Decentralisation refers to a systematic effort to delegate authority at all levels of management and in all departments. This shifts the power of decision making to lower level under a well considered plan.
For example, traffic police controlling movement of vehicles on road. He holds a lower level position in the organisation yet he has lot of authority given to him. The senior concentrate on ways and means to improve traffic control.
In case of business units, the heads of departments have the authority to take decisions on most matters relating to the functioning of their department. The top managers are confined themselves to policy decisions like product lines to be added, further investment, etc.
Decentralisation has number of benefits. Firstly, it reduces the workload of the top level management. Secondly, it motivates the employees and gives them more autonomy. It promotes initiative and creativity. It also helps employees to take quick and appropriate decisions. In this process, the top management is freed from the routine jobs and it enables them to concentrate on crucial areas and plan for growth.
Decentralisation is not same as delegation. The points of differences are:
While delegation is the process of assigning responsibility and authority and thereby creating accountability; decentralisation is the ultimate outcome of planned delegation.
Delegation of authority takes place between the manager and his subordinates while decentralisation involves the entire organisation, and is between top management and divisions or departments.
Delegation is done to speed up the work and is essential in trace; while decentralisation is optional and is usually done in large scale organisations.
In case of delegation the responsibility and authority delegated may be withdrawn by the delegator; which is not so easy in case of decentralisation.