What factors affect the degree to which top management centralises decision making authority?

Principles and Practice of Management notes and Revision questions and answers

FACTORS THAT INFLUENCE THE DEGREE OF CENTRALISATION OR DECENTRALISATION

Managers cannot ordinarily be for or against decentralization of authority. They may prefer to delegate authority, or they may like to make all the decisions.
Although the temperament of individual managers influences the extent of authority delegation, other factors also affect it. Most of them are beyond the control of the individual managers. Managers may resist their influence, but no successful managers can ignore them.

These factors include:

i. Management Philosophy:
This is the orientation of top management. Sometimes top managers do not interfere with the authority and information that they hold. At other times, top managers keep authority nt just as a desire for status or power but because they simply cannot give up the activities and authority that they enjoyed before they reached on top. Top managers may see decentralisations as a way that people create their own status.
ii. Costliness of the decision:
This is probably the most important factor as managers are reluctant to delegate authority for crucial decisions. Generally, the more costly the action to be decided, the more likely it will be made at higher levels e.g. an airline’s decision to purchase airplanes will be made at top levels while a decision to purchase desks may be made at the operating level. Similarly, quality control in drug manufacturing company where a mistake could risk lives, would normally be made at higher levels.
iii. Importance of the decision:
If decisions at lower levels affect important aspects of the organisation, then the degree of centralisation will be restricted.

iv. Volume/Number of organisational decisions at lower levels:
The greater the number of decisions being made an organisation at lower levels, the greater the degree of decentralisation.

v. Desire for uniformity of policy:
Usually where uniformity of policy is required, centralisation is favoured. An organisation may wish to ensure that customers are treated alike with respect to quality, price, delivery and service or that vendors are treated alike with respect to quality, price, delivery and service or that vendors are treated with the same policies or that public relations are standardised. Uniformity of standards makes it easier to compare relative efficiencies of departments and to keep costs down.
vi. Size and character of the organisation:
The larger the organisation, the more need to decentralise. Large organisations with huge numbers of people must be divided into fairly autonomous divisions to facilitate efficient management. Sometimes, decisions may be slow because of the number of managers and specialists who must be consulted. This could be expensive and therefore whenever feasible, the organisation should be centralised. The cost of large size may be reduced organising the enterprise into small units.
vii. History and culture of the enterprise:
viii. Desire for independence:
ix. Availability of managers/Manager talent:
x. Control Techniques:
xi. Willingness of employees to accept responsibility:
xii. Rate of growth of the organisation

Principles and Practice of Management notes and Revision



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