Class 12 Business Studies - Chapter Organising NCERT Solutions | Decentralisation is an optional policy.
Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
Yes, decentralisation is an optional policy, yet it is important in the organisation. It refers to systematic delegation of authority at all levels of management and in all departments of organisation to take decisions.
An organisation should choose to be decentralised because of its following importance:
1. Develops initiative among subordinates: It helps to promote self-reliance and confidence amongst the subordinates. This is because, lower managerial levels have been given freedom to make their own decisions and they learn to depend on their own judgement. It also helps to identify those executives, who have the potential to become dynamic leaders.
2. Develops managerial talent for the future: Formal training along with experience of handling independent assignments helps to create a reservoir of qualified and capable managers, who can take up more challenging positions in the upcoming ventures of the organisation.
3. Quick Decision-making: Under decentralisation, authority to make decisions is placed in the hands of those, who are responsible for executing the decisions. Since decisions are taken at levels nearest to the point of execution, there is no delay or distortion of information.
4. Relief to top management: It helps to reduce the amount of direct supervision over subordinates by giving them freedom to take decisions and act on their own. This reduces the workload of top executives and they can devote their time and attention to important policy matters.
5. Facilitates Growth: It provides greater autonomy to lower level managers and departmental heads. This encourages them to function more efficiently to prove their supremacy, and facilitate expansion and growth of the organisation.
6. Better Control: It makes it possible to evaluate performance at each level and make the departments accountable for their own results. Feedback is quick and leads to better control.
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A company X limited manufacturing cosmetics, which has enjoyed a pre-eminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry of many MNC’s in the sector. With the result the market share of X limited has declined. The company had followed a very centralised business model with Directors and divisional heads making even minor decisions. Before 1991 this business model had served the company very well as consumers had no choice. But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.
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