Factors Determining the Degree of Decentralisation

Decentralisation helps in achieving the organisational objectives more efficiently. Following factors are usually considered in determining the degree of decentralisation.


1)     Size of operations: As an organisation grows in size and complexity, need for decentralisation tends to increase. More decisions are taken at different places and coordination of a large number of departments becomes difficult. Thus as the size increases, decentralisation becomes inevitable.


2)     Cost and risks of decision-making: As the organisation grows in size the decisions involving heavy costs also multiply. With decentralisation of authority, the high cost and high-risk decisions may be taken at the top level but routine decisions can be taken at lower levels. Thus decentralisation helps and quickens decision-making process.


3)     Top management philosophy: The attitude of top executives and their philosophy have an important influence on the extent to which authority is decentralised.


4)     Availability of managerial resources: The extent of decentralisation is limited to the extent of availability of trained and competent managerial personnel.


5)     Environmental influence: The most important environmental forces affecting the degree of decentralisation are: Government controls, tax policies, and unionism.

For example, where prices of a product are controlled, the sales manager’s freedom is curtailed. Similarly, labour legislations and the decisions of worker’s unions may limit the authority of managers.

Mayank Rai

Hi, My name is Mayank Rai. I found that Blogging is an easiest way to share your knowledge with everyone & learn something new from there.

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