BBA Principle Management Parity Authority Responsibility Study Material Notes
Table of Contents
BBA Principle Management Parity Authority Responsibility Study Material Notes: Purity of authority and responsibility delegation of authority steps in deletion Principles of Deletion Blocks to effective delegation factors in delegator superior Factors in elegant subordinate organization factors Centralisation and decentralization:
MCom I Semester Human Resource Policies Practices Study Material
Parity of Authority and Responsibility
Principle of parity of authority and responsibility suggests that authority of a person should match his responsibility. Since authority is the discretionary right to carry out assignments and responsibility is the obligation to accomplish, it logically follows that the authority should correspond to responsibility. From this principle, it may be derived that the responsibility for actions cannot be greater than that implied by authority delegated nor it! should be less. This parity is not mathematical but, rather, coexistensive, because both relate to the same assignment. For example, when a manager is assigned activities of manufacturing certain products, he cannot complete manufacturing unless he is given authority to buy raw materials and utilise other organisational resources. However, a common feature in many organisations is lack of parity between authority and responsibility because of the tendency to delegate authority inadequately. This has to be corrected which requires the understanding of delegation of authority and its mechanism.
Parity Authority Responsibility
Delegation of Authority
Delegation of authority is one of the important factors in the process of organising. It is essential to the existence of a formal organisation. The organisational units created through the process of departmentation require the authority to the managers charged with their respective management. Assignment of activities to various managers creates responsibilities and in order to carry out these responsibilities, managers need appropriate authority. In fact, the authority should match responsibility.
To delegate means to grant or confer. Here, delegation means conferring authority from one manager or organisational unit to another in order to accomplish particular assignments. A manager simply does not delegate authority: he delegates authority to get certain work accomplished. By means of delegation, the manager extends his area of operations, for without delegation, his actions are confined to what he himself can perform. Delegation authority has following features:
1 Delegation is authorisation to a manager to act in a certain manner. The degree delegation prescribes the limits within which a manager has to decide the things. Since formal authority originates at the top level, it is distributed throughout the organisation through delegation and redelegation.
2. Delegation has dual characteristics. As a result of delegation, the subordinate receives authority from his superior, but at the same time, his superior still retains something like imparting knowledge. You share with others who then possess the knowledge, but you still retain the knowledge too. 19
3. Authority once delegated can be enhanced, reduced, or withdrawn depending on the situation and requirement. For example, change in organisation structure, policy. procedure, methods, etc., may require change in the degree of delegation of authority.
4. Delegation of authority is always to the position created through the process of organising. The individual occupying a position may exercise the authority so long as he holds the position. Therefore, the authority is recovered fully from the individual when he moves from the particular position.
5. A manager delegates authority out of the authority vesting in him. He cannot delegate which he himself does not possess. Moreoever, he does not delegate his full authority because if he delegates all his authority, he cannot work.
6. Delegation of authority may be specific or general. Delegation of authority is specific when courses of action for particular objectives are specified. It is general when these are not specified, though objectives may be specified.
Parity Authority Responsibility
Steps in Delegation
The distribution of authority throughout an organisation does not occur automatically. Rather, it is deliberate design or plan by which a manager makes his authority effective and influential. This requires delegation of authority through particular steps. The entire process of delegation of authority can be completed through the following four steps: (1) determination of results expected; (2) assignment of duties, (3) authorisation for actions. and (4) creation of obligation. Let us now explain briefly these steps.
1 Determination of Results Expected. Authority should be delegated to a position according to the results expected from that position. Since authority is intended to furnish managers with a tool for so managing as to gain contributions to the organisational objectives, it is essential that authority delegated to a manager is adequate to ensure the ability to accomplish results expected. It implies that results expected from each position have been identified properly. To the extent there is clarity in these, delegation will be effective. Therefore, the first requirement is the determination of contributions of each position which is largely a step undertaken at the stage of creating various positions.
2. Assignment of Duties. The second step is the assignment of duties to the subordinate. Duties can be described in two ways: First, these can be described in terms of an activity or set of activities: for example, selling activity to salesman. According to this view, delegation involves assignment of these activities by a manager to subordinate. Second, duties can be described in terms of results that are expected from the performance of activities, for example, how much sale is to be achieved by salesman. Assignment of duties in terms of results expected works better because a subordinate is likely to get psychological satisfaction from his work, and he will have advance notice of the criteria on which his performance is to be judged. A man’s duties will be clear to him only when he knows what activities he must undertake and what goals he must fulfil.
3. Authorisation for Action. The third aspect involves granting of permission to take actions like making commitments, use of resources, and other actions necessary to get the assigned work done. This problem is essentially one of determining the scope of authority to be delegated to each particular subordinate. In the delegation process, the manager confers upon a subordinate the right to act in a specified way or to decide within limited boundaries. The subordinate exercises the authority in conformity with his understanding of the intentions of the superior who delegates it to him and within the framework of such controls as the superior deems it wise to establish. The process of delegation states out the boundaries of permissible actions, separating them from actions which are not permissible. The central problem, therfore, is to determine what scope of authority the superior wishes his subordinates to exercise. A ground rule in this context is that the scope of authority allocated to individuals by the superior is inseparably linked with the activities allocated to them.
Parity Authority Responsibility
4. Creation of Obligation. The last aspect of delegation is to create obligation on the part of subordinate for the satisfactory performance of his assignments. As discussed earlier, a subordinate is responsible for the total activities assigned to him and not only for the activities actually being performed by him. The sense of obligation required arises from the maintenance of responsibility by the superior and an accompanying insistence that the work performed must meet his expectations.
Principles of Delegation
Delegation of authority is a conscious effort on the part of the manager. Therefore, in delegating authority, he should observe certain principles so as to make delegation effective. Unless these principles are observed, delegation may be ineffective, consequently, organisation may fail and the managerial process may be seriously impeded. Following are such principles:
1 Delegation by Results Expected. As discussed earlier, delegation should be based on results expected from a position in the organisation. Since authority is intended to achieve certain outcomes in the organisation, it should be adequate to achieve those outcomes. A manager is expected to perform better if he knows what he has to contribute and he has commensurate authority for that. Delegation by results expected implies that planning exercise has been taken and goals for each position have been set, communicated, and properly understood by those who are responsible for achieving these goals. Often managers fail to delegate adequately because either they have very vague ideas about the contributions of their subordinates or they just do not bother to determine whether the subordinates have authority to do the things.
2. Functional Definition. Closely related with the principle of delegation based on results expected is principle of functional definition. In an organisation, the activities are classified and grouped to create departments or units. Each department contributes to organisational obiectives but at the same time has its own objectives. Thus, there is a need for coordination of obiectives and activities of the department in such a way that they contribute maximum to the organisation. This gives rise to the principle of functional definition The definitions of results expected, activities to be undertaken, authority department has clear definitions of results expected, activities to be delegated, and authority and Informational relationships with other departments, the more adequately the department can contribute towards accomplishing organisational objectives
3. Clarity of Lines of Authority. Each position in the organisation is linked with others through authority relationships; some directly through line authority, others indirectly. More clearly these lines of authority are defined, more effective is the delegation of authority. In this respect, classical authors have given two principles which guide the delegation of authority. These principles are scalar chain and unity of command. Scalar chain principle refers to the chain of direct authority relationship from superior to subordinate throughout the organisation. Clearer the line of authority from the top manager to every subordinate position in the organisation, the more effective will be responsible decision making and organisational communication. The other principle, that is, unity of command suggests that a subordinate should be responsible to a single superior and he should receive instructions from the same superior only. The more complete an individual has a reporting relationship to a single superior, the less is the problem of conflict in instructions and greater the feeling of personal responsibility for results.
Parity Authority Responsibility
4. Level of Authority. Authority level principle suggests that maintenance of intended delegation requires that decisions within the authority competence of individuals are made by them and not referred upward in the organisation structure. Thus, managers should make whatever decisions they can in the light of their delegated authority and only matters that authority limitations keep them from deciding should be referred upward. This is possible if authority delegation is clear and managers at each level are sure what authority they have.
A problem comes when two or more managers can decide the things jointly without referring the matter upward but singly none of them can decide. Such a matter may be related with inter-departmental functioning. A single manager cannot make decision because of splintered authority. Splintered authority exists wherever a problem cannot be solved or a decision made without pooling the authority delegation of two or more managers. For example, production manager of plant A can reduce his costs by some procedural changes in plant B. However, he cannot do this unless he pools his authority with manager of plant B. Alternatively, he can refer the matter upward and positive thing can happen by the action of common superior. In such a case, it is preferable to consolidate and pool splintered authority rather than referring the matter upward for decision. Splintered authority cannot be wholly avoided in making decisions. However, recurring decisions on the same matters may indicate the need for reorganisation and redelegation of authority.
5. Absoluteness of Responsibility. Responsibility is an obligation to get the assigned work done. Since responsibility cannot be delegated, a superior cannot be absolved of his responsibility for the activities assigned to his subordinates. Similarly, responsibility of subordinates to their superiors for performance is absolute; once they have accepted an assignment and the authority to carry it out, superiors cannot escape responsibility for the performance of activities of their subordinates.
6. Parity of Authority and Responsibility. A common saying in management is that “authority and responsibility should always be equal. It implies that since authority is the discretionary right to carry out assignments and responsibility is the obligation to accomplish them, authority should correspond to the responsibility. Thus, responsibility for actions cannot be greater than authority delegated, nor should be less. This party is not mathematical but, rather, coexistensive, because both relate to the same assignment.
Both under-delegation and over-delegation are equally bad. In an organisation, authority is the cement of the organisation structure. With the increasing size, specialisation, and need for employee development, adequate delegation of authority becomes a prerequisite for organisational success. Proper delegation of authority increases operational efficiency. satisfaction of need for autonomy, feeling of involvement, and saving time of superiors. Inadequate delegation, on the other hand, creates lack of commitment, lack of initiative, frustration among employees, and overburden of superior managers. Similarly, overdelegation also affects organisational operation adversely. In this case, a manager may have authority for those actions for which he cannot be held responsible. Thus, a tendency may develop to avoid responsibility. Moreover, authority without responsibility may develop unhealthy trend in the organisation for cornering more and more authority jeopardising the organisational objectives.
Parity Authority Responsibility
BLOCKS TO EFFECTIVE DELEGATION
Ideally speaking, delegation of authority must be commensurate with responsibility. It implies that delegation should be according to need both in terms of quantity and quality of authority. If a manager thinks that he has as much authority as needed to perform his duties, he can treat his authority to be adequate. Delegation is inadequate to the extent it falls short of the need for authority. Thus, inadequate delegation is equal to the difference between felt need for authority and degree of delegation of authority. Managers generally complain the inadequate delegation of authority because they do not have authority commensurate with their responsibility. This happens because of several reasons. Such reasons can be seen in the context of superior manager (delegator), subordinate manager (delegant), and the organisation in which context delegation takes place. Let us see how these factors block effective delegation of authority.
Parity Authority Responsibility
Factors in Delegator (Superior)
The qualities of superior managers play an important part in determining the kind of functional and social equilibrium that will be achieved in the superior-subordinate relationships, and consequently the delegation of authority. A superior manager is likely to delegate less authority in the following situations:
1 Love for Authority. A superior is unlikely to delegate his authority specially if he is an autocrat. Such a manager has intense desire to influence others, to make his importance felt in the organisation, and to see that his subordinates come frequently to get their decisions approved. Such desires on the part of the manager keep him away from delegation of adequate authority to his subordinates irrespective of their needs.
2. Maintenance of Tight Control. A manager does not delegate authority because he wants to maintain tight control over the operations assigned to him. He likes to show busyness and security created by work piled high on his desk. Doing tangible work is a pleasurable activity, whereas spending one’s time thinking, planning, and other less tangibles is a difficult process. The manager may become habituated to the constant contact of subordinates bringing matters to him for approval.
3. Fear of Subordinates. A manager may not delegate adequate authority because of fear of subordinates. The fear of a subordinate’s growth may be real. It can take two forms. First. the subordinate might show that he can perform the superior’s work so well that he becomes entitled to his position, status, title, or prestige. Second, the subordinate’s increasing ability might earn him a promotion to some other part of the organisation and the superior may lose the best subordinate. In this case, the superior may adopt defensive behaviour. He simply fails to delegate the kind of authority that would have had such a result.
4. Fear of Exposure. A superior manager, specially a weak one, may not like to delegate simply because adequate delegation may reveal managerial shortcomings being practised. This may happen specially when the superior has poor operating procedures, methods. and practices
5. Attitude Towards Subordinates. Delegation of authority is a particular kind of trust between superior and his subordinates. Therefore, his attitude towards subordinates, and their attitudes towards him become important in the process of delegation. Negative attitudes work against delegation of authority in several ways. First, if a superior has lack of confidence in his subordinates’ capacity, he will not like to delegate them authority. Second, the superior may feel that his subordinates just do not require more authority than they have been delegated. Such feeling may result in inadequate delegation of authority. Third, the superior may not have good interpersonal relationships with subordinates which may result in less delegation of authority.
6. Personality of Superior. Personality factors of superior also affect the degree of delegation of authority. For example, an autocrat superior will delegate less authority as compared to a democrat. Similarly, a superior believing in the application of modern management techniques likes to delegate adequately. A superior coming from the rank and file may delegate less. Similarly, a manager who has not been delegated adequate authority in his career is likely to delegate less.
The various factors discussed above either make a superior blind to the need for adequate delegation of authority or he may be aware about the significance of authority delegation but he may withhold it because he simply does not like to delegate.
Parity Authority Responsibility
Factors in Delegant (Subordinate)
The degree of delegation of authority is also determined by the qualities of subordinates. While superior’s perception about the qualities of subordinates plays an important role in delegation of authority, subordinates themselves affect the degree of delegation of authority. They affect the delegation in several ways. First, some subordinates have more capability to assume more responsibility. Since responsibility and authority go together, competent subordinates may get more authority. Second, the delegation of authority is formal and institutional but its exercise is personal. Thus, a competent subordinate may assume and exercise more authority than others although working within the context of same set of delegation.
In the following situations, however, subordinates are expected to exercise less authority:
1 when they fear harsh criticism for unfavourable results:
2. when they lack self-confidence;
3. when they lack resources:
4. when they have inadequate positive incentives; and
5. when their superior is easily available for making decisions on their part.
Parity Authority Responsibility
Organizational Factors
Although personal factors affect the authority delegation to a very great extent, other organisational factors also affect the degree of authority delegation. Individual managers do not have control over these factors but have to work within the context of these factors. For example, even the autocrat has to delegate authority if the organisational factors so warrant. Various organisational factors such as management philosophy, policy towards centralisation or decentralisation, availability of managerial personnel, control techniques, etc, determine the delegation of authority at various levels of management. If these factors are not favourable, delegation of authority will be affected adversely
Parity Authority Responsibility
MEASURES FOR EFFECTIVE DELEGATION
Effective delegation denotes distribution of authority at various points of the organisation so that managers can take actions according to their responsibility. Responsibility for adequate delegation of authority lies mostly with superiors, particularly with top management. However, at the same time, role of organisational prescriptions and subordinate managers is also important. In order to make delegation effective, actions should be taken in all these directions. Following are some measures which help in making delegation more effective:
1 Making the Potential Delegator Feel Secure. Typically the non-delegator is a hard worker, fully competent, but he may feel insecure in his job. This is partially the reason why he surrounds himself with less competent people or in any event those who lack the courage to challenge him. He wants to continue as the unchallenged superior and to be looked upon as a necessary man in the organisation’s team. Therefore, there is a need for creating a feeling for security for him. A number of things can be done for this. First, it should be made very clear that his job and position is secure so long he continues to contribute to the organisation. Second, his contributions for the organisation are not being questioned and atternpts are to make him even more effective manager. Third, some apparent status symbols like office and other facilities can be granted to him. Granting such privileges reflects in part a manager’s appraisal through outward manifestations of his subordinate management members.
2. Creating Awareness for Need of Delegation. Many managers are not fully aware about the need for adequate delegation of authority. They do not realise that they should do only what their subordinates cannot do. In this way, they can multiply themselves and their efforts. This happens specially in the case of those managers who come from operative level and continue to make decisions which their subordinates can do. Through proper education and training, such managers can be convinced about the need for better delegation.
3. Determining Decisions and Tasks to be Delegated. Delegation is adversely affected because there is no clarity about what is to be delegated. A simple and direct means for solving this problem is to list for the delegator all types of decisions and tasks that must be performed and then rate each one in terms of (0 its relative importance to the total organisation and (II) the time required to perform. This information will serve to determine what types of decisions and tasks should be delegated. Usually, those decisions and tasks that are relatively less important and more time-consuming should be delegated.
4. Establishing Conducive Organisational Climate. An organisational climate free from fear and frustration goes a long way in dertermining the success of organisational processes including delegation of authority. Organisational climate is essentially psychological and social in character. In conducive organisational climate, managers feel confident that delegation of authority will be rewarded and not penalised. Further, delegation of authority should have the support of top-level management. It should be reflected in adequate delegation from top level and also in such things as a reasonable and satisfactory compensation, an impartial appraisal of a manager’s work, and continuous management development.
5. Choosing the Delegant Wisely. Among unfortunate things that can happen with me dinates is that work does not get done. When the results do not appear, the delegator is accountable to his superior in turn. This requires that the delegator must make a careful selection of the person to whom the work is delegated. He must be sure that the man is able to carry the degree of responsibility and effort contemplated in the assignment. Apart from selection, the delegants have to be properly trained and oriented to certain work because many times, superiors concerned may not have authority to select their own subordinates. Further, the superior should not delegate beyond the capacity of his subordinates.
6. Tying Delegation with Planning. A pitfall in delegation is that sometimes it is undertaken without consideration of what is to be achieved by delegation. To delegate without knowing and keeping in mind objectives leads to chaos. Therefore, authority should never be delegated to the managers before the objectives are clear. Authority is utilised to achieve objectives and the extensiveness of the authority should be in keeping with the type of activities performed in attaining the objectives. It is better to delegate authority for achieving specific results. Specific results and objectives for each activity can be defined when there is proper planning in the organisation.
Parity Authority Responsibility
7. Delegating Authority for Whole Job. It is better to give the delegant a chance to participate in a complete undertaking. Broad rather narrow projects serve best imagination and stimulation of ideas. Such assignments serve as an effective means of testing a man’s ability to manage and of building his confidence. Frequent delegation on the same subjectmatter may convey a feeling that the delegator does not want to do the job and wants to get rid of unpleasant job through delegation. However, through the delegation for whole job. this problem can be overcome.
8. Developing Appropriate Control Techniques. Since a delegator remains responsible even for the tasks he has delegated to his subordinates, he must ensure that his subordinates get the work done. Therefore, proper control and monitoring techniques should be developed to ascertain that delegated authority is being used properly. This does not, however, mean that control techniques interfere unnecessarily with the day-to-day functioning of the subordinates. These should be broadbased and should focus attention on major deviations from the plans.
Parity Authority Responsibility
Centralisation and Decentralisation
Another highly important issue in organising is the extent to which authority is centralised, or its opposite, decentralised, in a formal organisation structure. In management, centralisation refers to concentration of authority and decentralisation dispersion of authority. However, both these terms are used to give various connotations. These words are used in the context of administrative processes, physical and geographical location, various functions being performed, or degree of delegation of authority. When these terms are used in the context of physical or geographical location, physical or geographical decentralisation refers to dispersion of an organisation’s operations throughout the country. The functional decentralisation refers to dispersion of organisational functions into separate autonomous units, for example, production, marketing, finance, etc. However, both these classifications of centralisation or decentralisation are merely descriptive and not analytical. Therefore, the terms are used with certain prefixes like geographical decentralisation or functional decentralisation. It is the degree of delegation of authority that conveys the meaning of centralisation or decentralisation in management, though in this case too, people prefer that these terms should be used along with ‘of authority to make them more clear and explicit such as ‘centralisation of authority’ or ‘decentralisation of authority’.
When centralisation and decentralisation are used in the context of degree of authority at various levels and associated management practices, they denote different degrees of delegation of authority. For example, Allen has defined both the terms as follows:
Thus, centralisation refers to the reservation of authority at the top level of the organisation and decentralisation refers to systematic delegation of authority in the organisation. However, there can neither be absolute centralisation nor there can be absolute decentralisation. The concepts of centralisation and decentralisation are two extreme points in the matter of distribution of authority in the organisation. In between these two extreme points, there may be continuum of authority distribution. Delegation and Decentralisation
Delegation and decentralisation should not be confused because of the tendency of using two terms interchangeably. Though these terms are closely related, decentralisation is much more comprehensive than delegation. Thus, both these terms should be used differently. The major difference between delegation and decentralisation may be identified in two ways: first, decentralisation is used to mean several types of dispersal other than of authority also, second, even in the context of authority, the terms denote different degrees of authority at various levels and consequent managerial process.
As discussed earlier, decentralisation is used to denote dispersal of physical facilities place-wise or function-wise. In these terms, decentralisation means that various facilities are located at different places or have been put for various functions. Through geographical or functional dispersal, an organisation tries to achieve its objectives by taking the advantages of different local conditions prevailing at each location or specialising in various functional areas with each area being different from others. In such kind of decentralisation. it is not necessary that the authority is also decentralised because many organisations have been able to run the affairs even with centralised authority though the system will work better with decentralised authority.
Even in the case of authority, delegation and decentralisation are different. Delegation merely denotes the authorisation of managers at various levels to make decisions. Authority at various levels of the organisation is required because managers can fulfil their commitments properly when they have authority commensurate with responsibility. However, sometimes, there may not be parity of authority and responsibility and a manager may have more authority than his responsibility. Since decentralisation reflects the dispersal of authority to the ultimate level of the organisation, it can be said to be the result of systematic delegation of authority. However, decentralisation goes one step further. In decentralisation, a manager becomes autonomous with the operation of concept of ultimate responsibility. Therefore, in a decentralised structure, a manager enjoys autonomy but at the same time, he is held responsibile for the contributions of total facilities put under his control. Thus, besides delegation of authority, there may be other variations in management in a decentralised structure as compared to that of a centralised structure From this point, decentralisation suggests a different kind of managerial culture and philosophy than mere delegation though effective delegation of authority is a pre-requisite for the success of decentralisation.
Parity Authority Responsibility
Factors Determining Degree of Decentralisation
A basic question that arises while designing the organisation structure is: how much to decentralise the authority? Managers cannot ordinarily be for or against decentralisation of authority. They may prefer to delegate authority, or they may like to make all decisions. Although the temperament of individual managers affects the extent of authority delegation, other factors also affect it. Most of these factors may be beyond the control of individual managers. Such factors are of the following types:
1 Size of Organisation. Decentralisation depends on the size of the organisation. The larger the size of an organisation, the more urgent is the need for decentralisation. In a large organisation, more decisions are to be made at more places. In such cases, it becomes difficult to coordinate them. The complexities of the large organisation may require major issues to be passed down the line for discussion. Managers at various levels are to be consulted. This process may take sufficiently long time resulting in slow decision making. Slow decision making may be quite costly to the organisation. Therefore, to minimise the cost, authority should be decentralised whenever feasible. The costs of large size may be reduced by bifurcating the organisation into a number of units. Considerable increases in efficiency are likely to result from making the unit small enough for its top executive to be near the point where decisions are made. This makes speedy decisions possible, keeps managers from spending time coordinating their decisions with many others, reduces the amount of paper work, and improves the quality of decisions by reducing their magnitude to manageable proportions.
2. History of the Organisation. Decentralisation of authority depends on the way the organisation has been built up over the period of time. Normally, those organisation which expand from within or expand under the direction of the owner-founder show a marked tendency to keep authority centralised. This is the reason why organisations belonging to many industrial houses have been designed on centralised basis. On the other hand, organisations that represent amalgamations and consolidations are likely to show a definite tendency to retain decentralised authority specially if the acquired unit is operating profitably. Moreover, the management process and pattern of acquired organisation, once independent one, cannot be changed immediately so as to centralise the authority. Therefore, at least for some time, the acquired unit will enjoy considerable autonomy.
3.Management Philosophy. The management philosophy of top-level managers has considerable influence on the extent to which authority is decentralised. In fact, decentralisation is a kind of management philosophy to regulate organisational process including decision making. In many cases, top managers may see decentralisation as a way of organisational life that takes advantage of the innate desire of people to create, to be free, or to have status. They may find in it a means to harness the desired freedom to economic efficiency. On the other hand, many top managers may keep authority with them not merely to gratify a desire for their status or power but because they simply cannot give up activities and authorities they enjoyed before they reached the top or before the organisation expanded from a small one.
4. Availability of Managers. Availability of managers directly affects the degree of decentralisation because exercise of authority requires competence on the part of those who exercise authority. If better quality managers are available, there is more chance for decentralisation because of two reasons. First, these managers can handle the problems of decentralised units effectively. Second, such managers have higher need for degree of autonomy which is possible in decentralised structures only. Moreover, decentralisation also works as training ground for managers which increases the ability of good managers
5. Pattern of Planning. Planning is usually the most crucial management function in thinking about decentralisation. Other functions of management, namely organising, staffing. directing, and controlling are also important but assigning those activities to managers at various levels typically depends on how planning duties have been allocated and the extent to which planning activities have been undertaken. Allocation of planning activities may be subject-wise and type of plan-wise, that is, what subjects can be decided at what level and what type of plan can be formulated at what level. In the organisation having carefullydrawn standing plans, the chance for decentralisation is high because managers can make decisions within the context of those plans without referring the matters under decisions upward. Similarly, if they have been made party to the planning process, other functions which are to be performed within the context of planning process, can be easily decentralised.
6. Control Techniques. Development and use of control techniques affect the degree of decentralisation by ensuring whether the performance at various levels and points of the organisation is in line with planning. Higher the degree of development and use of control techniques, better is the prospect for decentralisation. In fact, improvements in statistical devices, accounting control and other techniques have helped make possible the current trend towards decentralisation. In the absence of adequate control techniques, either there is less chance for decentralisation or it may not work properly.
7. Decentralised Activities. In many cases, decentralisation of authority becomes necessary because there is decentralisation based on other factors like economies of division of labour, the opportunities for using physical facilities at various locations, and the nature of work. For example, the activities of banking, insurance, and transport organisations have to be decentralised. Although this kind of decentralisation may be geographic or physical in nature, it influences the decentralisation of authority. In fact, some organisations with diverse locations may form local board of directors. For example, State Bank of India operates on the basis of local board of directors with each zone having its own board of directors.
8. Rate of Change in Organisation. The rate of change in the organisation also affects the degree to which authority may be decentralised. If the business of the organisation is fast developing and it is facing the problems of expansion, there is more chance that authority will be decentralised because in this case, top managers will have to share disproportionate decision making and consequently overburdened. This problem can be overcome by delegating authority at the lower levels. As against this, in old, well-established, or slowmoving organisations, there is a natural tendency to centralise authority because few major decisions are made and, in most cases, decisions are programmed requiring insignificant amount of analysis and time.
9. Environmental Influences. Besides the various factors discussed so far which are mostly internal to the organisation, there are environmental influences also which determine the degree of decentralisation. Among the most important environmental forces are the government regulations over the private business and leave very little scope to the use of discretionary power of the manager. For example, business covered by administered prices like fertilisers, etc., requires less time of manager’s in determining the price structure and sometimes even distribution pattern. Thus, even marketing functions throughout the country may be centralised. Moreover, since top management itselr does not have authors over these aspects, there is no question of its delegation.
Rationale of Centralisation
Centralisation, as discussed earlier, is the systematic and consistent reservation of authority at central points within the organisation. This results in a number of benefits in the organisation:
1 Centralization provides opportunity for personal leadership.
2. It facilitates integration of efforts.
3. Quick decisions are possible; hence emergencies can be handled very easily.
4. It makes communication and control easier in the organisation,
5. It helps in reducing wastage of efforts by avoiding duplication.
6. There is uniformity in actions throughout the organisation and, thus, coordination can be achieved easily.
Centralisation is quite suitable for smaller organisations, organisations producing single or homogeneous products, and operating in limited geographical areas. However, when organisations grow in size and diversify, the benefits of centralisation turn into limitations which affect the operational efficiency of the organisations. In such organisations, decision making becomes quite complex but at the same time, faster decision making is required. This is not possible in centralisation. Therefore, its alternative, that is decentralisation, is preferable.
Rationale of Decentralisation
Decentralisation has become the prevailing philosophy for organising activities on the part of large organisations. Experience shows that many organisations which were centralised and working efficiently at one point of time have adopted decentralisation because they were not able to cope up with the situation under the old system. Decentralisation offers the following benefits:
1 It reduces burden of the top management so that it can focus more attention on strategic management.
2. It facilitates growth and diversification in the organisation.
3. It is a good philosophy to motivate managers.
4. It encourages development of managers by providing them opportunities to shoulder more responsibility.
5. It emphasises horizontal growth of the organisation thereby reducing the number of management levels and increasing the span of management.
6. It pinpoints more accurately on the results to be achieved by each unit of the organisation by making various units autonomous.
Decentralisation is useful basically to large organisations with multiple products or operating in different geographical locations. Further, if the organisation is growing rapidly and working in dynamic environment, decentralisation is the best philosophy to achieve positive results. However, it does not mean that decentralisation offers all positive things as compared to centralisation. In fact, there are many problems in decentralisation. Some of the major problems of decentralisation are of the following nature:
1 If not followed properly. decentralisation will create chaos in the organisation in the absence of proper control.
2. It tends to increase costs by making most units autonomous for facilities.
3. In decentralized structure, there is more need for good managers. Unless these managers are available, decentralisation cannot be effective.
4. Decentralisation requires high degree of self-motivation and self-control because of autonomy given to managers.
These problems, however, are not inherent to decentralisation but emerge because it is not followed properly. Looking into the role of decetralisation for managing large and diversified organisations which are to be more in number in modern society, some efforts should be made to make decentralisation effective.
Parity Authority Responsibility
Making Decentralisation Effective
Whether to decentralise or not depends on various factors described earlier. However, when organisation chooses for decentralisation to take its benefits, it has to make some efforts to reap its advantages. Following are some measures which make decentralisation more effective:
1 Centralised Top Policy and Control. Though it appears to be contradictory, for decentralisation to become effective, there should be appropriate centralisation particularly in the context of policy formulation. This ensures the integration of various parts of the organisation into a unitary whole. The concept of centralised policy formulation and control in decentralised structure has been generated out of the management practices of Genereal Motors of U.S.A. during the tenure of Alfred Sloan. The system has been described as ‘centralised control with decentralised responsibilities’ or ‘decentralised operations and responsibilities with coordinated control. In fact, this approach is followed by many large and diversified Indian organisations like DCM Limited, Century Textiles Limited, Gwalior Rayon Limited, and so on. The centralised policy and control, however, should be limited to certain basic and important activities affecting the functioning of entire organisation. Such areas may be financing pattern, dividend distribution, etc.
To make decentralisation effective, centralised control is also necessary so that headquarters people know where their various units are going. This control is mostly related with overall performance of a unit rather than interference in day-to-day operations of the unit. Thus, operational control is within the domain of unit managers. Each unit enjoys considerable autonomy within the context of overall organisational policy. To make control effective, there is a need for developing appropriate control and reporting techniques.
2. Appreciation of Concept of Decentralisation. A major problem before decentralisation and its working is that managers do not really understand and appreciate the philosophy of decentralisation and, therefore, they are not ready to practise it as organisational philosophy. This concept is based on the premise that considerable autonomy will be given to various units within the framework of the organisation. However, problems come while determining the framework. Top-level managers may see it as providing adequate control on various units so that they dance to their tune while unit managers may feel that they are free to do whatever they like. Such a feeling may create confusion and tension between corporate-level managers and unit managers. Therefore, there is a need for developing a proper climate in which decentralisation is taken in right perspective. In this context, leadership role of top managers is quite important. Unit managers should be given free hand in operational matters and must be held responsible for final results. They should be given adequate compensation in the form of security of job, promotion, and other benefits based on their performance.
3. Development of Managers. The success of decentralisation depends on the quality of managers who hold various positions. It can be said that better quality managers are always needed whatever the structure is adopted and they will show good result. It may be true but only good managers cannot turn the results unless their abilities and potentials are utilised properly. Decentralisation provides this opportunity. At the same time, however, decentralisation requires more managers of good quality. Since these managers cannot always be recruited from outside, there is an urgent need for developing managers from within. Therefore, transformation from centralisation to decentralisation should be a gradual process so that there is no vacuum in the organisation in respect of managers.
3. Competition among Units. Since various units of a decentralised organisation work independently, there should be proper competition among these units. One of the basic problem in large organisation is that unit managers tend to assume protected monopoly position and may develop complacency unless their performance is measured objectively and independently. Thus, what one department produces will be used by another department irrespective of cost or quality, and inefficiency of one department may be passed to another department. This problem may be overcome by introducing the element of competition in which the contribution of each department is to be measured in terms of market price or quality. This will create consciousness among unit and department managers. Similarly, where various units produce goods which are not used internally, competition may be generated in terms of overall contributions of the units to the organisation and suitable incentive package may be adopted to reward highly efficient units.
Parity Authority Responsibility
Case: The Assistant Business Manager
Ice Cool Private Limited was an ice cream manufacturing company employing about 100 Including persons at various levels of management. Because of increasing business, any needed to strengthen its accounting procedure, particularly through computerisation. For this purpose, the company decided to hire a new manager designated as assistant business manager. The company invited applications through press advertisement. After receiving the applications, it appointed a selection committee consisting of members of top management including business manager Rakesh Mohan. The committee interviewed several candidates and finally selected Bishwash as new assistant business manager. Bishwash was neat, well dressed, and quite articulate.
Bishwash joined the company immediately and started working very hard. He used to put extra efforts and even worked during holidays as he did not have any family responsibility. He gained the reputation of being a dedicated and competent employee, his strong point being his knowledge of accounting and computer system. He was reporting to Rakesh Mohan, the business manager who was quite impressed with his working.
At that time, the company had no computer system, and its accounting procedures were in need of considerable improvement. Anil Kumar, the managing director of the company, directed Rakesh Mohan to get the needful done. Since most of accounting work related to sales, no separate accounting department existed and the work was performed under the direction of the business manager. Bishwash was mainly appointed to strengthen the accounting aspects of the business. He was asked to prepare a project so that necessary changes can be made. In order to get the first hand information about the problem, Bishwash began meeting regularly with Anil Kumar without the knowledge of Rakesh Mohan. There was no attempt to have secret meeting: Anil Kumar would just call Bishwash in for a report without bothering to tell Rakesh Mohan. The management team, whose members were with the company for a quite long period, had formed a tight-knit group and appeared satisfied with the company. They all worked together and the company prospered in spite of fierce competition.
The meetings between Anil Kumar and Bishwash continued and Rakesh Mohan was gradually losing contact with the project and its progress. In fact, Bishwash was almost reporting directly to the managing director though he was placed under business manager and retained his title of assistant business manager. Rakesh Mohan was now visibly upset over the development and was also concerned about Bishwash’s spreading share of influence. He started feeling down in the company.
Parity Authority Responsibility
QUESTIONS
1 What is the nature of the problem in this case?
2. Could Rakesh Mohan have prevented Bishwash’s assumption of power? If so, how specifically, could it have been done?
3. Suggest the courses of action now available to Anil Kumar, Rakesh Mohan, and Bishwash?
