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DECENTRALIZATION

DECENTRALIZATION

Meaning and Definition

Decentralization of authority refers to systematic delegation of authority at all levels of management and in all departments of the organization for taking decisions and actions and appropriate at the respective levels. In a decentralized organization authority is retained at the top management level for taking major decisions and framing policies concerning the entire organization. Top management also retains authority for overall control and coordinate of the organization. At the same time the middle and lower managers are entrusted with authority for taking decisions on tasks assigned to them. Authority is pushed down to the lowest managerial levels.

According to the Henry Fayol, "everything that goes to increase the importance of the subordinate's role in the decentralization; everything that goes to reduce it is centralization".

According to the Louis A. Allen, "decentralization refers to the systematic efforts to develop delegate to the lowest levels all authority except that goes to reduce it is centralization".  For example, consider an organization in which the major decisions on products, lines of business, capital investment, etc, are made by top managers. At the same time, the heads of manufacturing and other departments have the authority to take decisions on matters prices of the products, distribution channels, methods of advertising the products, and organizing sales campaigns. 

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