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Advantages of Centralised Structure For
Advantages of Decentralised Structure For
Organisations
Organisations
Senior managers enjoy greater control
most important decisions (as the other decisions can
over the organisation.
be undertaken by other people down the
organisation structure.
Decision making is a form of empowerment.
The use of standardised procedures can
results in cost savings.
Empowerment can increase motivation and
therefore mean that staff output increases.
Decisions can be made to benefit the
People lower down the chain have a greater
organisations as a whole. Whereas a Senior managers have time to concentrate on the
understanding of the environment they work in and
decision made by a department the people (customers and colleagues) that they
manager may benefit their department, interact with. This knowledge skills and experience
but disadvantage other departments. may enable them to make more effective decisions
than senior managers.
The organisation can benefit from the Empowerment will enable departments and their Unit 8: Span of Management
decision making of experienced senior employees to respond faster to changes and new
managers. challenges. Whereas it may take senior managers
longer to appreciate that business needs have
changed.
Notes
In uncertain times the organisation will Empowerment makes it easier for people to accept
need strong leadership and pull in the and make a success of more responsibility.
same direction. It is believed that strong
leadership is often best given from
above.

Case Study Bajaj Auto
he belief that "tomorrow's CEO must be today's empowered manager" compelled
57 year old Rahul Bajaj, CEO of the two-wheeler giant Bajaj Auto to delegate his
Tresponsibility to a successor systematically 5 years back. Both the heirs apparent -
his two sons, Rajiv and Sanjiv are qualified enough to exchange the baton smoothly. For
a man who took charge of every critical area in the traditional family – managed company,
the decision was a bold one. He assumed complete charge of production, finance, design
changes, production systems and labour relations at the company, personally overseeing
all operations for over two decades (1968-1990).
He never realised the need for delegation of authority and decentralisation of
responsibilities. Not surprisingly, the company remained a fat, cost-callous, inflexible
giant, although rising sales and burgeoning consumer demand camouflaged the flab. The
second line of executives were never groomed to mange at least day-to-day operations.
He never allowed others the required freedom to take even simple decisions independently.
Additional responsibilities as the chairman of Indian Airlines, CII, AIAM, etc., literally
forced him to see the merits in creating a second line of command in his absence.
Meanwhile, with the onset of a recession and the advent of competition, the company had
to rewrite the rules of the game quickly, combining delegation with succession planning.
Both sons have joined as apprentices initially, selecting their respective areas and
undergoing training in those areas. Rajiv in manufacturing and Sanjiv in marketing.
Another cousin of Rahul Bajaj, Mathur was made the incharge of HR functions and began
to represent Rahul in meetings. Responsibilities were delegated to Mathur slowly but
steadily.
Rahul Bajaj started distancing himself from his followers too, after his son Rajiv took
charge of the Akrudi plant independently. The report card of the company during the past
three years has been quite encouraging – with sales picking up in motor cycle as well as
scooter segments.
Questions
1. What do you analyse as the reason behind Bajaj Auto to change its management
technique to decentralization?
2. What were the advantages that Bajaj Auto earned from decentralization?
3. How do suggest Bajaj Auto to have benefitted more by a balanced centralisation-
decentralisation mix?

8.5 Summary

The span of management is the number of employees reporting to a superior.
This principle states that no single executive should have more people working to him for
guidance and leadership than he can reasonably be expected to serve.

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