Advantages of Decentralization

The important advantages of decentralization are as follows:

  1. Relief to top executives. Decentralization enables the top executives to devote greater attention and effort to important issues. They may not be able to do this if they keep their hands full with problems of a routine nature.
  2. Motivation of subordinates. Systematic decentralization results in development of initiative, responsibility, and morale among employees. Because the authority to make decisions is placed in the hands of employees who have the responsibility to execute them, the employees are more sincere and hardworking in performing their jobs.
  3. Intimate relationships. In a decentralized unit, employees have greater opportunities to come in close contact with one another. This results in improved communication, so that employees can benefit from expertise and experience of one another.
  4. Sense of competition. In a decentralized enterprise, its departments and division are independent of one another. As a result, the management can experiment with new ideas and processes in any department without any risk of its adverse effect on the functioning of other departments.
  5. Effective control. Though each of the departments and divisions is granted freedom in running its affairs, the control function is not adversely affected. This is because for judging the performance of each unit, an important yardstick is its profitability and the rate of return on investment.