BCA NOTEZ- TBC 104

Batch 2022-2025

Unit 2 – Function of Management (Planning & Organizing)

 Topics Covered in this Note:

Functions of Management:
Planning - Meaning - Need & Importance, types levels – advantages & limitations.
Forecasting - Need & Techniques. Decision making steps and Process, Organizing - Elements
of organizing & processes: Types of organizations, Delegation of authority - Need,
difficulties in delegation – Decentralization.

 1. Planning Meaning

Making decisions about what to do, why to do it, and when to do it necessitates preparation.
Before beginning a task, management must plan out how to complete it. As a result, creativity
and innovation are inextricably linked to this management function.

Setting goals allows a manager to know where he needs to go because planning bridges the
gap between where we are now and where we want to be. The actions taken by managers at
all levels are central to planning. It necessitates deciding because it involves choosing one
course of action over another.

 2. Planning Importance

Importance of Planning:
1. Planning, which is concerned with the anticipated course of action, provides direction. It
directs the efforts of the employees. Planning outlines what employees must do, how they
must do it, and so on. Planning provides direction for action by outlining how tasks must be
completed in advance. Employees are aware of the direction in which they must work ahead
of time. This also leads to a sense of purpose. Without planning, people would work in
different directions, preventing the organisation from reaching its ultimate goal.
2. Planning eliminates ineffective and unnecessary activities. When developing
organisational plans, each department's needs are considered. The overall organisational
structure is used to develop plans for each department. As a result, coordination will take
place across multiple departments. On the other hand, if managers, non-managers, and all
employees follow the plan of action, there will be integration in the activities. Plans ensure
that thoughts and actions are clear and that work is completed quickly.
3. Since planning is an intellectual process that requires deep thought, it encourages inventive
thinking. As a result, there is plenty of room for improvement regarding task-specific ideas,
methods, and processes. During the planning process, managers are forced to think creatively
and make assumptions about the future. As a result, it encourages managers' innovation and
creativity.
  3. Planning Advantages and Disadvantages
Advantages of Planning:

Planning is one of the crucial functions of management. It is basic to all other functions of

management. There will not be proper organization and direction without proper planning. It

states the goals and means of achieving them.

Above all other things, planning is important for the following reasons:
1.  Attention on Objectives:

Planning helps in clearly laying down objectives of the organization. The whole attention of

management is given towards the achievement of those objectives. There can be priorities in

objectives, important objectives to be taken up first and others to be followed after them.

2.  Minimizing Uncertainties:

Planning is always done for the future. Nobody can predict accurately what is going to

happen. Business environments are always changing. Planning is an effort to foresee the

future and plan the things in a best possible way. Planning certainly minimizes future

uncertainties by basing its decisions on past experiences and present situations.

3.  Better Utilization of Resources:

Another advantage of planning is the better utilization of resources of the business. All the

resources are first identified and then operations are planned. All resources are put to best
possible uses.

4.  Economy in Operations:

The objectives are determined first and then best possible course of action is selected for

achieving these objectives. The operations selected being better among possible alternatives,

there is an economy in operations. The method of trial and error is avoided and resources are

not wasted in making choices. The economy is possible in all departments whether

production, sales, purchases, finances, etc.

5.  Better Co-ordination:

The objectives of the organization being common, all efforts are made to achieve these

objectives by a concerted effort of all. The duplication in efforts is avoided. Planning will

lead to better co-ordination in the organization which will ultimately lead to better results.

Limitations of Planning:

Despite of many advantages of planning, there may be some obstacles and limitations in this

process. Planning is not a panacea for all the ills of the business. Planning will only help in

minimizing uncertainties to a certain extent.

The following are some of the limitations of planning:

1.  Lack of Reliable Data:

Planning is based on various facts and figures supplied to the planners. If the data on which

decisions are based are not reliable then decisions based on such information will also be

unreliable. Planning will lose its value if reliable facts and figures are not supplied.

2.  Time Consuming Process:

Practical utility of planning is sometimes reduced by the time factor. Planning is a time-

consuming process and actions on various operations may be delayed because proper

planning has not yet been done. The delay may result in loss of opportunities. When time is

of essence then advance planning loses its utility. Under certain circumstances an urgent

action is needed then one cannot wait for the planning process to complete.

3.  Expensive:

The planning process is very expensive. The gathering of information and testing of various

courses of action involve greater amounts of money. Sometimes, expenses are so prohibitive

that small concerns cannot afford to use planning. The long-term planning is a luxury for

most of the concerns because of heavy expenses. The utility derived from planning in no case

should be less than expenditure incurred on it.

According to Hainman, “The cost of planning should not be in excess of its contribution, and

wise managerial judgment is necessary to balance the expense of preparing the plans against

the benefits derived from them.”

4.  External Factors may Reduce Utility:

Besides internal factors there are external factors too which adversely affect planning. These

factors may be economic, social, political, technological or legal. The general national and

international climate also acts as limitation on the planning process.

5.  Sudden Emergencies:

In case certain emergencies arise then the need of the hour is quick action and not advance

planning. These situations may not be anticipated. In case emergencies are anticipated or they

have regularity in occurrence then advance planning should be undertaken for emergencies

too.

 4. Forecasting - Need & Techniques

What Is Forecasting?

Forecasting is a technique that uses historical data as inputs to make informed estimates that
are predictive in determining the direction of future trends.

Businesses utilize forecasting to determine how to allocate their budgets or plan for

anticipated expenses for an upcoming period of time. This is typically based on the
projected demand for the goods and services offered.

KEY TAKEAWAYS

 Forecasting involves making predictions about the future.

 In finance, forecasting is used by companies to estimate earnings or other data for
subsequent periods.
 Traders and analysts use forecasts in valuation models, to time trades, and to identify
trends.
 Forecasts are often predicated on historical data.
 Because the future is uncertain, forecasts must often be revised, and actual results
can vary greatly.
 Forecasting Techniques

In general, forecasting can be approached using qualitative techniques or quantitative

ones. Quantitative methods of forecasting exclude expert opinions and utilize statistical data
based on quantitative information. Quantitative forecasting models include time series
methods, discounting, analysis of leading or lagging indicators, and econometric modeling
that may try to ascertain causal links.

Qualitative Techniques
Qualitative forecasting models are useful in developing forecasts with a limited scope. These
models are highly reliant on expert opinions and are most beneficial in the short term.
Examples of qualitative forecasting models include interviews, on-site visits, market
research, polls, and surveys that may apply the Delphi method (which relies on aggregated
expert opinions).

Gathering data for qualitative analysis can sometimes be difficult or time-consuming. The
CEOs of large companies are often too busy to take a phone call from a retail investor or
show them around a facility. However, we can still sift through news reports and the text
included in companies' filings to get a sense of managers' records, strategies, and
philosophies.

Time Series Analysis

A time series analysis looks at historical data and how various variables have interacted with
one another in the past.  These statistical relationships are then extrapolated into the future to
generate forecasts along with confidence intervals to understand the likelihood of the actual
outcomes falling within that scope. As with all forecasting methods, success is not
guaranteed.

The Box-Jenkins Model is a technique designed to forecast data ranges based on inputs from
a specified time series. It forecasts data using three principles: autoregression, differencing,
and moving averages. Another method, known as rescaled range analysis, can be used to
detect and evaluate the amount of persistence, randomness, or mean reversion in time series
data. The rescaled range can be used to extrapolate a future value or average for the data to
see if a trend is stable or likely to reverse.

Most often, time series forecasts involve trend analysis, cyclical fluctuation analysis, and
issues of seasonality.

Econometric Inference
Another quantitative approach is to look at cross-sectional data to identify links among
variables—although identifying causation is tricky and can often be spurious. This is known
as econometric analysis, which often employs regression models. Techniques such as the use
of instrumental variables, if available, can help one make stronger causal claims.

For instance, an analyst might look at revenue and compare it to economic indicators  such as
inflation and unemployment. Changes to financial or statistical data are observed to
determine the relationship between multiple variables. A sales forecast may thus be based on
several inputs such as aggregate demand, interest rates, market share, and advertising budget
(among others).
  5. Decision making Steps and Process

Decision making is a daily activity for any human being. There is no exception about that.
When it comes to business organizations, decision making is a habit and a process as well.
Effective and successful decisions make profit to the company and unsuccessful ones make
losses. Therefore, corporate decision making process is the most critical process in any
organization.
In the decision making process, we choose one course of action from a few possible
alternatives. In the process of decision making, we may use many tools, techniques and
perceptions.
In addition, we may make our own private decisions or may prefer a collective decision.
Usually, decision making is hard. Majority of corporate decisions involve some level of
dissatisfaction or conflict with another party.
Let's have a look at the decision making process in detail.

Steps of Decision Making Process:

Following are the important steps of the decision making process. Each step may be
supported by different tools and techniques.
Step 1: Identification of the purpose of the decision
In this step, the problem is thoroughly analysed. There are a couple of questions one should
ask when it comes to identifying the purpose of the decision.
 What exactly is the problem?
 Why the problem should be solved?
 Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?

Step 2: Information gathering

A problem of an organization will have many stakeholders. In addition, there can be dozens
of factors involved and affected by the problem.
In the process of solving the problem, you will have to gather as much as information related
to the factors and stakeholders involved in the problem. For the process of information
gathering, tools such as 'Check Sheets' can be effectively used.
Step 3: Principles for judging the alternatives
In this step, the baseline criteria for judging the alternatives should be set up. When it comes
to defining the criteria, organizational goals as well as the corporate culture should be taken
into consideration.
As an example, profit is one of the main concerns in every decision making process.
Companies usually do not make decisions that reduce profits, unless it is an exceptional case.
Likewise, baseline principles should be identified related to the problem in hand.
Step 4: Brainstorm and analyse the different choices
For this step, brainstorming to list down all the ideas is the best option. Before the idea
generation step, it is vital to understand the causes of the problem and prioritization of causes.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and-
Effect diagram helps you to identify all possible causes of the problem and Pareto chart helps
you to prioritize and identify the causes with highest effect.
Then, you can move on generating all possible solutions (alternatives) for the problem in
hand.
Step 5: Evaluation of alternatives
Use your judgement principles and decision-making criteria to evaluate each alternative. In
this step, experience and effectiveness of the judgement principles come into play. You need
to compare each alternative for their positives and negatives.
Step 6: Select the best alternative
Once you go through from Step 1 to Step 5, this step is easy. In addition, the selection of the
best alternative is an informed decision since you have already followed a methodology to
derive and select the best alternative.
Step 7: Execute the decision
Convert your decision into a plan or a sequence of activities. Execute your plan by yourself
or with the help of subordinates.
Step 8: Evaluate the results
Evaluate the outcome of your decision. See whether there is anything you should learn and
then correct in future decision making. This is one of the best practices that will improve your
decision-making skills.

 6. Organizing - Elements of Organizing

Basic Elements of Organizational Structure Design
An organizational structure is based on a range of elements, including:

 Work specialization
 Departmentation
 Chain of command
 Span of control
 Centralization/Decentralization
 Formalization

Work specialization:
Work specializations define how responsibilities are split between employees based on the
job description. It’s used to split projects into smaller work activities and assign digestible
tasks to individual employees. The most common results of improper specialization are low
efficiency and burnout.

Documentation:
Documentation is an act of grouping specialists on the basis of the job description, skills,
location, or other factors that connect them. 

The biggest challenge is choosing the criteria for departmentation. In many cases, it’s no
more enough to apply functional departmentation – where employees are grouped based on
the tasks they perform. Startups often go for matrix departmentation that involves combining
two types of departmentation and takes the best out of both worlds. For instance, functional
departmentation can be joined by geographical departmentation to better serve clients in
different locations.

Chain of command:
Chain of command represents a system for passing instructions and reporting within an
organization. Ideally, it distributes the power, supports knowledge sharing, and
encourages employee accountability.
The traditional chain of command makes decision-making more complex and does not allow
for much flexibility. On the contrary, modern approaches strive to enhance employee
autonomy and avoid micromanagement.

Span of control:
Span of control regulates the number of direct reporters managed by a single supervisor. It
heavily depends on the three aforementioned elements of organizational structure.
Furthermore, to identify the right span of control, you need to evaluate your leaders’ capacity,
workplace size,  and experience level of employees.

Centralization and decentralization:

Centralization and decentralization are the concepts defining how managers, as well as
employees, give input on company goals and strategy. While centralization gives leaders the
ultimate control over decision-making processes, decentralization allows employees to
impact business decisions. We’ll dive into centralized and decentralized organizational
structures in the further section.

Formalization
Formalization determines to which extent business processes, policies, and job descriptions
are standardized. It may regulate communication between employees and managers,
workplace culture, operational procedures, etc.

Centralized vs. Decentralized Organizational Structures

Back to centralization and decentralization. When designing an organizational structure,
you’ll need to choose a side. Do you want to implement top-down or bottom-up
management?

Centralized organizational structure

As has been said, in a centralized organizational structure, decisions are made by top
managers and are distributed down the chain of command. 
For sure, the structure has a range of advantages. It ensures greater control over business
processes. But most importantly, it only includes highly experienced professionals that are
able to foresee the effect of decisions made in the long run.

The biggest drawback of a centralized organizational structure is the amount of time the
decision-making process takes in large companies. Imagine a customer support manager
being asked to implement an exclusive package for a high-ticket customer. To get
permission, they’d need to run the request up the chain of command and wait for it to be
processed by top management. When the request is approved, a high-ticket customer might
no longer be there.

Decentralized organizational structure

To avoid this issue, large organizations turn to decentralization. In a decentralized structure,
lower-level employees pinpoint issues and make decisions before communicating it to upper
management. Greater autonomy not only empowers employees but also eliminates process
delays, which are common for centralized systems.

However, decentralization also brings coordination challenges and higher expenses.

Often, it’s recommended that early-stage startups and small businesses go after a centralized
organizational structure. Fast-growing companies and enterprises usually choose a
decentralization framework.

 7. Process of Organizing

Process of Organizing:

First, let us understand the concept of organizing. Organizing essentially consists of establishing
a division of labour. The managers divide the work among individuals and group of individuals.
And then they coordinate the activities of such individuals and groups to extract the best
outcome.

Organizing also involves delegating responsibility to the employees along with the authority to
successfully accomplish these tasks and responsibilities. One major aspect of organizing is
delegating the correct amounts of responsibilities and authority.

Now, as one of the most important functions of management, organizing follows a

meticulous process. The following are the steps in the process of organizing,

1] Identifying the Work

The obvious first step in the process of organizing is to identify the work that has to be done by
the organization. This is the ground level from which we will begin. So the manager needs to
identify the work and the tasks to be done to achieve the goals of the organization.

Identification of the work helps avoid miscommunication, overlapping of responsibilities and

wastage of time and effort.

2] Grouping of Work

For the sake of a smooth flow of work and smooth functioning of the organization, similar tasks
and activities should be grouped together. Hence we create departments within the company and
divisions within each department. Such an organization makes the functioning of the company
way more systematic.

Depending on the size of the organization and the volume of work, an organization can have
several department and divisions. And every department has a manager representing them at the
top-level of the management.

In smaller organizations sometimes these departments are clubbed together under one manager.
3] Establish Hierarchy

The next step in the process of organizing is to establish the reporting relationships for all the
individual employees of the company. So a manager establishes the vertical and horizontal
relationships of the company.

This enables the evaluation and control over the performances of all the employees in a timely
manner. So if rectifications need to be made, they can be made immediately.

4] Delegation of Authority

Authority is basically the right an individual has to act according to his wishes and extract
obedience from the others. So when a manager is assigned certain duties and responsibilities, he
must also be delegated authority to carry out such duties effectively.

If we only assign the duties, but no authority he will not be able to perform the tasks and
activities that are necessary. So we must always assign authority and clearly specify the
boundaries of the duties and the authority which has been delegated.

5] Coordination

Finally, the manager must ensure that all activities carried out by various employees and groups
are well coordinated. Otherwise, it may lead to conflicts between employees, duplication of
work and wastage of time and efforts. He must ensure all the departments are carrying out their
specialized tasks and there is harmony in these activities. The ultimate aim is to ensure that the
goal of the organization is fulfilled.

 8. Types of Organizations

Types of Organisation and their Structure

There are two broad categories of organisation, which are:
1. Formal Organisation
2. Informal Organisation
Formal Organisation: Formal organisation is that type of organisation structure where the
authority and responsibility are clearly defined. The organisation structure has a defined
delegation of authority and roles and responsibilities for the members.
The formal organisation has predefined policies, rules, schedules, procedures and programs.
The decision making activity in a formal organisation is mostly based on predefined policies.
Formal organisation structure is created by the management with the objective of attaining
the organisational goals.
There are several types of formal organisation based on their structure, which are discussed
as follows:
1. Line Organisation
2. Line and Staff Organisation
3. Functional Organisation
4. Project Organisation
5. Matrix Organisation
Let us learn about these organisation structures in detail in the following lines.
Line Organisation: Line organisation is the simplest organisation structure and it also
happens to be the oldest organisation structure. It is also known as Scalar or military or
departmental type of organisation.
In this type of organisational structure, the authority is well defined and it flows vertically
from the top to the hierarchy level to the managerial level and subordinates at the bottom and
continues further to the workers till the end.
There is a clear division of accountability, authority and responsibility in the line organisation
structure.
Advantages of Line organisation
1. Simple structure and easy to run
2. Instructions and hierarchy clearly defined
3. Rapid decision making
4. Responsibility fixed at each level of the organisation.

Disadvantages of Line organisation:

1. It is rigid in nature
2. It has a tendency to become dictatorial.
3. Each department will be busy with their work instead of focusing on the overall
development of the organisation.
Line and Staff Organisation: Line and staff organisation is an improved version of the line
organisation. In line and staff organisation, the functional specialists are added in line. The
staff is for assisting the line members in achieving the target effectively.
Advantages of Line and Staff organisation
1. Easy decision making as work is divided.
2. Greater coordination between line and staff workers.
3. Provides workers the opportunity for growth.
Disadvantages of Line and Staff Organisation
1. Conflict may arise between line and staff members due to the improper distribution of
authority.
2. Staff members provide suggestions to the line members and decision is taken by line
members, it makes the staff members feel ignored.
Functional Organisation: Functional organisation structure is the type of organisation where
the task of managing and directing the employees is arranged as per the function they
specialise. In a functional organisation, there are three types of members, line members, staff
members and functional members.
Advantages of Functional organisation
1. Manager has to perform a limited number of tasks which improves the accuracy of the
work.
2. Improvement in product quality due to involvement of specialists.
Disadvantages of Functional organisation
1. It is difficult to achieve coordination among workers as there is no one to manage them
directly.
2. Conflicts may arise due to the members having equal positions.
Project Organisation: A project organisation is a temporary form of organisation structure
that is formed to manage projects for a specific period of time. This form of organisation has
specialists from different departments who are brought together for developing a new
product.
Advantages of Project organisation
1. The presence of many specialists from different departments increases the coordination
among the members.
2. Each individual has a different set of responsibilities which improves control of the
process.
Disadvantages of Project Organization
1. There can be a delay in completion of the project.
2. Project managers may find it difficult to judge the performance of different specialists.
Matrix Organisation: Matrix organisation is the latest form of organisation that is a
combination of functional and project organisation. In such organisations there are two lines
of authority, the functional part of the organisation and project management part of the
organisation and they have vertical and horizontal flow of authority, respectively.
Advantages of Matrix Organisation
1. Since the matrix organisation is a combination of functional and project management
teams, there is an improved coordination between the vertical and horizontal functions.
2. Employees are motivated as everyone will be working towards one project.
Disadvantages of Matrix Organisation
1. Due to the presence of vertical and horizontal communication, there will be increased cost
and paperwork.
2.Having multiple supervisors for the workers leads to confusion and difficulty in control.
Informal Organisation: Informal organisations are those types of organisations which do
not have a defined hierarchy of authority and responsibility. In such organisations, the
relationship between employees is formed based on common interests, preferences and
prejudices.

 9. Delegation of Authority

Delegation of authority is a process in which the authority and powers are divided and shared
amongst the subordinates. When the work of a manager gets beyond his capacity, there
should be some system of sharing the work. This is how delegation of authority becomes an
important tool in organization function. Through delegation, a manager, in fact, is
multiplying himself by dividing/multiplying his work with the subordinates. The importance
of delegation can be justified by –

1. Through delegation, a manager is able to divide the work and allocate it to the
subordinates. This helps in reducing his work load so that he can work on important
areas such as - planning, business analysis etc.
2. With the reduction of load on superior, he can concentrate his energy on important
and critical issues of concern. This way he is able to bring effectiveness in his work as
well in the work unit. This effectivity helps a manager to prove his ability and skills in
the best manner.
3. Delegation of authority is the ground on which the superior-subordinate
relationship stands. An organization functions as the authority flows from top level
to bottom. This in fact shows that through delegation, the superior-subordinate
relationship become meaningful. The flow of authority is from top to bottom which is
a way of achieving results.
4. Delegation of authority in a way gives enough room and space to the subordinates to
flourish their abilities and skill. Through delegating powers, the subordinates get a
feeling of importance. They get motivated to work and this motivation provides
appropriate results to a concern. Job satisfaction is an important criterion to bring
stability and soundness in the relationship between superior and subordinates.
Delegation also helps in breaking the monotony of the subordinates so that they can
be more creative and efficient.

Delegation of authority is not only helpful to the subordinates but it also helps the
managers to develop their talents and skills. Since the manager get enough time
through delegation to concentrate on important issues, their decision-making gets
strong and in a way they can flourish the talents which are required in a manager.
Through granting powers and getting the work done, helps the manager to attain
communication skills, supervision and guidance, effective motivation and the
leadership traits are flourished. Therefore it is only through delegation, a manager can
be tested on his traits.
 5. Delegation of authority is help to both superior and subordinates. This, in a way, gives
stability to a concern’s working. With effective results, a concern can think of
creating more departments and divisions flow working. This will require creation of
more managers which can be fulfilled by shifting the experienced, skilled managers to
these positions. This helps in both virtual as well as horizontal growth which is very
important for a concern’s stability.

Therefore, from the above points, we can justify that delegation is not just a process but it is a
way by which manager multiples himself and is able to bring stability, ability and soundness
to a concern.

 10. Difficulties in Delegation

Difficulties Faced by Delegation of Authority:

There may arise certain difficulties in the process of delegation. The difficulties may be due

to the attitude of either superiors or subordinates or both. There may be certain defects in

organizational structure which hamper proper delegation of authority.

Some of the difficulties involved in delegation are as such:

1. Over Confidence of Superior:

The feeling in a superior that only he can do certain work effectively than others is the main

difficulty in delegation. When a manager is of the opinion that his subordinates will not be

able to make proper decisions then he will concentrate all powers with him and will not like

to delegate his authority. This may not be due to the incompetence of subordinates but due to

the over- confidence of a superior.

2. Lack of Confidence in Subordinate:

The superior may be of the view that subordinates are not competent to carry out certain

things of their own. He may lack confidence in his subordinates. Under these (Circumstances

superior will hesitate to delegate authority.

3. Lack of Ability in Superior:

A superior may lack the ability to delegate authority to subordinates. The manager may not

be able to identify the areas where delegation is required. He may not even be able to chalk

out the proper process of delegation. The lack of competence on the part of superior restricts

the delegation of authority.

4. Lack of Proper Controls:

There may not be proper controls in the organization which help the manager to keep in touch

with performance of subordinates. When certain controls like budgets, standard costs etc., are

there then manager can exercise adequate control over the performance of his subordinates.

In the absence of such techniques he will not be able to judge the performance of his

subordinates. Since he will not be able to exercise control he will not like to delegate

authority.

5. Lack of Proper Temperament of Superior:

The chief executive may be over-cautious or conservative by nature. He will not like to take

the risk of delegating authority. His fear will always be that something may not go wrong.

The executives with this type of temperament will hesitate to delegate authority. An element

of risk cannot altogether be ruled out but certain risk will have to be taken. The subordinates
will learn only when given a chance to take independent decisions. A lack of proper

temperament of superior may also act as a barrier in delegation.

6.  Inability of Subordinates:

There may also be shyness on the part of subordinates in assuming additional responsibility.

They may avoid botheration accruing from delegation of authority. The fear of committing

mistakes or lack of confidence on the part of subordinates may also act as a barrier in

delegation of authority.

 11. Decentralization
Decentralisation is referred to as a form of an organisational structure where there is the
delegation of authority by the top management to the middle and lower levels of management
in an organisation.
In this type of organisation structure, the duty of daily operations and minor decision-making
capabilities are transferred to the middle and lower levels which allow top-level management
to focus more on major decisions like business expansion, diversification etc.
Delegation refers to the assigning a portion of work and the associated responsibility by a
superior to a subordinate. In simple words, when delegation is expanded on an organisational
level, it is called decentralisation.

Importance of Decentralisation

1. Rapid decision making – Most of the decisions are taken on the spot, and approval
from the higher authority is not required. The ability to make a prompt decision
allows an organisation to function its operation quickly and effectively. 
2. Administrative development – The decentralisation process questions the manager’s
judgement and techniques, when responsibility and challenges to develop solutions
are given to them. This questioning method grows confidence, encourages self-
reliance, and make them a good decision-maker resulting in the development of the
organisation.
3. Development of executive skills – It allows the employee to perform task
individually, giving them invaluable exposure. This individual performance creates an
environment where an individual can enhance their expertise, take ownership & more
significant responsibilities, and be suitable for promotion.
4. Promotes growth – Decentralisation also allows the heads of the department to work
independently. This independence helps the department to grow, have a healthy
competition between other departments. Ultimately, the competition will lead to an
improvement and enhancement in productivity.
5. Higher control – It also evaluates and reviews the performances of each department
and gives them a comprehensive perspective of their work. However, controlling is
the biggest challenge of decentralisation and stabilised management and scorecard are
being developed.

Advantages of Decentralisation

1. Reduces the burden on top executives

2. Facilitates diversification
3. Executive Development
4. It promotes motivation
5. Better control and supervision

Disadvantages of Decentralisation

1. Uniform policies not Followed

2. Problem of Co-Ordination