Factors for determining effective decentralization:
Size of Organization: – Decentralization depends upon size of organization. Larger the size of organization more the number of decision making areas will be there. So it will not be possible for single head to make all the decisions alone. Also the decision making process will be slow as communication process will be very long. Therefore need of decentralization would be more important.
History of organization:- Decentralization depends upon how the organization developed over the period of time. Normally those organizations which expand under the direction of owner-founder show resistance to decentralization.
Management philosophy: The character of top leader of organization influence the extent of authority is centralized or decentralized.
Availability of mangers: – The shortage of quality manager also influences the extent of authority to be decentralized. If good mangers are available then there is more possibility of decentralization of work.
Costliness of decision: – The costliness of decisions in most important factor that effect the decentralization process. Decisions involving heavy costs or investment will be with top management like decision making for purchasing capital goods, land or machinery will be with top management and purchase of normal routine goods like daily stationary furniture will be made by department.
Rate of change in organization: – The rate of change in organization also affects the decentralization decision. If the organization is fast developing and it is facing problems of expansion there is more chances of decentralization of authority for reducing burden from top management.
Nature of activities: – The nature f operation s also determine the extent of decentralization i.e. whether the operation of organization are concentrated at one place or region or dispersed over different areas. If activities are dispersed in different territories then decentralization is must.