The Topic Decentralization is Relevant for UGC NET Commerce & Management as Follows:


Decentralization is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group Decentralization is the organizational structure in which the power and the authority of decision-making is divided into different sub-level, units and departments. It refers to assignment of authorities and responsibilities by the top level management to the middle or low-level management. Decentralization can also be said as an addition to Delegation of authority ( meaning thereby it is extension of delegation of authority and systematic delegation of authority in an organization).

In delegation, only authority and responsibility are transferred but not the accountability. However, in decentralization, all the three are transferred


The degree of decentralization is determined by:

(a)Nature of the authority delegated,

(b) How far down in the organisation it is delegated,

(c) How consistently it is delegated.

Example: So, the degree of decentralization is determined by the authority given. For example, manager A in a company is given the authority to buy certain material worth Rs. 1500 whereas manager B is allowed to do similar type of work to the extent of Rs. 4500.

It is clear that the degree of decentralization is less in case of A. Similarly decisions about the matters referred, measure the degree of decentralisation depending upon the power to take decisions vested in an officer without the need of getting consent of somebody else.

Advantages of Decentralization

  1. Reduces the burden on top executives
  2. To provide product and market emphasis
  3. Better control and supervision
  4. Facilitates diversification
  5. It promotes motivation
  6. Quick Decision-Making

Disadvantages of Decentralization

  1. Decentralization makes the utilization of the services of exceptionally talented people. Because of weak financial resources, appointment of such persons may not be possible.
  2. It increases the problems of coordination among the various units.
  3. In some cases, decentralization may not be possible at all. External factors make this difficult, such as company wide strikes
  4. It increases the administrative expenses because highly-paid managers have to be appointed.
  5. High Cost of Operation: Establishing of various departments and employment of specialists in each department will result in a higher cost of operation.
  6. Lack of Uniformity: There shall not be uniformity in policies and actions, since each manager will form his own genius in designing them.
  7. Unsuitable for Small Firms: Departmentalization is completely unsuitable for small firms as it involves high operating costs.

Practice Question

Consider the following statements and identify the correct ones:

1.Decentralization is the philosophy of management.

2.In decentralisation, only authority and responsibility are transferred but not the accountability.

3.In the decentralization a substantial amount of liberty can be seen.

4.Decentralization is discretionary.


A. 1 and 2 only

B. 1,2 and 4 only

C. 3 and 4 only

D. All of the above

Solution: B

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