Decentralization

Meaning & Definition

Decentralization refers to an organizational style that distributes decision-making authority between the various levels of management, as opposed to concentrating it all at the very top. This helps ensure that managers and teams who are closest to doing the work can make timely decisions that enhance the overall efficiency, accountability, and responsiveness of the organization.

Important features of Decentralization

• Enables higher velocity of operational decision-making.
• Provides managers and employees with an enhanced level of responsibility.
• Promotes organizational flexibility and responsiveness.
• Lowers the amount of workload and reduces dependence on top management.
• Improves leadership development and takes accountability.

Compliance & Policy Considerations

In India, there is no specific legal requirement governing decentralization. Decentralization can only occur if the decision-making process in decentralized systems is compatible with the corporate governance standards, internal delegation of authority procedures, and any existing labour legislation in order to hold parties accountable and compliant.