14 Delegation and Decentralisation of Authority

Delegation and Decentralisation of Authority

  In order to understand the concepts of delegation and decentralisation, it is necessary to know the concepts of authority, power, responsibility and accountability.

Concept of Authority

Authority may be defined as the right to give orders and to enforce them. “Applied to the managerial job authority to further enterprise or departmental purpose.”

      Authority is the key to the executive job and the binding force in an organisation. No executive can get things done without authority. The main features of authority are as follows:

• The authority vested in a position is legitimate right having legal or social sanctions.
• Authority creates a relationship between the superior and the subordinate.
• The purpose of exercising authority is to influence the behaviour and performance of subordinates so that Organisational objectives are achieved.
• The authority enjoyed by a person is bound by certain limits. Higher is the rank of a person, greater is his authority.
• Authority is exercised by making decisions that are to be carried out by the subordinates.

Authority and Power

 Power refers to the ability of a person to influence others. A person’s power may be measured in terms of his capacity to (a) give rewards, (b) punish individuals, etc. Coercion, reward and expertise are the main sources of power. Like authority, power is a means of exercising influence on others. Influence implies the change in the behaviour and performance of others. Power is a personal force and a means of exercising influence.

The main points of distinction between authority and power are as follows:

• Authority is the right of a person to influence others whereas power is the capacity of a person to influence others.
•  Authority is institutional in character while power is personal in nature.
• Authority is legitimate but power may have no legitimacy. Unlike power, authority has legal sanctity.
• A manager may have little authority and more power, or he may have little power and more authority. Authority and power do not always go together.
  
  

To sum  up, authority may be called institutionalised power.

Sources or Types of Authority

Opinion is divided on the sources of authority. Three different schools of thought are available regarding the source from which authority originates.

1. Formal Authority Theory: According to this view, all authority originates form the institution of private property. The ultimate authority in a joint stock company lies with the shareholders by virtue of the funds provided by them. Shareholders delegate most of their authority to the board of directors which in turn delegates to the chief executive and so on. Managers at each level derive their authority from the managers at the higher levels. Formal authority is thus the authority that a manager possesses because of his position in the organisation. Formal authority always flows for top to bottom and may, therefore, be called ‘Top Down Authority’.
2. Acceptance Theory: A second and new concept of authority is that the real source of managerial authority lies in the acceptance by subordinates of the orders of a superior. Formal authority becomes ineffective if subordinates do not accept the command of an executive. Subordinates are free to accept or reject the formal authority of a manager. They will accept orders if they feel that the advantages of acceptance are greater than the disadvantages of non-acceptance. A subordinate accepts the authority of his superior because (a) he can earn the approval or appreciation of his fellow workers, or (b) he can contribute to the attainment of enterprise objectives, or (c) he gets rewards in terms of more pay, promotion, prestige, etc. or (d) he responds to the leadership qualities of his superior, or (e) he feels that obedience is in accordance with conscience or moral standards.

             Robert Tannenbaum supports this view and observes that authority can be said to be exercised only when the subordinates accepts the decisions of the superior. Chester Barnard also emphasizes that “the necessity of the ascent of the individual to establish authority over him is inescapable.” According to this view authority flows upward and may, therefore, be called “bottom up authority.” This authority stresses upon the sanctions that a manager can use over the subordinates.

• Competence Theory: A third view is that authority flows form the personal qualities or technical competence of a person. Some people may have no formal authority but their expert advice is sought and carried out as an order. Such authority is authority of knowledge or technical authority. Fayol has called it authority of personality. A manager enjoys it by virtue of his intelligence, knowledge, skill and experience. Staff specialists, for instance, possess authority due to their expert knowledge. Subordinates accept the authority of a manager by virtue of hisi knowledge, skill and experience.

Responsibility

It is the obligation of a subordinate to carry out the duties assigned to him. By accepting delegated authority, a subordinate incurs a responsibility to use the authority as desired by the delegator. Authority pre-supposes the existence of responsibility. “Viewed initially with respect to the enterprise, responsibility may be defined as the obligation of a subordinate to whom a duty has been assigned to perform the duty. The essence of responsibility is then obligation. Responsibility has no meaning except as applied to a person; a building, a machine or an animal cannot be held responsible.”

                Responsibility is a concomitant of authority. A person who has authority has a corresponding responsibility for the proper use of authority given to him. Authority flows from a superior to a subordinate while responsibility flows from a subordinate to a superior. If organisational efficiency and morale are to be optimal, responsibility and authority must be in balance. Responsibility may be continuing obligation or a temporary obligation. A production manager has a continuing obligation to a general manager. A consultant who works under a contract may have no obligation once the contract Is fulfilled.

           Responsibility is a personal attribute. It is an obligation to one’s own superior. No person can shift his responsibility by delegating his authority to others. A sales manager has responsibility for good sales to the general manager. He does not make sales himself but authorizes his subordinates to do so. Still he remains responsible to his superior. Whether an individual exercises the authority himself or gets it exercised through others, he remains responsible to his own superior for proper performance. Thus, responsibility is absolute and can never be delegated or shifted to others.

 Accountability

A distinction should be made between responsibility and accountability. Responsibility is the liability for the proper discharge of assigned duties. Accountability is, on the other hand, a subordinate’s obligation to render an account or report of his activities to his superior. It is the obligation of an individual to report formality to his superior on the discharge of  his responsibility. “To be accountable is to be answerable for one’s conduct in respect to obligation fulfilled or unfilled.”

      Accountability grows out of responsibility and goes hand in hand with it. A person who is responsible for something is also accountable for the results. Responsibility is the obligation to perform assigned tasks, accountability is the reporting of performance. Accountability makes responsibility meaningful and completes the process of delegation. In practice, however, accountability and responsibility are used interchangeably or as one and the same. Responsibility being the more common term, it is used here exclusively for both the terms.

 Delegation of Authority

Meaning of Delegation

Authority is said to be delegated when a superior assigns a part of his rights to a subordinate. According to Allen, “delegation is the process a manager follows in dividing the work assigned to him so that he performs that part which only he, because of his unique Organisational placement, can perform effectively, and so that he can get others to help him with wants remains.”

     In simple words, to delegate means to entrust authority to a subordinate in certain defined areas and to make him responsible for results. The main features of delegation are as follows:

• Delegation occurs when a manger grants some rights to a subordinate.
• A manager cannot delegate authority unless he himself possesses the authority.
• A manager never delegates all his authority to subordinates. He transfers only a part of his authority.
• Delegation does not imply reduction in the status of a manager. The manager retains the right to exercise control over the subordinates. A manager can reduce, enhance or take back the delegated authority.
• Delegation never means abdication of responsibility. No manager con avoid his responsibility by delegating authority to subordinates.

Need and Advantages of Delegation

Delegation is the key to organisation and the dynamics of management. It is the cement that binds different parts of an organisation. Once a manager’s job grows beyond his personal capacity, his success lies in multiplying himself through delegation of authority. Need for delegation arises due to the following factors:

1. Delegation enables a manager to distribute his work load among his subordinates. Through delegation an executive can transfer routine work to subordinates and thereby concentrate on more important tasks.
2. Delegation pushes authority near the point of action. As a result decisions can be taken more quickly and without referring to higher authorities.
3. Delegation helps to improve the motivation and morale of subordinates. It helps to satisfy their needs for recognition and responsibility.
4. Delegation is a means of training and developing subordinate executives. They acquire skills through experience.
5. Delegation facilitates the growth and expansion of the organisation. In the absence of delegation, a firm cannot expand and grow.

Elements (Process) of Delegation

The process of delegation involves the following steps:

1. Assignment of Duties: A manager defines the duties or tasks to be performed by his subordinates. Before assigning duties to subordinates, an executive subdivides his job and allocates a part of it to each subordinate. He also defines the results expected of subordinates.
2. Granting Authority: An executive then confers on his subordinates the rights necessary to perform the duties assigned to them. Subordinates are authorized to use resources, to take decisions, to represent the superior, etc.
3. Exacting Responsibility: Exaction of responsibility implies creating an obligation and to hold subordinates accountable for results.

        Thus, duty, authority and responsibility are the basic elements of delegation. “These three inevitable attributes of delegation are like a three legged stool, each depends on others to support the whole, and no two can stand alone.”

Principles of Delegation

 Delegation is essentially an art but it is based on certain principles. These principles serve as broad guides to the manager who wants to delegate authority. Some of these principles are given below:

1. Functional Definition. The functions to be performed by a subordinate must be defined clearly and precisely. The limits of authority of every subordinate should also be clearly defined.
2. Unity of Command. Every subordinate must at a time receive orders and be accountable to only one superior. No individual can serve more than one boss at the same time.
3. Delegation by results Expected. Authority should be delegated according to the results expected of subordinates. This will enable the subordinates to know by what standards their performance will be judged.
4. Absoluteness of Responsibility. Responsibility can never  be delegated. By delegating authority a manager, therefore, becomes responsible for the actions of his subordinates.
5. Parity of Authority and Responsibility. Authority and responsibility should be co-extensive and coterminus. It is unfair to hold a person responsible for something over which he has no authority. Responsibility without authority causes frustration, and authority without responsibility results in misuse of power. There need not be mathematical equality between authority and responsibility but the two must go together if the results are to be achieved efficiently.

Barriers or Difficulties in Delegation (Limitations of Delegation)

Delegation of authority is an elementary art of management. It appears to be a simple process but in practice several obstacles arise in the way of effective delegation. These obstacles may be grouped into three categories:

1. On the Part of the Superior. A manager may fail to delegate authority on account of the following reasons:
2. Lack of Willingness to Let Go. A manager may desire to dominate the work of subordinates. He may not delegate authority to make his presence felt everywhere. He has a passion for power and is on autocratic nature.   
3. Lack of Receptiveness. He may feel that he can do the job better than anyone else. He is not willing to give other people’s ideas a chance. “I can do it better myself” attitude hampers effective delegation of authority. Such a manager is overcautious and conservative and cannot tolerate mistakes.
4. Lack of Confidence in Subordinates. The superior may not have confidence in the ability, capacity and dependability of subordinates. He does not, therefore, want to give them any chance to make mistakes and learn decision-making.
5. Lack of Ability to Direct. A manager may not delegate authority because he does not know how to direct the behaviour of subordinates.
6. Fear of Subordinates. An executive may be afraid of his subordinates. He thinks that they may overshadow him by effectively discharging their responsibilities. He may not delegate authority feeling that it will undermine his influence and prestige in the organisation. Such a manager is overcautious and too conservative to take chance.
7. Lack of Controls. Delegation of authority does not reduce the accountability of the executive and, therefore, he must ensure that delegated authority is being properly used by the subordinates. When the manager does not have adequate controls that can warm him of coming troubles, he is reluctant to delegate authority.

• On the Part of the Subordinate. Subordinates may not be willing to shoulder responsibility and accept authority due to the following factors:
• Lack of Self-Confidence. A diffident subordinate lacking in self-confidence will avoid responsibility.
• Fear of Criticism. Subordinates may be very touchy and may have been victims of undue criticism for committing mistakes.
• Dependance on the Boss. Some people prefer to depend upon the boss for decision-making and, therefore, avoid accepting authority.
• Lack of Information. Subordinates may hesitate to accept authority where required information and facilities are not available or when effective communication is lacking in the organisation.
• Inadequacy of Incentives. There may not be sufficient positive incentives, e.g., recognition and reward for successful delegation. Subordinates will not accept delegation when they are already overworked or feel that delegation will merely increase burden on them.
• On the Part of Organisation. The following defects in the organisation structure may also obstruct delegation of authority:
• Inadequate planning.
• Lack of clear-cut authority-responsibility relationships.
• Lack of unity of command.
• Absence of effective control mechanism.

Guidelines for Effective Delegation

Delegation can be made effective by adhering to the principles of delegation. Following are additional hints for making delegation effective:

1. Clear-cut objectives and standards of performance should be established so that subordinates know why their work is both necessary and important.
2. The authority and responsibility of every subordinate should be defined precisely so that the subordinate know his job well and can perform it within prescribed limits.
3. Proper incentives, resources and information should be provided to motivate the subordinates and to help them to carry out the assigned duties successfully.
4. Subordinates should be given orientation and training in accepting and discharging authority.
5. Proper guidance should be provided and subordinates should be required to complete their assignments.
6. Adequate controls should be established to enable subordinates to measure and evaluate their own performance.

Decentralisation of Authority

Meaning of Decentralisation

Centralisation and  decentralisation are counter forces that shape and reshape an organisation. The terms are often used to refer to the geographical concentration or dispersion of activities or operations of an enterprise. For example, the L.I.C has offices all over the country. But this is mere physical dispersion of business activities. A company may be highly centralised although its physical operations are widely scattered or dispersed and vice-versa. Decentralisation can take place without dispersal of physical facilities and facilities can be dispersed without decentralisation. In management, centralisation and decentralisation refer to the location of decision-making authority in an organisation. When decision-making authority is dispersed throughout the organisation, so that decisions are made largely near the point of action, it is decentralisation. On the other hand, when authority is concentrated largely at higher levels of management and majority of decisions are made at a level higher than the point of action, there is Centralisation. “Authority delegation may be extensive or limited. Much authority delegated through the echelons of an organisation is referred to decentralisation of authority, while authority is said to be centralised wherever a manager delegates little of it.” According to Allen, Centralisation is “the systematic and consistent reservation of authority at central points in an organisation, while decentralisation refers to consistent and systematic delegation to the lowest levels all authority except that which can only be exercised at central points.”

      It must be clear that every organisation Is both centralised and decentralised. Absolute Centralisation is impossible as it means no organisation but one-man operation. Similarly, there cannot be absolute decentralisation as it will amount to virtual disintegration of the enterprise. Centralisation and decentralisation are, therefore, relative terms and not absolute. They are tendencies or qualities like “hot” and “cold”. It is a matter of degree, not kind. The crux of the matter is how much authority is to be reserved at the top and how much is to be delegated to lower levels. It requires careful selection of decisions that are to be held at or near the top and to be pushed down the organisation structure. A company is highly decentralised when authority lies at the point of action. On the other hand, it is highly centralised when authority to make decisions is withheld or concentrated at the top level of management. The degree of decentralisation can be measured by the number scope and importance of decisions made at lower levels and the amount of checking required on them. The type of authority delegated, the level to which it is delegated and how consistently it is delegated, indicate the degree of decentralisation. In broad terms, “everything that goes to increase the importance of the subordinate’s role is decentralisation, everything which goes to reduce it is Centralisation.”

Decentralisation vs Delegation

Decentralisation and delegation are closely interlinked. Both the terms refer to dispersal of authority. But they are not one and the same thing and distinction between them must be clearly understood. Delegation refers to the entrustment of authority by one individual to another. Decentralisation, on the other hand, implies systematic and consistent delegation of authority at all levels and in all functions in the organisation. It is the sum-total or pattern of delegations. It is a systematic effort made for delegating authority to the lowest levels in the organisation. It arises when the ultimate authority to command and ultimate responsibility for results is pushed as far down in the organisation as efficient management of the organisation permits. Decentralisation is thus wider in scope and consequence than delegation. When delegation is practiced systematically and in all functions and divisions of the company and for a wide range of authorities and responsibilities, the company is said to be highly decentralised. Although closely related to delegation of authority, decentralisation is more; it is a philosophy of organisation and management, implying both selective dispersal and concentration of authority. It requires far more than simply handling over authority to subordinates.” In other words, decentralisation is an extension of delegation. To the extent,, authority is not delegated, it is centralised.

    To summarise, there are following differences between delegation and decentralisation:

• Delegation is individualistic, while decentralisation is totalistic in nature. The former involves only two levels or individuals, a superior and a subordinate. The latter encompasses several levels or executives. Delegation is personal decentralisation is organisation-wide.
• Delegation can taka place from one place to another and be a complete process. But decentralisation is complete only when the fullest possible delegation is made to all individuals and in all functions in the organisation. Delegation is the process of devolution of authority while decentralisation is the resultant structure or end-result.
• The degree of delegation may vary from department to department. Decentralisation being an organisation-wide concept does not vary between the parts of a single organisation.
• When delegation takes place between one executive and his subordinates, control is retained at the higher level. In case of decentralisation, operating control is passed on to the lower levels to facilitate self-regulation and control.
• Delegation as the process of securing work is essential. Subordinates must be given the authority necessary to carry out their tasks. Decentralisation as the philosophy of management is optional. Top management may or may not disperse authority in the organisation.

Advantages (Need) of Decentralisation

The advantages of Centralisation are the disadvantages of decentralisation and vice versa. One need consider, therefore, only decentralisation.

• Reduction in the Burden of Chief Executive. It relieves top executives from operating details, so that they can concentrate on more important problems of policy-making and control. In case of Centralisation, the chief executive is over-burdened with the work of decision-making.
• Promotion of Initiative. Decentralisation promotes initiative and responsibility on the part of subordinates who decide for themselves. It leads to effective supervision as lower level executives have complete authority to regulate the behaviour of workers. Full use can be made of executives at lower levels.
• Improvement of Motivation. Decentralisation improves the motivation and morale of subordinates. Involvement in decision-making creates sense of belonging and makes lower level jobs more challenging. It also facilitates communication and satisfies needs for power and independence. It fosters team-spirit and group cohesion among subordinates.
• Continuity of Organisation. Decentralisation makes for stability and continuity of organisation. Success and survival does not depend on a few individuals.
• Executive Development. Decentralisation facilitates the development of future executives. Lower level people learn by exercising delegated authority. They have opportunity to try their ideas and prove their calibre.
• Quick and Accurate Decisions. Decisions are likely to be made more quickly and are likely to be more realistic as they are made by those who know the situation thoroughly and who are to execute them. It reduces red tape and places decision-making power in the hands of the people who are well aware of the realities of the situation.
• Growth and Diversification. Decentralisation facilitates growth and diversification as size is not limited to few executives and there is a continuous supply of managers. Semi-autonomous units can be set up under the overall direction and control of top management. Diversification, in turn, leads to spreading up of risks.
• Democratic Management. Decentralisation makes for democratic management. People at lower levels do not feel alienated from the top and there is little danger of administration becoming top heavy or monolithic.
• Comparative Evaluation. Divisionalisation of the organisation enables comparison between different departments. This helps in locating sources of inefficiency and in increasing profits of the enterprise. It offers several internal and external economies in operations.
• Greater Flexibility. Decentralisation increases the flexibility of the organisation. Division of organisation into small semi-autonomous units enables full control by individual executives. They have the authority to effect necessary changes without dislocating the entire structure.

Disadvantages of Decentralisation

• Difficulty in Coordination. Decentralisation makes coordination difficult. Decentralised units tends to emphasise their own operations without regard to one another. Executives may adopt narrow outlook and sectional interests may overshadow Organisational goals. There may be lack of uniformity and consistency of action.
• High Administrative Expenses. Administrative costs increase due to duplication of facilities. Trained people are needed at all levels to accept and exercise authority successfully.
• Decentralisation may restrict timely action in case of emergencies.
• Inappropriate for Small Units. A small organisation may work more efficiency under centralised control of a dynamic leader. Creation of autonomous decentralised units requires broad product lines which is not possible in small firms.
• External Constraints. In certain cases, decentralisation may not be feasible due to external constraints and uncertainties. Centralisation may be necessary to ensure uniform action in important matters, e.g., personnel relations.

Reasons for Centralisation

• To Facilitate Personal Leadership. In the early stages of an enterprise and in small firms, the success depends largely on the personal leadership of a dynamic and talented leader. Authority may be centralised to give full scope to facilitate personal leadership which may result in quick decisions and imaginative action.
• To Provide Integration. Coordination of individual efforts is essential to the success of every organisation. Centralised direction is an effective means of unification and integration of individual efforts. It acts as a binding force on the various parts of the organisation.
• To Achieve Uniformity of Action. Where uniformity of policy and action is required, authority may be centralised at the top. Such uniformity is often desirable in personnel, purchasing and advertising. Therefore, authority in these tends to be centralised.
• To Handle Emergencies. When competition is very acute or the emergency is urgent and immediate, the need for centralised decision-making is very great.

Centralisation of authority suffers from several disadvantages. The top executives are overburdened with more work and lower level managers do not get opportunity for development. Most of the decisions are taken far away from the scene of action. As a result there is considerable delay and cost in decision-making. The motivation and morale of subordinate executives tend to be low. The growth of the enterprise is limited to the competence of a few top executives.

      Thus, neither decentralisation nor Centralisation is a panacea for the Organisational ills. A balance between the two should be established after a careful analysis of the total operating environment. The economic issue between Centralisation and decentralisation is between total administrative cost and more effective performance. The advantages of Centralisation should be weighed against the advantages of decentralisation before determining the degree to which decisions are to be centralised and decentralised.

Factors Determining Degree of Decentralisation

The extent of decentralisation that a management will adopt depends upon a variety of factors. They are described below:

• Size and Complexity.  A very large and diversified firm finds it hard to practice Centralisation. Top management cannot personally take all decisions of the enterprise. Such organisations are , therefore, decentralised to a greater extent than a small organisation with limited operations.
• History of the Enterprise. Firms that have been built under the personal leadership of owners are likely to minimize decentralisation. On the other hand, concerns created through combination or group leadership tend to emphasise decentralisation.
• Management Philosophy. The attitude and temperament of top executives has an important bearing on  the degree of decentralisation. Executives who cannot tolerate mistakes and who want to dominate delegate little authority. This is often true of managers who have been promoted and continue to make decisions that should be delegated. On the other hand, executives who trust subordinates are receptive of others’ ideas and are willing to use broad controls delegated to the maximum possible extent. They consider decentralisation a means of executive development.
• Availability of Qualified Executives. Dispersal of decision-making is possible when the lower level staff is of high calibre. But shortage of qualified staff should not be an excuse for Centralisation. Decentralisation itself is essential for the development of good managers.
• Location of Operations. Authority tends to be decentralised when performance is decentralised. Geographical dispersion of activities makes communication difficult under centralised decision-making. However, physical dispersion does not necessarily lead to decentralisation. For example, the executive of a store in the chain system has little authority for decision-making.
• Importance of the Decision. Greater is the impact of a decision on the success and survival of the enterprise, greater is the degree of Centralisation. Vital and crucial decisions are made at higher levels. This does not imply that senior executives always make lesser mistakes than junior ones. The reason is that vital decisions involve heavy responsibility and top management has ultimate responsibility for the success of an enterprise. For example, the decision regarding quality in a drug manufacturing company is crucial and is centralised at the top level. The same decision in a toy manufacturing firm can safely be delegated to lower levels. The cost of a decision can be measured in terms of financial gain, company reputation, employee morale, etc.    
• Uniformity of Action. Greater is the need for uniformity of policy or action, greater is likely to be the degree of Centralisation. That is why pricing, wage fixation and public relations are more centralised than production and sales.
• Control Techniques. Delegation does not absolve a manager of his responsibility. Decentralisation is, therefore, greater well techniques available for controlling subordinates’ actions are effective. Well-established procedures and improvements in statistical, accounting and other techniques have enabled greater decentralisation in large organisations.
• Business Dynamics. The rate of change in the industry affects the degree of decentralisation because a decentralised organisation is more flexible. A growing and fashion goods industry is likely to be more decentralised than an old and well-established firm providing necessities.
• Environmental Influences. External factors like government policy, trade unions, tax policy, etc. also influence decentralisation. Where price is subject to legal controls, local managers cannot be given the authority to fix prices. Wage and other disputes have to be handled at the top level where national unions are involved.