Page 44 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 3: Behavioural Considerations

3.7 Decentralization as a Management Philosophy Notes

Decentralisation is best held to mean a state or pattern of organisation in which specific
responsibilities have been “delegated”, the implication of this is that ‘delegation is the process
and ‘decentralisation’ is the resultant embodiment of it.
Centralisation can only mean reserving responsibilities to given units or sections of central
head quarters, but such units not necessarily of themselves carrying top management authority.

!
Caution The delegation or subdivision of management responsibility can be made on
either of two bases: (i) the whole of the process of command can be subdivided into
smaller, self-contained units or (ii) the process of command can be subdivided in such a
way that there is concentration of specialist responsibilities established to serve the units
of direct command.

The decentralized pattern reflects whichever pattern has been used, the second one gives rise to
the combined pattern of ‘operational’ and ‘functional’ responsibilities. Delegation of the
‘operational’ responsibilities involves the decentralisation of the process of command itself; the
managers of the decentralized sections are thus the users of the services provided by the specialist
or functional sections.

Task Take an example of a company from the service sector and find out all its objectives
if possible.

3.7.1 Decentralised Units – Advantages and Potential

1. The speed of operating divisions may be increased because many decisions do not have to
be referred to corporate head quarters.

2. The quality of many decisions may be improved because they can be made by the business
units closest to the point of decision.
3. Corporate management may be relieved of day-to-day decisions and can concentrate on
broader issues.
4. Profit consciousness may be enhanced. Business unit manager, who is responsible for
profits, will find its ways and means to improve them.
5. Measurement of performance is broadened since profitability is a more comprehensive
measure of performance than either revenue or expenses separately.
6. A business unit provides an excellent training ground for general management.
7. Business unit managers, with fewer corporate restraints, should be freer to use their
imagination and initiative. If a company has a strategy of diversification, business unit
structure facilitates vise of different talents and expertise in different types of business.
8. Divisionalization provides top management with information on the profitability of
components of the company.
9. Business units are subject to pressures to improve their competitive performance.

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