1. Examine five advantages of decentralization to an organization.
Decentralization is a type of organizational structure in which daily operations and decision-making responsibilities are delegated by top management to middle and lower-level mangers
within the organization, allowing top management to focus more on major decisions
Advantages of Decentralization:
- Reduces the burden on top executives: Decentralization relieves the top executives of the burden of performing various functions. Centralization of authority puts the whole responsibility on the shoulders of an executive and his immediate group. This reduces the time at the disposal of top executives who should concentrate on other important managerial functions. So, the only way to lessen their burden is to decentralize the decision-making power to the subordinates.
- Facilitates diversification: Under decentralization, the diversification of products, activities and markets etc., is facilitated. A centralized enterprise with the concentration of authority at the top will find it difficult and complex to diversify its activities and start the additional lines of manufacture or distribution.
- To provide product and market emphasis: A product loses its market when new products appear in the market on account of innovations or changes in the customers demand. In such cases authority is decentralized to the regional units to render instant service taking into account the price, quality, delivery, novelty, etc.
- Executive Development: When the authority is decentralized, executives in the organization will get the opportunity to develop their talents by taking initiative which will also make them ready for managerial positions. The growth of the company greatly depends on the talented executives.
- It promotes motivation: To quote Louis A. Allen, “Decentralization stimulates the formation of small cohesive groups. Since local managers are given a large degree of authority and local autonomy, they tend to weld their people into closely knit integrated groups.” This improves the morale of employees as they get involved in decision-making process.
- Better control and supervision: Decentralization ensures better control and supervision as the subordinates at the lowest levels will have the authority to make independent decisions. As a result they have thorough knowledge of every assignment under their control and are in a position to make amendments and take corrective action.
- Quick Decision-Making: Decentralization brings decision making process closer to the scene of action. This leads to quicker decision-making of lower level since decisions do not have to be referred up through the hierarchy.
2. Causes of structural changes within an organization
- Change in management
- Desire to improve productivity and profitability
- Financial crisis which may lead to restructuring and downsizing.
- The need to irriprove the quality of goods and services
- The need to change the culture / ‘introduce new culture-in the firm.
- Increased competition
- Changes in government policies
- Technological advancement
- Customer change in taste and preferences
- Demographic changes (changes in population variables)
- Social forces e.g. health issues, religious issues
- Gender and ration issues
- Changes in lifestyle etc.
- Economic factors e.g. increased international cooperation, free trade etc.
- International forces e.g. increased international cooperation, free trade etc.
- Ecological factors i.e. natural environmental factors e.g. drought, floods etc. November
3. Six steps involved in the organizing process.
- Review plans and objectives: Objectives are the specific activities that must be completed to achieve goals. Plans shape the activities needed to reach those goals. Managers must examine plans initially and continue to do so as plans change and new goals are developed.
- Determine the work activities necessary to accomplish objectives: Although this task may seem overwhelming to some managers, it doesn’t need to be. Managers
simply list and analyze all the tasks that need to be accomplished in order to reach organizational goals.
- Classify and group the necessary work activities into manageable units: A manager can group activities based on four models of departmentalization: functional, geographical, product, and customer.
- Assign activities and delegate authority: Managers assign the defined work activities to specific individuals. Also, they give each individual the authority (right) to carry out the assigned tasks.
- Design a hierarchy of relationships: A manager should determine the vertical (decision-making) and horizontal (coordinating) relationships of the organization as a whole. Next, using the organizational chart, a manager should diagram the relationships.
4. Factors influencing span of Control
- Managerial abilities: In the concerns where managers are capable, qualified and experienced, wide span of control is always helpful.
- Competence of subordinates: Where the subordinates are capable and competent and their understanding levels are proper, the subordinates tend to very frequently visit the superiors for solving their problems. In such cases, the manager can handle large number of employees. Hence wide span is suitable.
- Nature of work: If the work is of repetitive nature, wide span of supervision is more helpful. On the other hand, if work requires mental skill or craftsmanship, tight control and supervision is required in which narrow span is more helpful.
- Delegation of authority: When the work is delegated to lower levels in an efficient and proper way, confusions are less and congeniality of the environment can be maintained. In such cases, wide span of control is suitable and the supervisors can manage and control large number of subordinates at one time.
- Degree of decentralization: Decentralization is done in order to achieve specialization in which authority is shared by many people and managers at different levels. In such cases, a tall structure is helpful. There are certainconcerns where decentralization is done in very effective way which results in direct and personal communication between superiors and subordinates and there the superiors can manage large number of subordinates very easily. In such cases, wide span again helps.
5. Advantages of organizational charts
Organizational chart help build and design the organization structure to meet the business’ objectives.
- Organizational chart can guide the employees to know their rights and responsibilities.
- Organizational chart help divided the functions of a company, enterprise or department. It also shows the relationships between the organization’s staff members.
- With organizational chart, it’s easy to find whether the officer’s workload is too heavy.
- It’s easy to find whether the unrelated persons undertake the work of several loose, no relationship.
- Find out whether a person is incompetence of his work at important positions.
- Make everyone clearly within their organizations and improve employee performance.
- Other departments are also able to understand and enhance the coordination of the organization.
- It’s easy to see the promotion channels open.
6. Explain the various types of organization structure
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be
considered as the viewing glass or perspective through which individuals see their organization and its environment
i) Functional organization structure: Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with software engineers. This leads to operational efficiencies within that group.
ii) Product organization structure: Also called a “divisional structure”, the divisional structure ‘groups each organizational function into a division. Each division within a divisional structure contains all the necessary resources and functions within it. Divisions can be categorized from different points of view.
iii) Line organization structure: Business or industry structure with self-contained departments. Authority travels downwards from top and accountability upwards from bottom along the chain of command, and each department manager has control over his or her department’s affairs and employees
iv) Line-and-staff organization structure: The line-and-staff organization combines the line organization with staff departments that support and advise line departments. Most medium and large-sized firms exhibit line-and¬staff organizational structures. The distinguishing characteristic between simple line organizations and line-and-staff organizations is the multiple layers of management within line-and-staff organizations.
7. Four factors that determine the degree of decentralisation in an organisation
- Attitude of Top Management: If the top management wants all the decision-making authority to be confined to itself and to a few key executives, it may prefer centralization. On the other hand, if the top management wants to have only overall control over the organization and prefers decision-making authority to be dispersed at different levels of the ‘organization, it may prefer the idea of decentralization.
- Size of the Enterprise/Scale of Operations: If the size of the concern or the scale of its operations is small, centralization can prove to be ‘effective. On the other hand, if there are a number of operations to be performed through many departments or diVisions, decentralilation can be ideal.
- Nature of Functions: In .a manufacturing concern, production and marketing are the basic functions. Such basic functions may be decentralized for better results. Functions such as personnel and finance, meant to facilitate the performance of the basic functions, may be centralized to derive greater efficiency.
- Extent of Diversification: If the business enterprise is producing and marketing different types of products, decentralization will be more beneficial.
- Availability of capable managers: The decision on decentralization is very much influenced by the availability of efficient managers. In fact, decentralization will be successful only if the top management is able to find capable managers to effectively manage the different departments or divisions of the enterprise.
8. Outline the advantages and disadvantages of Organisations with narrow spans of management
Advantages of narrow span of management
• It is easier for a manager to provide guidance to subordinates and to supervise and control their activities.
• It is easier to develop group cohesiveness within the smaller group of employees reporting to each manager.
• It is possible to have organizational units with more focused functions, rather than many different functions grouped under one manager. Thus it is possible to develop greater degree
of specialization for management activities.
Disadvantages of narrow span of management
- It tends to increases the total number of organizational levels. This makes it difficult for manages at higher levels to keep in touch with ground realities at operating level.
- It increases the total number of employees in the organization. This increases cost of employees.
- It creates problem of coordination between different managers and organizational units.
9. Outline the advantages and disadvantages of Organisations with wide spans of management
The advantages of wide span of control are:
- There are less layers of management to pass a message through, so the message reaches more employees faster
- It costs less money to run a wider span of control because a business does not need to employ as many managers
- All the subordinates will be able to work easily with each other as they are on the same level of heirarchy and also be authorised by one person.
- Creates a more entrepreneurial culture as workers can take responsibility for jobs
Disadvantages of wide span
- Fewer promotional opportunities so can be de-motivating.
- Harder for manager to supervise and co-ordinate the exact work of subordinates and ensure they are working towards same common goal.
- Increase the risk of wrong decision being made as subordinates may be less well trained or lack experience
10. Why a formal structure and design is important to an organisation
• It shows at a glance the line of authority and responsibility It is a reliable blue print of how positions are arranged.
• It is a tool of administration to tell employees how their positions fit into the total organisation and how they relate to others.
• It serves as a valuable guide to the new personnel in understanding the organisation and for their training
• It provides a framework of personnel classification and evaluation systems
• Communication. The importance of organizational structure is particularly crucial forcommunication. Organizational structure enables the distribution of authority. When a person starts a job, he knows from day one to whom he will report. Most companies funnel their communication through department leaders. For example, marketing employees will discuss various issues with their director. The director, in turn, will discuss these issues with the vice president or upper management.
11. Factors that may necessitate an organisation to move towards centralisation.
- Size of the organisation: Large organisation makes a lot of decisions. Their decisions are taken at different levels. So large organisations are more decentralised. Small organisation makes few decisions. All their decisions are taken at the top level. So small organisations are less decentralized. Thus, we can say, the bigger the organisation, the more the decentralisation and viceversa.
- Cost and Importance of decisions: The most costly and important decisions are made by the top level of management. So, there is less decentralization Of costly and important decisions. Thus, we can say, the higher the cost and importance of the decision the leSser the decentralization and viceversa.
- Uniformity: If the management wants more uniformity, then there will be more centralisation and less decentralisation:
- History of organization: An organisation which expands from within has more centralisation. For e.g. Henry Ford made most of the decisions for Ford Motors. However, an organisation which expands with the help of business combinations has more decentralisation.
- Management Philosophy: The management philosophy also influences decentralisation. If the management wants to make all the decisions themselves, then the organisation will be more centralized and vice-versa.
- Availability of efficient managers: If more efficient managers are available, then there will be more decentralisation. However, if there is a shortage of efficient managers then there will be more centralisation.
12. Define the following;
i) Responsibility: Responsibility is the liability of a person to be called to account for his or her actions and results, and is therefore an obligation to do something.
ii) Accountability: It is the need for individuals to explain and justify any failure to fulfil their responsibility to the superior in the hierarchy
13. Principle guidelines for effective delegation of authority
The guideline presented in the following sections can help ensure that authority is delegated properly:
- Grant proper amount of authority: This is the principle of parity of authority and responsibility. It means that responsibility for results cannot be greater than the authority delegated. Conversely responsibility should not be less than the authority delegated. Enough authority should always be delegated to achieve the desired results. Failure to delegate the necessary authority to discharge the responsibility implies that subordinates should not be held responsible for it would be both unsatisfactory and inequitable. At the other extreme too much authority can result in a manager’s “running away” from the situation to the detriment of the organization e.g. too much authority over money may lead to misappropriation and improper investments by managers.
- Define the results expected: Another helpful approach is for the delegator to make sure he or she has clearly defined the results expected. If a manager defined precisely what is to be done, he or she is in a much better position to decide how much authority to delegate.
- Consider the capabilities of the subordinate: In delegating it is important that the manager considers the experience background and intelligence of the person to whom authority is to be assigned. Generally the more able the individual, the more authority the person will be able to handle. However, allowances for mistakes should be made.
- Make sure the authority is clearly stated: If authority is not clearly explained problems can develop. Authority relationships should be clear not only to the subordinates but to all others concerned as well. The person in charge should be known to everyone involved in an activity i.e. all those concerned should know where authority resides.
- Modify the authority whenever necessary: Managers should maintain a flexible attitude about what kind of and how much authority to delegate. Because of changes in the external environment new laws, economic conditions etc. Authority is always revocable or subject to modification. It can always be taken back, increased, decreased, or otherwise changed by the person who granted it in the first place.
- Follow unity of command and chain of command: Ideally, authority should be delegated so that each individual reports to only one superior. Doing so is often not possible because of the need for staff specialists, who frequently are given functional authority. It is also important for each person to know the source of authority delegated to him or her. Each manager at all levels should know what decisions should be made by him or her and what decisions must be passed upward to a superior. When this chain of command is violated, the working authority of a manager is endangered.
- Develop a willingness to delegate: Without delegation no organization can function well, and some of the largest obstacles to effective delegation are psychological. Lack of courage to delegate properly and of the knowledge of how to do it is one of the most general causes of failure in an organization. Many managers are afraid to delegate authority because they fear the subordinate will not perform satisfactorily and thus will make them look bad. Two observations are in order in dealing with fear of subordinates. First, an effective Organization is never built by holding good people back. Second an old maxim in management states, “managers are judged not by what they do but by what they cause others to do”.
- A supportive climate: A supportive managerial climate free of fear and frustration should prevail. Mistakes should be treated as teaching points and not causes for reprimand. A supportive and positive attitude towards subordinates should be maintained. Participative management styles are more suitable than authoritative ones for effective delegation.
- Free communication: Delegation works best where superiors and subordinates communicate freely.
- Control techniques: Control ensures that the delegated authority is not being abused. Control tools should not however interfere with the day to day work of subordinates.