Delegation, Centralisation and Decentralisation (AQA A-Level Business): Revision Notes
Delegation, centralisation and decentralisation
Understanding delegation
Delegation is when a manager grants authority to a subordinate to complete a specific task or make certain decisions. This is an important tool for effective management and organisational efficiency.
Authority refers to the power to carry out a task that has been delegated. When you delegate authority, you give someone the right to take action and make decisions within agreed boundaries.
However, there's a crucial distinction here. While authority can be passed down the organisational structure, responsibility remains with the manager who delegated the task. This means the manager is still accountable for the outcome, even though someone else is doing the work.
Common Mistake Alert
Many students mistakenly believe that when you delegate a task, you also pass the responsibility down the organisation. This is incorrect.
Authority is passed down, but responsibility stays with the manager.
Requirements for successful delegation
For delegation to work effectively, managers must be careful about who they choose as delegates. The subordinate must have:
- The necessary skills to complete the task
- The ability to carry out the work to the required standard
- The manager's complete trust
When delegation works well, it frees managers from routine decisions. This allows them to focus their time and energy on more strategic and important matters that require their expertise.
Organisational structures and span of control
Businesses can be structured in different ways, which affects how delegation and decision-making work in practice.
Flat hierarchy (wider span of control)
A flat hierarchy has fewer management layers and a wider span of control. This means each manager supervises more employees directly. In the diagram shown, managers at each level oversee many subordinates in a horizontal structure.
Benefits of flat structures:
- Cost savings - fewer middle management positions means lower salary costs
- Greater employee engagement - workers often feel more empowered and involved in decision-making
- More opportunities for delegation
Tall hierarchy (narrower span of control)
A tall hierarchy has more management layers and a narrower span of control. Each manager supervises fewer employees, but there are more levels in the organisational structure. This creates a pyramid-like structure with authority concentrated at the top.
Centralisation and decentralisation
Whether an organisation is centralised or decentralised determines where authority and decision-making power lie in the business.
Centralisation
Centralisation means concentrating management and decision-making power at the top of an organisation's hierarchy. Senior managers make most of the important decisions, with little input from those lower down.
In a centralised structure, decisions are made by top management and then communicated down through the organisation. Branch or department managers have limited authority to make their own decisions.
Decentralisation
Decentralisation involves redistributing decision-making power away from a central location or authority. Those lower down the hierarchy play a greater role in the decision-making process.
In a decentralised structure, individual managers at different levels or locations have the authority to make decisions relevant to their area. For example, individual store managers might decide on local promotions or staffing levels.
Influences on delegation, centralisation and decentralisation
Several factors influence how much a business delegates and whether it adopts a centralised or decentralised approach. Decentralisation naturally involves a greater degree of delegation.
Uniformity of decisions
When a business needs decisions to be uniform (the same everywhere), there is little room for delegation or decentralisation.
Example: Pizza Hut's Centralised Approach
Pizza Hut operates with limited delegation. Individual outlet managers have little or no input into decision-making because the company wants consistency across all locations.
Customers expect the same menu, prices, and experience whether they visit Pizza Hut in London or Manchester.
Management style
The leadership approach adopted by senior managers significantly affects organisational structure.
- An autocratic management style tends to lead to a more centralised organisation. Autocratic managers prefer to keep control and make decisions themselves.
- A democratic or laissez-faire style gives greater scope for decentralisation. These managers are more comfortable sharing decision-making power with subordinates.
Skills and ability of workforce
A decentralised approach only works where the workforce has the necessary skills to make good decisions.
A business employing mainly professional, skilled workers is more likely to delegate and adopt a decentralised approach. These employees have the expertise needed to make informed decisions.
In contrast, a business employing mainly unskilled workers may find delegation difficult. These employees may lack the knowledge or experience to make complex business decisions.
Economic influences
Changing economic circumstances can affect how businesses approach delegation and centralisation.
- During difficult economic times, businesses may adopt a more centralised approach. Senior managers want tighter control over spending and decision-making to protect the business.
- When the economy is growing strongly, there may be greater freedom for delegation and decentralisation. Businesses feel more confident allowing managers to make local decisions.
Technology
Developments in technology have resulted in much more information being readily available across businesses. This technological advancement may provide greater scope for delegation and decentralisation.
Example: Technology Enabling Decentralisation
Individual branch or store managers can now access real-time sales data, inventory levels, and customer feedback through computer systems.
This information empowers them to make informed decisions without constantly consulting head office.
Key Points to Remember:
- Authority can be delegated, but responsibility cannot - managers remain accountable even when they delegate tasks
- Centralisation concentrates decision-making at the top, whilst decentralisation distributes it throughout the organisation
- Flat structures have fewer management layers and wider spans of control, leading to more delegation opportunities
- The choice between centralisation and decentralisation depends on factors like workforce skills, management style, economic conditions, and technology
- Successful delegation requires choosing subordinates with the right skills, ability and trustworthiness