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Decentralisation refers to the dispersal of the decision making power among the middle and lower level managers. It is an optional policy as it depends on the organisation how much power the top level management wants to delegate to the lower levels. An organisation may choose to be centralised or decentralised depending on the objectives and the decisions of the top level managers. Following are a few factors that explain why an organisation would choose to be decentralised.

(i) Initiative: Decentralisation allows a sense of freedom to the lower managerial levels as it lets them take their own decisions. It gives them a higher degree of autonomy to take initiative. Moreover, it promotes a feeling of self-confidence and self-reliance among them. When the power is delegated to lower level managers, they learn to face new challenges and find solutions for the problems themselves. This helps in spotting those potential managers who can take the needed initiative.

(ii) Managerial Competence: Once the authority is delegated to the managers at lower levels, it provides them the needed opportunity to develop themselves. It provides them with the opportunity to gain experience and thereby, develop the skills and knowledge to face new challenges. Decentralisation gives them a chance to prove their talent and get ready for higher positions. It also helps in pre-identification of the future managers who are well-equipped with the necessary talent required to deal with managerial problems.

(iii) Control: Decentralisation helps in evaluating the performance of the organisation in a better manner. Decentralisation helps in analysing and evaluating the performances of each department separately. Thus, the extent of achievement of each department and their contribution to the overall objectives of the organisation can be easily can be easily evaluated.

(iv) Active Decision Making: Since through decentralisation, the authority of making decisions is passed on to lower levels of management, decisions are taken quickly and timely. This is because the decision can be taken at the nearest points of action which thereby, helps in easy adjudication of the problems.

(v) Growth: Managerial efficiency is developed to a large extent with the help of decentralisation. Decentralisation results in greater authority to the lower level managers. It promotes competition among the managers of various departments. In a race to outperform each other, they give their best shot and thereby, increase the overall productivity and efficiency. The organisation gains from the increased overall performance and thereby, grows.

(vi) Reduced Workload of Top Managers: Delegation of authority provides freedom to top level managers. It helps them in shifting the workload to their subordinates and gives them time to concentrate on more important and higher priority work such as policy decisions. Moreover, direct supervision by the top level management is decreased, as the subordinates are given the rights to take the decisions by their own.

:1. Identification and Division of Work It involves identification and division

of total work to be done into specific activities (called jobs) in accordance
with previously determined plans. By dividing the work, the burden of work
can be shared among the employees. It facilitates specialization of work &
skills. Duplication of work can be avoided by dividing the work into
manageable activities.
2. Departmentalisation: The second step in organizing is to combine or
group similar or related jobs into larger units called departments, divisions
or sections. They can be grouped on the basis of functions, products,
customers and territories etc. Departmentalization is done to achieve
coordination & to facilitate unity of efforts.
3. Assignments of duties: Once departments have been formed each of
them is placed under the charge of an individual called departmental head
(e.g., production manager, finance manager etc.). Jobs are then allocated
to the members of each department according to their skills and
qualifications.

4. Establishing Reporting Relationships: Merely allocating work is not
enough. Each individual should also know from whom he has to take
orders and to whom he is accountable. It helps in coordination amongst
various departments.

1. Benefits of specialization: In organizing every individual is assigned a
part of total work and not the whole task. This division of work into smaller
units and repetitive performance leads to specialization. Thus organizing
promotes specialisation which in turn leads to efficient & speedy
performance of tasks.
2. Clarity in working relationship: It helps in creating well defined jobs and
also clarifying the limits of authority and responsibility of each job. The
superior-subordinate relationship is clearly defined in organizing.
3. Effective Administration: It provides a clear description of jobs and
related duties which helps to avoid confusion and duplication. Clarity in
working relationships enables proper execution of work which results in
effective administration.
4. Optimum utilization of resources: The proper assignment of jobs avoids
overlapping/duplication of work. This helps in preventing confusion and
minimizing the wastage of resources and efforts.
5. Adoption to Change: A properly designed organizational structure is
flexible which facilitates adjustment to changes in workload caused by
change in external environment related to technology, products, resources
and markets.
6. Development of Personnel: Sound organization encourages initiative
and relative thinking on part of the employees. When managers delegate
their authority, it reduces their workload so they can focus on more

important issues related to growth & innovation. This also develops the
subordinates’ ability and helps him to realize his full potential.
7. Expansion and growth: It helps in growth & diversification of an
enterprise by adding more job positions, departments, product lines, new
geographical territories etc.

Functional Organisation involves grouping of the functions of similar nature. Each group forms a separate department that report to one head. For example, departments may be divided on the basis of functions such as production, human resources, etc. that report to the managing director of the organisation.

Both decentralisation and delegation relate to downward delegation of authority and responsibility. Under delegation, the authority is shared by the superior to the immediate subordinate. On the other hand, under decentralisation this concept is extended and the authority is distributed at not just one but multiple levels. That is, while delegation involves just two persons, i.e. the superior and subordinate, decentralisation is a wider concept of the same (delegation) where the power gets transferred to numerous levels. For example, suppose the director of an organisation delegates the responsibility of completing a task, hiring the required workers and supervising them to a project head. The project head in turn shares his responsibility of hiring and supervising the workers with the project lead. The project lead further delegates the responsibility of supervising the workers to the team lead. Thus, delegation at each level from the director, to project head, project lead and further to the team lead results in decentralisation. Hence, it can be said that delegation at each level leads to decentralisation and decentralisation is extending delegation to the lowest level.

No, any organisation cannot work smoothly if it is either completely centralised or completely decentralised. Rather a balance is required between the two.

Centralisation refers to a situation where the decision making power is concentrated only in the hands of the top level management. Herein, only the top level managers are authorised to take the needed decisions. All the functions related to policy making, planning and controlling are curtailed to the top level management. In contrast to this, decentralisation refers to a situation where the decision making power is delegated to the lower level managers. Herein, the power of taking actions and deciding the policies is distributed at different levels.

An organisation cannot function either with extreme centralisation or with extreme decentralisation. As an organisation grows in size, it cannot maintain complete centralization. Rather, a need arises to move towards decentralisation. For a smooth functioning, the individuals involved in the actual work must have certain degree of authority and responsibility. With decentralisation, the overall management of the work becomes more efficient. It allows for better control of the work at each level of hierarchy. Moreover, as the organisation grows in size, decentralisation would facilitate quick decision making. This is because in a decentralised system the decision making power is near the point of actual work. Thereby, the delay in work is avoided.

However, an organisation cannot also follow extreme decentralisation. If all the decision making power is delegated to the lower level managers, then it may harm the harmony of the organisation. It is possible that lower level managers at each department mould the rules and policies according to their own convenience and thereby, diverge from the organisational goals. Thus, certain degree of authority and control must be retained at the top level management so as to maintain integrity of the organisation.

Hence, we can say that a large sized organisation cannot be totally centralised or totally decentralised, rather it must maintain a balance between the two.

The following points highlight the difference between a functional structure and a divisional structure.

Following are the differential factors between Centralisation and Decentralisation.

1. Develops initiative amongst subordinates: It helps to promote confidence because the subordinates are given freedom to take their own decisions.
2. Quick and better decisions: The burden of managerial decisions does not lie in the hands of few individuals but gets divided amongst various persons which helps them to take better and quick decisions.
3. Relieves the top executives from excess workload: The daily managerial works are assigned to the subordinates which leaves enough time with the superiors which they can utilize in developing new strategies.
4. Managerial Development: It means giving authority to the subordinatesupto the lower level to take decisions regarding their work. In this way the opportunity to take decisions helps in the development of the organization.
5. Better Control: It makes it possible to evaluate performance at each level which results in complete control overall the activities.

Decentralization is the process of distributing or dispersing functions, powers, people or things away from a central location or authority. Concepts of decentralization have been applied to group, dynamics and management sciences ,in private businesses and organizations, political science, law and public administration, economics and technology.

Meaning: It means the granting of authority to subordinates to operate within the prescribed limits. The manager who delegates authority holds his subordinates responsible for proper performance of the assigned tasks. To make sure that his subordinates perform all the works effectively and efficiently in expected manner the manager creates accountability.

An informal organization is that organization which is not established deliberately but comes into existence because of common interests, tastes and religious and communal relations. The main purpose of this organization, structure is getting psychological satisfaction. For example, employees with similar interest in sports, films, religion etc. may form their own informal groups.

Features
1. It originates from within the formal organization as a result of personal
interaction among employees.
2. It has no written rules and procedures.
3. It does not have fixed lines of communication.
4. It is not deliberately created by the management.
5. It is personal means the feelings of individuals are kept in mind.
Advantages
1. Speed: Prescribed lines of communication are not followed which leads
to faster spread of information.
2. Fulfilment of social needs – enhances job satisfaction which gives them
a sense of belongingness in the organization

3. Quick solution of the problems – because the subordinates can speak
without hesitation before the officers, it helps the officers to understand
the problems of their subordinates.
Disadvantages
1. It creates rumours: All the persons in an informal organization talk in a
careless way and sometimes a wrong thing is conveyed to the other
persons.
2. It resists changes and lays stress on adopting the old techniques.
3. Priority to group interests: Pressurises members to conform to group
expectations.

Advantages
1. Quick decision-making: Divisional manager can take any decision
regarding his division independently which makes decisions quick and
effective.
2. Divisional results can be assessed: Divisional results (profit/loss) can
be assessed easily. On this basis any unprofitable division can be closed.
3. Growth and Expansion: It facilitates growth and expansion as new
divisions can be added without disturbing existing departments.

Disadvantages
1. Conflicts among different divisions on allocation of resources.
2. Duplicity of Functions: Entire set of functions is required for all
divisions. It gives rise to duplicity of efforts among divisions & increases
cost.
3. Selfish Attitude: Every division tries to display better performance and
sometimes even at the cost of other divisions. This shows their selfish
attitude.

Organisational structure refers to that specific pattern of relationship which is
created during organising process. The structure provides a basis or frame work
for manager and other employees for performing their functions. It may be defined as a ‘system of job positions, the jobs assigned to them and the authority relationship among them. Relationship between span of management and organisation structure: It refers to the number of subordinates that can be effectively controlled by a manager/ superior. It gives shape to the organisational structure and determines levels of management.

A tall structure of organisation is the one that has multiple levels of hierarchy. A tall structure of organisation has narrow span of management. That is, under such a structure a manager has charge of only a few subordinates.

A Functional structure entails organising and grouping together activities of similar nature. That is, under functional organisation activities or work of similar nature are grouped together. Each group functions as a separate department and specialises in its work. For example, an organisation can have departments such as production, human resource, finance, marketing, etc. Each department in turn report to one coordinating head. Functional structure is usually suitable for large organisations who deal with number of varying functions requiring high degree of specialisation. The following points highlight the suitability of functional structure.

i. Large Size: A large size organisation can function smoothly, if the work is divided into various departments. Departmentalisation in large organisation improves managerial efficiency and the degree of control. Thereby, the work proceeds smoothly.

ii. Varying Functions: Dealing with diverse varying functions simultaneously requires high degree of coordination so as to improve efficiency. By a clear division of activities in various departments, a functional structure promotes coordination among the various functions and thereby, ensures smooth functioning.

iii. Requirement of Specialisation: Varying functions in an organisation can be performed better if dealt with specialisation. With departmentalisation, each department can function independently and specialise in their respective functions.

Organising refers to the procedure of aligning the activities in a certain order. It contains designing the roles and directing the people towards accomplishment of goals. Human efforts along with the resources are brought together and coordinated under this function. The focus of the function lies in enabling people to work together and implementing the plans for successful attainment of objectives. Through organising the working relationships of an organisation gets clearly defined, thereby ensuring its smooth functioning. The process of organising involves:

i. Identifying the work and dividing them according to the plans

ii. Grouping the work of similar nature and making departments for the same.

iii. Assigning authorities to the right personnel

iv. Designating the reporting relations

The following are the steps involved in a successful process of organising.

(i) Identifying and Dividing the Work: Under organising, the very first step deals with identifying the activities and dividing them according to the defined plans. The actions are divided as per the objectives. A clear division of work is done so as to avoid any duplicity.

(ii) Creating Departments: Herein, the divided actions are further grouped into units based on the similarity in nature. That is, similar activities are grouped together. Such departmentalisation promotes specialisation. Each department specialises in a particular task. Departments can be formed on the basis of several criteria such as working profiles, regions, product, etc.

(iii) Assigning Duties: The third step under organising deals with assigning the roles and responsibilities to the personnel. Under each department work is allocated to different members as per their skill and ability. While assigning the duties it must be ensured that the best suited and proficient person is selected for the work.

(iv) Establishing the Relationships: Any organisation needs a proper hierarchic structure to work efficiently. Every person should know whom he’s working under and to whom he needs to report. Clear establishment of such relationships help in smooth functioning of an organisation.

Span of management refers to the number of subordinates that a manager can efficiently handle. It is the determining factor for the nature and structure of an organisation. Span of management can be classified into the following two categories.

i. Narrow Span of Management: If the number of subordinates reporting to a particular manager is small, the span of management is said to be narrow. Narrow span of management leads to tall organisational structures that have multiple levels of management.

ii. Wide Span of Management: Span of management is said to be wide if, there are large number of subordinated reporting to a manager. Wide span of management leads to flatter organisational structures with only a few levels of management.

Span of management depends on various factors such as ability of the manager in terms of leadership, control, etc., extent of decentralisation followed in the organisation, working ability of the subordinates, nature of work, etc.

Delegation refers to the transfer of authority and responsibility to the subordinates.

The following are the basic elements of delegation:

(i) Authority: It refers to the power given to an individual to command and direct the subordinates. It implies the right to take decisions regarding what is to be done and by whom. Scalar chain in a formal organisation gives rise to authority as it entails the link between various jobs and determines the relation of who is to report to whom. It is a downward flowing channel, i.e. superior commands authority over the subordinates. The extent of authority at the top level management is the highest and it becomes lesser at the middle level and the lowest at the lower level management. However, the scope of authority delegated, depends on the rules and regulations of the organisation. Assigning authority helps in maintaining obedience and compliance.

(ii) Responsibility: Responsibility refers to the adherence and answerability of the subordinate to complete the given task. That is, once a duty has been assigned to a subordinate, it is his responsibility to perform the task properly. A subordinate should be obedient and loyal towards the duty assigned to him. The superior-subordinate relationship gives rise to a sense of responsibility. As against authority, responsibility flows upward i.e. the subordinate is responsible to his superior. However, care should be taken that while assigning responsibility to a subordinate, he must also be given a certain degree of authority. On the other hand, an individual who is given authority must also have some responsibility. This is because authority without responsibility may lead to the misapplication of power. On the other hand, responsibility without authority may lead to inefficiency.

(iii) Accountability: Accountability implies the answerability of the superior for the final outcome of the work he assigned. Though the superior delegates the work to his subordinate but he still will be responsible for the final outcome. For this the superior, through regular feedbacks and supervision ensures that the subordinate performs the tasks properly and satisfactorily. The concept of being accountable arises out of responsibility itself. We may say that while responsibility is assumed, accountability is imposed.

A network of social relationship that arise spontaneously due to interaction at work is called informal organisation. It emerges from social interaction and free flow of communication among the employees of an organisation. On the other hand, formal organisation refers to a formal system based on superior-subordinate relationship. Whereas, delegation and decentralisation are concerned with the transfer of authority and responsibility to the subordinates.

Rumours are a result of informal organisation. They can have adverse effect on the working environment. It may result in arguments or conflicts among the people of the organisation. For example, a rumour about the boss may pop up during a communication among a group of employees, which may affect the superior-subordinate relationship.