What Is Decentralization?

From experience, you’ve probably learned that when you work in a group, you become more motivated to participate. Somehow, you feel empowered. As a result, you tend to do more and give more to the group.

In business, increased motivation is also achieved in a decentralized organization. Decentralization is the division of an entity into smaller manageable units. Lower level managers are endowed with decision-making authority. And are given the responsibility to run their own departments or business units.

When technology is centralized, it typically means that it is controlled and run by a single company, government, or individual. Decentralized technology, on the other hand, is run by a network of participants. Here are some benefits of decentralization we have mentioned for you.

Advantages of Decentralization

Decentralization comes with many advantages…

First, it helps managers make better, more timely decisions. Lower level managers have first-hand information and experience with how their departments operate and are more acquainted with the common problems and concerns of their departments. This makes them better able to respond to local circumstances compared to their senior counterparts. Lower level managers also work more closely with employees and customers; this more proximate position, along with the absence of bureaucratic hierarchy, allows them to make timely decisions and respond promptly to issues at hand.

Second, it eases the burden on top management. Decentralization frees senior management from the burden of running the day to day operations of the business. They’re relieved of what others call management firefighting – that is, the day to day fixing of problems. Hence, senior management can focus their time and attention on more important management functions like long-term planning, dealing with major customers and suppliers, evaluating and making the investment and financing decisions, etc.

Third, it empowers and motivates lower level management and employees. Giving lower level managers decision-making authority empowers them and motivates them to contribute more towards the attainment of the organization’s goals. Further, decentralization and the granting of local autonomy actually promote closer, more integrated sub-units. This boosts employee morale as employees get more involved in the decision-making processes of their sub-units.

Fourth, it facilitates the development of junior management. The delegation of authority provides a good opportunity and training ground for junior managers. They get the opportunity to develop their talents and managerial skills, preparing them for senior management positions when the time comes.

Conclusion

Lastly, it facilitates diversification. A more centralized organization, where authority is concentrated in top management, would really find it difficult to diversify activities, products, and markets. A decentralized structure supports a diversified company.

And of course decentralized networks come with their own tradeoffs: they can be slower to develop and interact with, they can be more expensive or inefficient to run, and mainstream users may just not care that the backend implementation of their service is decentralized or not, as long as they can accomplish their intended task as easily or cheaply as possible.



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