasks: The responsibilities or the tasks delegated to subordinates
must be clearly defined in terms of results expected out of those tasks. Knowing
what is exactly expected of them will enable the subordinates perform the
delegated tasks better.
9. Matching the job with the abilities of the subordinates: 'Round pegs in the
round holes shall make delegation effective as the right job will be given to the
right person.
10. Open communication: Though delegatees are given the authority to solve
problems related to the assigned tasks, yet, they should be allowed to freely
discuss the problems with their delegators.
11. Monitoring the critical deviations: Subordinates may make mistakes, however
efficienct they are at work. The superiors should overlook minor deviations with
respect to the delegated tasks and pinpoint only major deviations in the tasks
assigned. This promotes better response and a sense of responsibility amongst
the employees.
12. Develop trust and confidence in subordinates: Delegation should be a
continuous process. Managers should appreciate the work of subordinates when
they perform well. They should delegate them more tasks and express trust and
confidence in them. This will boost their morale to perform better in future.

7.6 Centralisation and Decentralisation

Centralisation and decentralisation help to coordinate organisational activities. While
delegation refers to assigning responsibility and authority to people from one level in the
organisational hierarchy to the other, centralisation and decentralisation refer to the extreme
to which authority and responsibility are passed to people at lower levels. If authority to make

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decisions is retained at top levels, the organisation is said to be centralised; if the decision
making authority is distributed widely throughout the oganisation and lower level managers
have the authority to use financial and non-financial resources, the organisation is said to be
decentralised.
To begin with, the authority is retained at the top. As the organisation size increases,
the scope of authority gets narrow at top levels and gets distributed to lower-level managers.
To what extent it flows down the level depends on the degree to which the organisation is
decentralised.
Centralisation is "the extent to which power and authority are retained at the top
organisational levels" and decentralisation is "the extent to which power and authority are
delegated to lower level."
No organisation can be completely centralised or decentralised. In a completely
centralised organisation, all decisions will be taken by top managers and there will be no
subordinate managers. In a completely decentralised organisation, authority to make decisions
is delegated to lower-level managers and, therefore will be no top managers. Both the
structures cannot co-exist.
Complete centralisation or decentralisation, thus, does not exist. Overall planning and
organising are initiated by top managers and some authority is decentralised to operating
units to carry out the work within the overall policy framework.
All successful companies delegate authority to lower level managers, though, the extent
to which it is delegated depends upon different factors.
The centralisation-decentralisation continuum appears as follows:
Decentralisation Complete

Complete Centralisation Decentralisation

Centralisation

As we look above from left to right we would see that the degree of centralisation
decreases and decentralisation increases.

Decentralisation :
Decentralisation is passing of authority to make decisions to the lowest possible level
in the organisational hierarchy. Dencertralisation is delegation of authority to the maximum
possible extent. As Allen puts it, "Decentralisation refers to the systematic effort to delegate
to the lowest levels all authortiy except that which can only be exercised at central points.
Decentralisation is essential but how much should the managers decentralise depends on
various factors like size of the company (decentralised decision-making authority increases
with increases in size of organisation), cost control (when companies want to maintain strict
cost control, decision-making authority is centralised), desire of managers (if managers desire

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to take all decisions on their own, the organisation tends to be centralised), functional areas
(decisions related to finance and personnel are generally centralised and those related to
production or marketing are decentralised), ability of subordinates (if subordinates are inspiring
and hard-working, decision-making authority can be dencentralised.
7.6.1 Importance of Decentralisation
Decentralisation is important because of the following reasons:
1. Reduction in the burden of top managers: Managers who look after both
strategic and routine matters often become so involved in handling routine
problems that they do not have time to look after strategic issues of the
organisation. The time, they should, on strategic planning is often not spent.
Through decentralisation, routine decisions can be delegated down the scalar
chain and important decisions can be retained at the top.
2. Development of subordinates: One learns through mistakes. If top executives
do not delegate authority to subordinates for the fear that subordinates will make
mistakes, they will not be able to develop potential managers. The subordinates
should be allowed to make mistake and also rectify them so that they lear n not to
repeat them in future. This is possible only in the decentralisaed organisation.
3. Faster decisions: In a decentralised organisation, people do not have to
approach the higher authorities every time they face a problem. As they are
closer to the problem area they can make decisions related to that problem. The
decisions are, thus, faster and better.
4. Promotes diversification: If top managers retain authority to make every
decision, they will be able to look after limited lines of products only.
Decentralisation enables them search new markets. They can diversify into new
markets and add new products to the existing line of products.
5. Promotes motivation: Rather than offering financial rewards to motivate
subordinates improve their performance, allowing them to make decisions in
their respective areas in specialisation serves as a better motivational force.
Thus, decentralisation motivates managers to promote the efficiency of workers
resulting in higher production and sales.
6. Flexibility: A decentralised organisation is more flexible as managers at different
levels can change their policies according to changes in environment.
7. Better communication: A decentralised organisation has less levels in the
scalar chain. Communication amongst people at different levels is faster and
efficient. Cases of information distortions (due to increased levels) are reduced.
8. Control: Managers at different levels lay standards of performance for their
respective units and exercise control on those activities. This facilitates the
process of control.

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7.6.2 Limitations of Decentralisation

Decentralisation suffers from the following limitations:
1. Coordination: Managers find it difficult to coordinate the organisational activities
where there is high degree of decentralisation.
2. Control: Difficulty in coordination also makes it difficult for top managers to
control the organisational activities.
3. Costly: Though useful, it is expensive since each department manages activities
in its own way. There is duplication of efforts and physical facilities in the
organisation.
4. Adaptability: In the fast changing environment, unless strategic decisions are
centralised different units will react to changes differently and working of the
organisation will become difficult.
5. Lack of uniformity: A highly decentralised organisation lacks the advantage of
uniform policies followed by all the organisational units. Each unit formulates its
own policies. The policies are more uniformly followed in a centralised
organisation.
6. Ability of lower level managers: In a decentralised organisation, decisions
are taken by managers of different units at their respective levels. If lower level
managers are not competent and skilled to make decision, efficiency of a
decentralised organisation will get reduced.
7.6.3 Factors Affecting Decentralisation
The factors affecting decentralisation can be classified into two categories:
• External factors affecting decentralisation
• Internal factors affecting decentralisation

• External Factors Affecting Decentralisation

The factors external to the organisation are:
1. Environment: If firms are operating in an environment where customers and
suppliers are dispersed, competition is not intense, markets provide wide area
for company to penetrate into (by adding new products to its products line), there
is need for the organisation to decentralise.
2. Regulation of the Government: If the Government lays strict policies and
procedures for the business firms, managers cannot take the risk of delegating
decision-making powers to people at lower levels. They have the fear of being
penalised for not observing the rules.The tendency to decentralise in such cases
is low.

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3. Market features: If firms operate in a market where homogeneous products are

produced for all the firms, the power to make decisions can be decentralised to
lower level managers.
4. Bargaining with trade unions: If trade unions agree to bargain with lower level
managers for their rights, decision-making power can be decentralised but if
trade unions bargain only with top management, the organisation tends to be
more centralised.
• Internal Factors Affecting Decentralisation
The factors internal to the organisation which affect decentralisation are as follows:
1. Size of the company: As size of company increases, it becomes difficult for
managers to take decisions single handedly. Decision-making will be time
consuming. Therefore, with increse in size of the firms, the decision-making power
is delegated to functional managers and lower level managers. This increases
efficiency of the organisation since top executives .................. concentrate on
strategic matters and routine matters can be managed at the lower levels.
2. Cost control: Decisions which require huge amount of funds, for example, the
decision to buy a plant or machine, are normally taken by top executives and
decisions where financial outlay is not too large can be taken at lower levels.
Thus, where firms want to maintain strict cost control over activities of the
organisation, the degree of decentralisation is less. To maintain financial control,
organisations can frame a policy that spending money upto a given limit per
month on petty items is left at the discretion of lower level managers but expenditure
beyond this limit has to be sanctioned by top managers.
3. Philosophy of management: Management philosophy refers to management's
desire to centralise or decentralise. Some managers prefer to retain power and
authority to make decisions and, therefore, believe in centralisation of authority.
Others, who want the decisions to be taken at lower levels, decentralise the
decision-making authority.
4. History of the enterprise: Enterprises which have always worked as centralised
organisations continue to do so in future also. Past precedents are followed in
future and are not easily changed unless a strong desire or outside influence is
created within or outside the organisation.
5. Functional areas: Some degree of centralisation or decentralisation is essential
in every functional area. However, some areas like finance and personnel tend to
be more centralised while others as prodcution and sales tend to be more
decentralised.

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6. Ability of subordinates: If lower level managers are inspiring and innovative,

decision-making power can be given to them. There is greater tendency for
decentralisation in such enterprises.
7. Growth rate of enterprise: Top managers of a growing enterprise in terms of
financial and physical parameters spend more time on important and strategic
organisational matters. Thus, there is greater tendency for decentralisation.
8. Communication system: An effective communication system helps to
coordinate diverse organisational activities. An organisation whose
communication system is based on modern management information systems
can be decentralised.
9. Control system: An effective system of control where regular appraisal of actual
performance against planned performance is done facilitates decentralisation.

7.6.4 Process of Decentralisation

The following steps make the decentralisation process:
1. Centralisation : Initially, the organisation starts as a centralised structure. The power
and authority to make decisions vests with the top management. As it grows, the need
for delegating the operating authority arises while important decisions related to
planning, organisation, motivating etc. continue to be exercised by the top management.
This ensures uniformity and the working of the organisation.
Following are the strategic areas where decision-making should remain centralised:
(a) Centralisation of Planning: To ensure consistency and uniformity in the
operations of the organisation, the framework of planning consisting of policies,
procedures, programmes, schedules, etc. is developed by top managers,
whatever the degree of decentralisation in the enterprises. It is withing the overall
planning that various units make sub-plans to synthesize with the broader plans.
(b) Centralisation of Organising: The organisation structure to be adopted,
creating departments, definiting authority-responsibility relationships amongst
members, the levels to be created (span of control) are decided by top
management and the task of work into sub-units and assigning each task to
different individuals.
(c) Centralisation of Coordination: More the degree of decentralisation, more
the problems of coordinating the activities. The chief executive should retain with
him the power to coordinate the activities of all divisions and departments. This
avoids duplication of efforts exercised by different divisions.

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(d) Centralisation of Motivation: Individuals are motivated by different factors.

While financial rewards are important for some, non-financial rewards of
acceptance and recognition are important for others. Various motivational factors
should be through studies by the management and a suitable policy for motivating
employees of different nature should be made.
(e) Centralisation of Control: When authority for making the overall plans is
reserved with top management, the task of ensuring that plans are adhered to is
also the responsibility of top managers. The task of setting adequate measures
of control to ensure that actual performance conforms to planned performance is
reserved on centralised basis with the top management.
(f) Development of managers: Once the basic framework of organisation is
structured, various standards for measuring performance are made, techniques
of coordination and motivation are laid, top managers decentralise the enterprise
by delegating authority to lower level managers. These managers frame policies
for their units. Though decisions made by these managers do not relate to strategic
issues, yet they are important for overall monitoring of their units. Unless managers
have the skill and competence to make such decisions, they can not plan for their
units.
(g) Communication and coordination: Though coordination of different activities
is the task top management, departmental managers must also ensure
coordination of different work ................This is possible through open system of
communication where information flows freely both vertically and horizontally.
(h) Dispersion: Dispersion refers to geographic separation of central head office
from the operating units. This is done so that interference of top executives in the
working of operating units is minimised. Dispersion helps to locate the units
near the source of raw materials or markets (thereby reducing the costs) and
enhances the leadership and supervision qualities of managers in charge of
their units. Increase in their skills and creativity motivates employees and their
units, resulting in higher productivity.

7.7 Summary
After analysing the various advantages and disadvantages of decentralisation, the
important point that arises is not whether to centralise or decentralise but how much to
centralise or decentralise. Some degree of decentralisation is a must. It is important to
determine what kind of authority to delegate and how far down the scalar chain it is to be
delegated. John Child describes four factors that characterise movement of organisation.

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1. Size: With increae in size of the organisation, managers cannot make all major
decisions themselves and, therefore, move towards decentralisation and
delegation.
2. Geographic dispersion: Top executives of the firm whose activities are spread
over different geographical areas will be unable to take decisions with respect to
all the functional areas and, there is the tendency to decentralise.
3. Technological complexity: As a result of technological developments, the top
management is unable to make all decisions alone and, therefore, the movement
towards decentralisation.
4. Environment uncertainty: The fast changing environment requries (i) careful
analysis of environmental factors that affect the organisation, and (ii) most speedy
and timely decisions by organisations to adapt to the changing environment. The
need for decentralisation, thus, arises.

Differences between Delegation and Decentralisation :

Decentralisation is extension of delegation. Both delegation and decentralisation help
to achieve vertical coordination in the organisation. Though similar in concept, there are
differences between the two. These are as follows:
1. Scope : Delegation takes place between two persons. A superior delegates
authority to his subordinate. Decentralisation takes place at all the levels, in all
the funcational areas of the organisation. It is an extension of delegation.
Decentralisation is wider in scope than delegation.
2. Control : In delegation, delegator controls the activities of delegatee. He cannot
leave everything at the discretion of delegatee. In decentralisation, control is
exercised by managers at the levels where decisions are made.
3. Interdependence : Delegation is possible without decentralisation. In fact, every
manager must delegate a part of his workload to subordinates as he cannot
manage everything himself. Decentralisation is, however, not possible without
delegation. It is the end result of delegation.
4. Autonomy : In delegation, delegatees perform tasks assigned to them by their
superior. They, however, have authority to perform the assigned tasks. In
decentralisation, managers at each level frame plans for their units and work
accordingly.
5. Completeness : Delegation is complete when one person transfers authority to
another (subordinate). This may take place at any level. Decentralisation is
complete when authority is transferred to the maximum extent. It is the end result
of delegation.

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The following table highlights major points of difference between delegation and
decentralisation:
1. Delegation is complete when there is transfer It is comlete when authority is delegated
of authority from one person to another. to the fullest possible extent. It is the end
result of delegation.

2. The delegator continues to exercise control The top management exercises control
over the activities of subordinates. only over strategic issues. Control over
routine matters is exercised by lower level
managers.

3. Delegation is possible without decentralisation Decentralisation is not possible without,

delegation. In fact, delegation is a pre-requi-
site to decentralisation.

4. Lower-level managers of each unit carry out Managers of each unit frame their own
the plans framed by their superiors. plans.

5. Power to control the delegated tasks vests Power to control is delegated to lower level
with the delegator. managers.

7.8 Questions for Exercise

1. What guidelines will you suggest for ensuring effective delegation of authority?
2. How would you support the view that "Delegation enables a manager to multiply
himself?" Why is the delegation of authority not always effective.
3. Distinguish between delegation and decentralisation. What are the limitations of
decentralisation?
4. What is delegation of autority? What obstacles stand in the way of effective
delegation of authority?
5. Define decentralisation of authority. What are the advantages and limitations of
decentralisation?
6. Distinguish between delegation and decentralisation of authority?
7. What is delegation? To what extent should authority be delegated?
8. What is delegation of authority? Explain its principles.
9. What is delegation? Explain the process of delegation.
10. Why is delegation important for an organisation? What are the barriers to effective
delegation? How can these barriers be overcome?

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11. State the various factors that affect decentralisation.

12. State the various advantages and disadvantages of decentralisation.

13. "Decentralisation is nothing but an extension of delegation." Discuss.

14. (a) Delegation is an art. Comment.

(b) What are the barriers to effective delegation ?

7.9 Suggested Readings

1. Keith Davis: Human Behaviour at work, McGraw - Hill, Newyork, 1981.

2. Raymond R. Miles: Theories of Management: Implications for Organisational

Behaviour and Development, McGraw - Hill, Newyork, 1975.

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