Page 120 - DMGT402_MANAGEMENT_PRACTICES_AND_ORGANIZATIONAL_BEHAVIOUR

Unit 5: Coordination, Centralisation and Decentralisation

Notes
Example: Each store of Tesco has a store manager who can make certain decisions
concerning their store. The store manager is responsible to a regional manager.

Caselet Hewlett-Packard India (HP)

here are no supervisors in HP, only reality checkers. Employees are allowed to
define their own job responsibilities. HP believes that 'people are here to do a great
Tjob.' Employees are treated like mature adults. Says one manager 'There is no boss
breaking down your neck. You are empowered and are on your own'. Even the bosses
proudly proclaim 'my team members are far more knowledgeable about their lines of
business. I can only learn from them.' Even a fresh recruit in HP is given all kinds of
resource back up and a team to do things in a novel, different way. All such attempts are
fully backed up by top management. In the headquarters in New Delhi, open encircles in
office encourage informality and ease of communication between employees. Across HP,
flexitime is religiously followed, depending on the convenience of the employee. Every
attempt is made to provide excellent opportunities for vertical growth of employees. Of
course, there are family day annual picnics, kids' days, dial-a-chocolate, wedding gifts,
subzi-on-wheels, car servicing facilities to make employee lives lively throughout the
year.
As a result, the employee satisfaction is at a high always. Moreover, attrition rate is quite
low and productivity is on an all time high as compared to the other major competitors.
Source: BT-Hewitt Study, 21-1-2001

5.4 Centralised and Decentralised Organisations

Centralisation and Decentralisation of Organisations need to be viewed as complementary to
each other as a fair combination of the two results in stability, accountability, efficiency and
effectiveness. It has been said that in order to ensure its existence, an organisation has to perform
certain functions which are basically centralising in nature and effect. Moreover, their performance
has to be from a central point of authority. Two such major functions are initiation and
decision-making in relation to basic management functions like planning, organising, motivating,
coordinating and controlling the work of the subordinates as also of the field units. Thus, the
higher levels by performing the functions of initiation and decision making tend to reserve the
real authority at the central points of the organisation. On the other hand, Earnest Dale points
out that the degree of decentralisation greater in the following situations:
1. The greater the number of decisions made at lower level of management hierarchy, the
greater the degree of decentralisation.
2. The more important the decisions made at lower level of management, the greater the
degree of decentralisation.

Example: The head of the field unit enjoys the authority of sanctioning financial
investments or expenditure without consulting any one else.
3. In a decentralised authority structure, more decisions are taken at lower levels which
affect most of the functions of the organisation as a whole. Thus, the organisations which
permit only operational decisions to be made at separate branch units are less decentralised
than those which also permit financial and personnel decisions at branch units.

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