fund a men tats of Organizing

231
The problems mentioned above are mostly operati al d
111terdepartmental coordination. on an can be overcome through effective

FREE-FORM ORGANIZATION

f)"ee-fo~ organization, also kn~wn as naturalistic, organic, or ad hoc organization, is based on

the prermse that the organization is an open system and the b i t k f .
h in th as c as o a manager 1s to
facilitate c ange e organization. This requires greater organizational flexibility and
adaptability. Many times , free-form organization is in the form of a rapidly changing, adaptive,
temporary system organized around the problems to be solved by a group of people who may be
stranger to each other and have diverse professional skills. A free-form organization has the
following features:
1. There is a small central group at the top which is relatively stable. It consists of mainly
planners and centre of control and evaluation.
2. Opera~g divisions are regarded as either temporary or permanent, depending on their
potential for generating profit; their additions or deletions are governed by organizational
policies on rate of return and alternative usage of resources committed to an operating
division. Thus, each division is treated as profit centre whether it contributes directly or
indirectly.
-
3. A division is abolished if its rate of return is below the prescribed level or its resources
can be used more profitably in another division or in a new venture.
4. Each division has considerable flexibility in its operation.
5. Free-form organization reduces the emphasis on positions, departments and other formal
units, and organizational hierarchy. Therefore, there is no traditional superior-subordinate
relationship.
Free-form organizations are suitable for those industries which have to work in highly
dynamic environment. Such environment is characterized by high flexibility and everchanging
character. To be successful in such an environment, the organizations are required to put more
emphasis on information processing, quick decisions, and independent status to the various
units which are directly exposed to the environment. Apart from the environmental pressure,
there is another reason for adopting free-form organization, and that is the democratic values of
the society which put more emphasis on equality and de-emphasis on boss-subordinate
relationships. In free-form organizations, both these things are possible. However, sometimes,
coordination problems emerge ·between central group and operating divisions. 1\vo recent
developments in the category of free-form organizations are virtual organization and boundaryless
organization.

Virtual Orgaotzation
The concept of virtual organization, also known as networked organization or modular
organization, along with virtual team and office has entered in management field very recently.
The literal meaning of virtual is unreal but capable of being considered as real for the purpose.
Virtual organization is defined as follows :
Virtual organization is a temporary network of independent organizations - suppliers,
customers, even erstwhile competitors - linked by tnformation technology to undertake
a specified venture or share their skills and costs.
A Virtual organization does not have any central office or hierarchy to operate; it is just a
temporary alliance between two or more organtzations which operates through use of information
technology.

►
2S2 Princip les and Practic e of Man
agettie,u

Reason s for Virtual Organization. The basic reason behind creatin g a virtual organtzatton 1
of Pu s to
genera te synergy throug h tempor ary alliances. Genera ting synergy involves the process
~
two or more elemen ts togethe r to achieve a sum total greate r than the sum total of indtvt
elemen ts separately. This can be describ ed as 2 + 2 = 5 effect. The synerg istic effect is
generat al
s s ect
in a virtual organiz ation becaus e of the comple mentar y compe tences of different partner · 0 rne
can d
organi zations can do someth ing very well but struggl e with others. Other organizations 0
th
very well in those areas in which the first group of organi zations feels handic apped. If both ese
strength
types of organiz ations put their efforts jointly to undert ake any project , their combin ed
l;
could lead much better results than what individual organiz ations could have achieved separate
However, manag ement schola rs have divided opinio ns over the effectiveness of Virtu~
Often
organi zations becaus e of the kind of trust that is require d in creatin g such organizations.
vtrtu~
clash of interes t genera tes much sooner than expect ed. For examp le, one of the
because
organi zations created by Intel, USA and a Japane se compa ny could not work proper ly
a major
the Japane se compa ny was not able to comple te its part of the ventur e, leaving Intel With
te
produc t delivery problem . Intel was not happy about that ventur e and decide d not to participa
in any such venture . 9

Boundaryless Organization
A bound aryless organiz ation, the term coined by Jack Welch, former chairm an of GE
(USA),
ies
seeks to eliminate vertical and horizon tal bounda ries in the organiz ation as well as the boundar
control,
betwee n the organiz ation and its custom ers and supplie rs. It deemp hasize s chain of
10
the
span of control , and rigid departm entatio n. Instead , it has limitle ss span of contro l without
It relies
existen ce of hierarc hical control . Depart ments are replac ed by self-m anagin g teams.
logy-
heavily on inform ation technology. Theref ore, some people tend to call it T{orm (techno
based) organi zation. Bound aryless organiz ation has self-ma naging teams but
11 it differs from a
red as
team-b ased organiz ation. A team-b ased organi zation is compa rativel y more structu
a virtual
compa red to a bounda ryless organiz ation. A bound aryless organi zation differs from
adopt
organiz ation in the sense that the former is a kind of structu re that an organi zation may
specified
while the latter is an allianc e betwee n two or more organi zations to achiev e certain
objectives. The major charac teristic s of a bounda ryless organi zation are as follows:
g of
1. In the bounda ryless organiz ation, vertica l bound aries are remov ed throug h flattenin
organizational hierarc hy and status and rank are minim ized.
ors,
2. Cros.s-hierarchical teams which include top executives, middle level manag ers, supervis
and operati ves adopt partici pative decisio n making . These tearns collectively share tbe
respon sibility of decisio n outcom es as agains t individ ual respon sibility in traditiOnal
organizations.
3 - In perform ance apprais al, 360-de gree apprai sal system is used. In this system, an
:
~dividuaJ's ~rfo~m ance is apprai sed by his superio r, peers, subord inates. and outsid
mterac ting with him. Besides, the individ ual himsel f apprai ses his perform ance, kn°
as self-app raisal, which is used along With 360-de gree apprais al to arrive at the concluSion
about the individual's perform ance.
h'Cb
1
4. In traditio nal organizations, functional depart ments create horizo ntal bounda ries w
ss
stifle interac tion betwee n functio ns , produ ct lines, and units. In boundary!~ 5
organizations, functional departm ents are replaced by cross-functional teams and activitl~
are organized around processes. For example, for new produc t development, no func~onle
depart ment is created but a multid isciplin ary team is created that works on a siilg
proces s.
 mentals of Organizing
f\lft rl(l 233
5. In order to develop multi-skills among employees, emphasis is put on horizontal transfer.
Just as ts the case with Job rotation. Through this way, the horizontal boundaries are also
mtntmtzed.
6. When fully operational, the boundaryless organization also breaks down barriers to
external constituents such as customers, suppliers, regulators, and others with whom
the organtzation deals, by linking them to the organization.
In the present era of globalization, strategic alliances and organization-customer-supplier
Un.ks have become significant sources for developing competitive advantage. Boundaryless
organtzations are better equipped to manage these effectively. This is the reason why more and
more organizations are movtng towards becoming boundaryless organizations. Low-cost but
efficient information technology has also facilitated this process. However, the boundaryless
organtzattons should not be treated as panacea for all structural ills because they have their own
drawbacks which are follows:
1. The concept and practice of boundaryless organizations is quite new. Therefore,
organizational members do not find these very comfortable in comparison to traditional
hierarchical systems. Even the earliest adopter of this concept, GE, has not yet achieved
boundaryless status. However. this can be treated as an operational problem which can
be overcome through experience over the period of time.
2. Boundaryless organizations use computer networks extensively. These networks may
include Internet. Extranet, and Intranet. Through these networks. people of boundaryless
organizations communicate across intra-organizational and extra-organizational
boundaries. These networks are not fully reliable at all times. The most important problem
is in the form of network security because computer networks are susceptible to attack
from network hackers. viruses, and other types of mischief.
In spite of both these problems. boundaryless organtzatlons are in practice and their popularity
is increasing day-by-day.

DY CONCEPTS FOR REVIEW

Adaptive system Informal organization
Boundaryless organization Matrix organization structure
Commtttee Organic system
Departmentation Organization structure
Divisional organization structure Span of management
Flat structure Tall structure
Format organization Task force
Free-form organization Team-based organization
Functional organization structure Virtual organization

QUESTIONS

llutttple Choice Questions

1· Organ1z1ng process does not involve one of the following elements:
(A) Departmentation (Bl Delegation of authority
(C) Fixing responsibility (D) Appraisal of a subordinate
2 · According to contingency approach of organizing, which one of the following factors is not important
In organizational design?
Deleg ation of Auth ority
Delegation of authori ty involves giving author ity to variou s organi zation al positio ns
to get thiilgs
done. It is one of the import ant factors in the proces s of organi zing and is essent
ial to th e
existen ce of a formal organiz ation.
r
243
nd Authority
po,.vera
n of authority has the following features:
pelegatio . .
Delegation is authonzat ion to a manager to act in a certain manner. The degree of delegation
1· rescribes the limits within which a manager has to decide the things. Since formal
;uthority origtnates at the top level, it is distribute d througho ut the organizat ion through
delegation and redelegati on.
Authority once delegated can be enhanced , reduced, or withdraw n dependin g on the
2
· situation and requirem ent. For example, change in organizat ion structure , policy,
procedure , method, etc., may require change in the degree of delegation of authority.
_ Delegation of authority is always to the position created through the process of organizin g.
3
The individual occupyin g a position may exercise the authority so long as he holds the
position. Therefore , the authority is recovered fully from the individua l when he moves
from the particular position. /
4. A manager delegates
authority out of the authority vesting in him. He cannot delegate
authority which he himself does not possess. Moreover , he does not delegate his frill
authorityb ecause ifhe delegates all his authority, he cannot work.
5. Delegation of authority may be specific or general. Delegatio n of authority is specific when
courses of action for particula r objective s are specified. It is general when these are not
specified though objectives may be specified.

Steps in Delegatio n of Authority

Delegation of authority througho ut an organizat ion does not occur automatic ally. This requires
certain steps which are as follows:
1. Determin ation of Results Expected . This step involves determina tion of results expected
to be achieved by exercise of authority to be delegated. This is essential because authority
should be delegated to a position according to the results expected from that position.
Since authority is intended to enable a manager to get things done to achieve organizat ional
objectives, it is essential that authority delegated to him is adequate to accompli sh results
expected.
2. Assignme nt of Duties. This step involves assignme nt of duties to subordin ates. Duties
can be described in two ways: First, duties can be described in terms of an activity or set
of activities; for example, selling activity of a salesman . Second, duties can be described in
terms of results that are expected from the performa nce of activities, for example, how
much sale is to be achieved by a salesman . Assignme nt of duties creates responsib ility of
the subordina tes.
3• Authoriza tion for Action. This step involves granting of permissio n to act in a specified
way like gtVing orders to subordin ates, use of resources , and exercise control to get the
assigned work done. Prescripti on to act in a specified way determine s the scope of authority
that may be exercised by the person to whom authority is delegated .
4· Creation of Accounta bility. The last step of delegatio n of authority is to create
accountab ility of the subordin ate for the satisfacto ry performa nce of his assignrne nt
Whether he carries out the total assignme nt himself or part of lt is given to subordin ates.
8
L0cKs TO EFFECTIV E DELEGA TION
ldean
! .
dele ~Peaking, delegation of authority must commens urate with responsib ility. It implies that
ni g tion should be according to need both in terms of quantity and quality of authority.
If a
au~ager thinks that he has as much authority as needed to perform his duties, he can treat his
ortty to be adequate. Delegatio n of authority ts inadequa te to the extent it falls short of the
 Principles and Practice of M
244 unuge~
et'tt
th rtty Managers often complain about the inadequate delegation of authority b
need for au : · thority ~o~ensur ate with their responsibil ity. This happens be ecallse
they dalo not ave;~h reasons can be seen in the context of superior - the person Who dcalllse Of
sever reasons.
authority, subordinat e - the person to whom au thori ty is d e1egat e d ' an d th e organization
e egat
es
which cont e xt delegation of authority takes place. Let us see how these factors block ef:r In
1ectiv
~~~~~ e
Factors in Superior
The characterist ics of superior play an important role in delegation of authority and he is likely
to delegate less authority in the following situations:
1. Love for Authority. A superior is unlikely to delegate auth~rity adequately if he has
intense desire to influence others, to make his importance felt m the organization , anct to
see that his subordinat es come frequently to get their decisions approved. Such desires
on the part of the superior keep him away from delegation of adequate authority to his
subordinate s irrespective of their needs.
2. Maintenan ce of Tight Control. If a superior wants to maintain tight control over the
matters assigned to him, he does not delegate authority adequately to his subordinates.
He likes to show busyness and security created by work piled high on his desk. Doing
tangible work is a pleasurable activity for him, whereas thinking, planning, and other
such intangible activities become a difficult propositio n. The superior may
become habituated to the constant contact of subordinat es bringing matters to him for
approval.
3. ~ of Subordinat es. A superior may not delegate adequate authority because of fear of
subordinate s. The fear of subordinat es may take two forms. First, a subordinate might
show that he can perform the superior's work so well that he becomes entitled to his
position, status, title, or prestige. Second, the subordinat e's increasing-a bility might earn
him a promotion to some other part of the organizatio n and the superior may lose his
best subordinate . In this case, the superior may adopt defensive behaviour by not delegating
the kind of authority that would have had such a result.
4. Fear of Exposure. A superior, specially a weak one, may not like to delegate adequate
authority simply because adequate delegation may reveal his managerial shortcoroings_
being practised. This may happen specially when the superior has poor operating
procedures, methods, and practices. ·
5. Attitude towards Subordina tes. Delegation of authority is a particular kind of trust
between superior and his subordinat es. Therefore, attitude towards each other affects
delegation of authority. Negative attitude works against delegation of authority in three
ways. (t) If a superior has lack of confidence in his subordinat es' capacity. he will not like
to delegate them authority. (it) The superior may feel that his subordinat es just do no;.
require more authority than they have been delegated resulting in inadequate delegatiOn °
authority. (tit) The superior may not have good interperson al relationship s wit 11
subordinate s which may result in less delegation of authority.
6. Personality of Superior. Personality factors of superior also affect the degree of delegatiO~
of authority. Thus, (t) an autocratic superior tends to delegate less authority as cornpare t
to a democratic superior; (it) a superior believing 1n the application of modern manager::y
techniques likes to delegate adequately, WO a superior coming from the rank an~ fll~n biS
delegate less; and (tv) a superior who has not been delegated adequate authority 1
career is likely to delegate less.
 rand Authority
PoUJe
,actors in Subordinate
I 245

degree of delegation of authority is also d t

f be , ti b e ermined byth h
While superiors percep on a out the characteristics of s e c aracteristics of subordinates.
delegation of authority, subordinates themselves af£ ubordinates plays an important role in
tbe following ways: ect the degree of delegation of authority in
1. some subordinates have better capability to
responsibility and authority go together, com etentssume more responsibility. Since
2_ Delegation of authority is formal and instttt!:ion subordinates may get more authority.
competent subordinate may assume and al but its exercise is personal. Thus, a
working within the context of same set of ;~:~:~::ore au th ority than others although
3_ In the following situations, subordinates are expect d t
they lack self-confidence; (ii) they have fear ofharseh c oiteix_erci~e les~,authoritywhen: (i)
... 1 k . r c1sm 1or umavourable results;
(m) they ac resources , (iv) they have inadequate positive incenti"es· and (v) the· ·
· easily availa bl e fior m aking d ecisions on their part.
1s v , rr supenor

0rganizational Factors

Although personal factors affect the authority delegation to a very great extent, some organizational
factors also affect the degree of authority delegation. Individual managers do not have control
over these factors but have to work within the context of these factors. For example, even an
autocrat has to delegate authority if the organizational factors so warrant. Various organizational
factors such as management philosophy, policy towards centralization or decentralization,
availability of managerial personnel, control techniques, etc. determine the delegation of authority
at various levels of management. If these factors are not favourable, delegation of authority will
be affected adversely.

MEASURES FOR EFFECTIVE DELEGATION

Effective delegation denotes distribution of authority at various points of the organization so
that managers can take actions according to their responsibility. Responsibility for adequate
delegation of authority lies mostly with superiors, particularly with top manage~ent.
However, at the same time, role of organizational prescriptions and subordmate manage~s
is also important. In order to make delegation of authority effective, actions should _be take~ m
all these directions. Measures given below are helpful in making delegation of authority effe_ctiv~:
A delegator may feel insecure m his
l. Making the Potential Delegator Feel Secure. non-
. all d uperior and to be looked upon as a necessary
Job. He wants to continue as ?1e unch enge s ere is a need for creating a feeling for
perso~ in the organizations team. Therefore, t~ following actions may be taken: (0 It
security for such a person. For this purpose, osition is secure so long he continues to
should be made very clear that his job and P Hi ntributions for the organizational
contribute to the organizational objectives. (H) h s ~; be made to make him an effective
cause are not being questioned and attemist:i:e ~~ice and other facilities can be granted
manager. (iii) Some apparent status symbo manager's appraisal through outward
to him. Granting such privileges reflects in part a b
gement mem ers.
manifestations of his subordinate mana gers are not fully aware about
2. Creating Awareness for Need of Delegation. Mand m~:ealize that they should do only
the need for adequate delegation of authority. The~ ~~ multiply themselves and their
0

What their subordinates cannot do. In this way, e~ers who come from operative level
efforts. This happens more in the case ofth~se m~dinates can make. Through proper
and continue to make decisions which their su o
 Principles and Practice of Manag
246 ern<!nt
. . h anagers can be convinced about the need for better
education and trammg, sue m
delegation of authority. • •
sks to be Delegated. De 1egation 1s adversely affe t
3 Determining Decisions an d Ta d . c ect
· . larity about what is to be delegate . A sunp1e way for solVing th·
because ~er~d1s ntify?cthe types of decisions to be made and tasks to be performed by ea lhs
P roblem 1s to 1 en . ·
f (l) its re1a tive rmportance
d ate each of these in terms o : to thc
'
organizational position anl') rthe time required to per1orm it Th' i~' . e
. 1s 1uormation helps .
total organization, an d ( 1 dt h it· 1n
. th typ f decisions and tasks to be assigne o eac pas 10n and types f
determ_ming bed legs;ed Usually those decisions and tasks that are relatively lei
authonty to de e e tlme-~onsum~ g should be assigned to lower-level managers. s
important an more
Conducive organizationa l Climate. An organizational climate free from
4. Establis hing . th f g · ti al
fear and frustration goes a long way in de~er~g . e suc~ess o oralamzla on pr_ocesses
including delegation of authority. Organizational cl1~ate 1s essenti y psychol?gical anct
social in nature. In a conducive organizational ch~ate, managers feel _confident that
delegation of authority will be rewarded and not penalized. Further, delegation of authority
should have the support of top level management. It should be reflected in adequate
delegation of authority from top level itself.
5. Tying Delegation with Objectives. A pitfall in delegation ?f authority is ~at, sometimes,
it is undertaken without consideration of what is to be achieved by delegation. To delegate
without knowing and keeping in mind objectives leads to chaos. Therefore, authority
should be delegated to the managers after the objectives are clear.
6. Delegating Authority for Whole Job. It is better to delegate authority for whole job that
a position holder is expected to perform. Frequent delegation on the same subject-matter
may convey a feeling that the delegator does not want to do the job and wants to get rid of
unpleasant job through delegation.
7. Developing Appropriate Control Techniques. Since a superior remains accountable
even for the work which he has assigned to his subordinates, he must ensure that his
subordinates get the work done. For this, proper control techniques should be developed
to ascertain that delegated authority is being used properly. However, these control
techniques should not interfere unnecessarily with the day-to-day functioning of the
subordinates. These should be broad-based and should focus attention on major
deviations from the proper use of authority.

Centralizat ion and Decentrali zation

Ano th er i_mp?rtant issue in organizing is determination of degree of centralizatio~ or
decentrahz~tio n, that is, the extent to which authority is centralized or decentrali~ed.
Centralization refers to concentration of authority at the top level of the organizatt 00 ·
Decentralizatio n refers to systematic delegation of authority in the organization. However. tbere
can neither be absolute centralization nor there can be absolute decentralizatio n. The concepts
of centralization and decentralizatio n are two extreme points in the matter of distribution of
authority in the organization. In between these two extreme points there n1ay be continuurn of
authority distribution. Therefore, an organization may be eith~r relatively centralized or
decentralized.
The term decentralizatio n is used in other context too: physical or geographical locatton ~~
organizational functions. When it is used in the context of physical or geographical locatton,_ 1~,5
termed as physical or geographical decentralizatio n and refers to dispersion of an orgamza?0 al
operation~ at various geographical locations. When it is used in the context of organiza~o~al
functions, 1t is termed as functional decentralizatio n and refers to dispersion of organtzatiO
 artd Au.th.ortty
~u,er
247
ctiOns
into separate autonomous units , "or
1' example
ftlll r terms centralization or decentralizatio 'production, marketing finance etc
tJ v,t,ve , n used in th • • ·
r•Od not analytical. Therefore, the terms are used With ese contexts are merely descriptive
aJl traUzation or functional decentralizatto I certain prefixes like geographical
decentra11Zat1on have been used to denote degree ~-d nl th is text, terms centralization and
decen . o e egation of authority.
~f81liages of Centralization
_u,,.atton has some advantages which are as "oll
CeOtr i:;UJL, 1' OWS:
l. Centralization provides opportunity for personal leadership
2. It facilitates integration of efforts. ·
3. Quick decisions are possible; hence emergencies can b e h an dled very easily.
.
4 . It makes communication and control easier in the organization.
5. It helps in reducing wastage of efforts by avoiding duplication.
6. There is uniformity in actions throughout the organization and, thus, coordination can be
achieved easily.

otsadvantages of Centralization
Centralization has certain limitations which result in disadvantages to organizations. These are
as follows:
1. Centralization is suitable only for smaller organizations, organizations producing single
or homogeneous products, and operating in limited geographical areas. Therefore, when
organizations grow in size and diversify, the advantages of centralization turn into
limitations which affect the operational efficiency of the organizations adversely.
2. Excessive centralization of authority becomes demotivating factor for organizational
members.
3. Centralization tends to result in autocratic leadership style which is injurious in many
cases.
4. There is lack of development of decision-making skills of organizational members as they
are not involved in decision-making process. Therefore, the organizations concerned may
feel shortage of good quality managers.
Because of inherent limitations of centralization, organizations prefer decentralization. Before
proceeding to discuss decentralization, it is worthwhile to understand difference between
delegation and decentralization because of the tendency of using these two terms interchangeably.

Delegation and .Decentralization: Dillerence

Ther . . decentralization. Delegation is the process of
e 1s difference between delegation and it d snot indicate the degree to which
autborization of a manager to get things done. Therefo~e, d oeee of delegation of authority and
authority has been delegated. Decentralization deno es ;itween responsibility and authority
1
~~~onty is delegated organtzatlon-wi~e so that fue~::,~:u delegation and decentralization, there
ar very manager. Because of this basic difference b resented in Table 9. 1.
0th
e er differences between the two which have een P

Factors Determining Degree of DecentraHzation

Ab . aniZatlon structure is: to which degree should
asic question that arises while designing org tion is not simple because degree of
authority be decentralizes? The answer of this ques
 Principles and Practice of Managen
248 te111
1•
TABLE 9.1: Dlllerence between delegation and decentralization
Delegation Decentralization ----
Basts
Process of authorizing subordinates Result of widespread delegation ---
l. Status
2. Nature
Compulsory as minimum authority Optional, depends on organizattonai
delegation being mu st policy
To reduce burden of superiors Giving autonomy to organizational
3. Purpose personnel
Less freedom to subordinates More freedom to subordinates
4. Freedom of action

decentralization depends on a variety of factors. Most of these factors may be beyond the control
-
of individual managers. Such factors are of the following types:
1. Size of Organization. Decentralization depends on the size of the organization. The larger
the size of an organization, the more urgent is the need for decentralization. In a large
organization, decisions have to be made at different levels of management and, even, at
different places to facilitate organizational functioning. In such cases, it becomes difficult
to coordinate the decisions because major issues are to be passed down the line for
discussion. This process may take sufficiently long time resulting in slow decision making.
Slow decision making may be quite costly to the organization. In order to reduce time
taken in decision making, authority should be decentralized.
2. History of the Organization. Decentralization of authority depends on the way the
organization has been built up over the period of time. Normally, those organizations
which expand from within or expand under the direction of the owner-founder show a
marked tendency to keep authority centralized. This is the reason why organizations
belonging to many industrial houses have been designed on centralized basis. On the
other hand, organizations that represent amalgamations and consolidations are likely to
show a definite tendency to retain decentralized authority specially if the acquired unit is
operating profitably. Moreover, the management process and pattern of acquired
organization, once independent one, cannot be changed immediately so as to centralize
the authority. Therefore, at least for some time, the acquired unit will enjoy considerable
autonomy.
3. Manag..:ment Philosophy. The management philosophy of top level managers has
considerable influence on the extent to which authority is decentralized. In fad,
~ecen1:alizati~~ is a kind of management philosophy to regulate organizational processes
mcludmg dec1s1on making. In many cases, top managers may see decentralization as a
way of organizational life that takes advantage of the innate desire of people to create. to
be free, or to have status. On the other hand, many top managers may keep authority with
them not merely to gratify a desire for their status or power but because they sinlP1Y
cannot give up activities and authorities they enjoyed before they reached the top or before
the organization expanded from a small one
4 · Availability of Managers. Availability o~ managers
directly affects the degree of
decentraliz~ tcm because exercise of authority requires competent managers who c~
exercis~tithority properly. If better quality managers are available, there is more chancs
for ~ntralization because of two reasons: (0 These managers can handle the proble~b
.?Ld centralized units effectively. (ti) They have higher need for degree of autonomy whic
1s possible in decentralized structure only.
S. Pattern of Plauoing. Planning is usually the most crucial management function in t:Wnki11g
about decentralization. Other functions of management depend to a great extent 00
 249
rand Auth ority
powe
ing proc ess and also in
plann tng tn term s of achie veme nt objec tives set throu gh plann
organ izatio n has prov ided
term s of how these objec tives can be achie ved . Thus , ff an
throu gh policies, proce dures ,
gwdelines for decis ion maki ng at vario us mana geme nt levels
maki ng decis ions may be
etc., decis ion maki ng beco mes easie r and autho rity for
decentralized easily.
iques affect the degre e of
6. contr ol Tech niqu es. Deve lopm ent and use of contr ol techn
us levels and point s of the
decen traliz ation by ensu ring whet her the perfo rman ce at vario
e of deve lopm ent and use of
organ izatio n is in line with plann ing. High er is the degre
. In fact, emergence of vario us
control techn iques , bette r is the prosp ect for decentralization
decen traliz ation . Thus , the
control techn iques over the perio d of time has facili tated
dece ntral ized easily. In the
organ izatio n whic h uses these contr ol techn iques may be
alternative case, an organ izatio n tend s to be centr alize d.
ities at vario us place s.
7. Dispersal of Activ ities. In many cases , there is dispe rsal of activ
traliz ation . In such a case,
Such activ ities can be mana ged effectively throu gh decen
fact, some organ izatio ns with
considerable autho rity is deleg ated to local mana geme nt. In
ple, State Bank of India
diverse locat ions may form local boar d of direc tors. For exam
zone havin g its own boar d of
opera tes on the basis of local boar d of direc tors with each
directors.
8. Rate of Chan ge in Orga nizat ion. The rate of chan ge
in the organ izatio n also affects the
of the organ izatio n is fast
degree to whic h auth ority may be dece ntral ized. If busin ess
chan ce that autho rity will
developing and it is facin g prob lems in expa nsion , there is more
to share dispr opor tiona te
be decen traliz ed beca use in this case, top mana gers will have
prob lem can be overc ome
decision maki ng, conse quen tly, beco ming overb urden ed. This
in old, well- estab lishe d, or
by deleg ating auth ority at the lowe r levels. As again st this,
centr alize autho rity beca use
slow-moving orga nizat ions, there is a natur al tende ncy to
are prog ramm ed requiring
only few majo r decis ions are made and, in most cases, decisions
instgniftcant amo unt of analy sis and time.
ssed so far whic h are most ly
9. Environmental Influ ence s. Besid es the vario us facto rs discu
intern al to the organ izatio n, there are envir onme ntal influ
ences also whic h deter mine the
factor whic h affects degree
degree of decen traliz ation . The most impo rtant envir onme ntal
ess and leaves very little
of dece ntral izatio n is the gove rnme nt regul ation over the busin
ple, busin ess covered by
scope to the use of discr etion ary powe r of the mana ger. For exam
mini ng the price struc ture
admt ntste red price s requ ires less time of mana gers in deter
and some times even distr ibuti on patte rn. Thus , even mark
eting funct ions throu ghou t the
itself does not have autho rity
country may be centr alize d. Moreover, since top mana geme nt
over these aspec ts, there is no ques tion of its deleg ation .

Advantages of Decentralization
organ izing activities on the part of
Decentralization has beco me the preva iling philo soph y for
large organtzattons beca use it has the following adva ntage s:
izatio n reduc es work load of
1. Redu ction of Workload of High er Man agem ent. Dece ntral
routi ne activiti~s of hig~e r
higher mana geme nt by: (t) assig ning many opera tiona l and
autho rity, and (ti) adop ~g
mana geme nt to lowe r mana geme nt with corre spon ding
tion of highe r mana geme nt 1s
'man agem ent by excep tion' contr ol techn ique in whic h atten
drawn only when there is exce ption al devia tion betw een
stand ard resul ts and act~a l
tion on those aspec ts whic h
results. Thus , highe r mana geme nt is able to focus more atten
are relev ant for long term .
 Prin ciple s and Prac tice of Mana
9ernen.t
250
2. Quick Dec ision Making. Dece ntral izati on lead s
to quic k dec_ision ~ak ing beca use eve
_ry
area . Quic k deci sion mak ing is qll.1te
h th rity to mak e deci sion s in his owni busi ness envi ronm ent
man ager as au o es pose d by the dyna m c . ·
relev ant to facin g chal leng
er coor dina tion amo ng superiors
Bett er Coo rdin atio n. Dec entra lizat ion facil itate s bett
rtme nts beca use each man ager anct
3. and subo rdin ates as well as amo ng diffe rent depa
defin ed. Ther efor e, there is better
depa rtme nt has com men sura te auth ority whic h is well
coor dina tion amo ng man ager s and depa rtme nts.
rol even with less er efforts. This is
Bett er Con trol. Dece ntral izati on /esu lts in bett er cont
4 niqu e thro ugho ut the organization
· poss ible beca use of use of man ag~ ent by exce ption tech
due to decentralization.
ntral ~zat ion deve lops initiative among
S. Deve lopin g Initiative amo ng Sub ordi nate s. Dece
r own area s. As a result, their
subo rdin ates as they have free dom of wor king in thei
idea s whic h may be relevant not
creativity tend s to be high resu lting in eme rgen ce of new
for the who le organization.
only for the work of the subo rdin ates conc erne d but even
6. Developing ManagP.rial Talent. Dece ntral izati
on lead s to deve lop man ager ial talent because
As a resu lt, they develop multi-
man ager s enjoy cons idera ble auto nom y in their work ing.
dece ntra lizat ion whic h leads to
skills. For exam ple, Hind usta n Unil ever has adop ted
ager s, subs eque ntly , work for its
develop man ager s with mult i-ski lls. Som e of thes e man
pare nt com pany Unilever Plc thro ugho ut the worl d.
7. nmn wor k. Dece ntral izati on prov ides platf orm for
deve lopin g team wor k beca use there is
s in deve lopm ent of teamwork
no conflict on the matt er of use of auth ority . This help
ing toge ther effor ts of the whole
among the employees. Team work is a kind of spir it of pull
This incr ease s productivity.
team rath er than focu sing on indiv idua l cont ribu tion s.

Disa dvan tage s of Dece ntra lizat ion

it offer s all posi tive thing s as compared
Various advantages of dece ntral izati on do not mea n that
dece ntra lizat ion whic h may result in
to cent raliz ation . In fact, ther e are man y prob lems in
of dece ntral izati on are of the following
disadvantages to organizations. Som e of the majo r prob lems
natu re:
1. If dece ntral izati on is not follo wed prop erly,
it tend s to crea te chao s in the organiZation
beca use of lack of prop er cont rol.
mos t unit s auto nom ous for facilities.
2. Decentralization tend s to incre ase cost s by mak ing
mor e good man ager s. Unless these
3. For mak ing dece ntral izati on effective, there is need for .
tive.
man ager s are available, dece ntral izati on cann ot be effec 1

4 · Dece ntral izati on requ ires high degr ee of self- moti vatio n and self- cont rol because
of
dece ntra lizat ion does not work
auto nom y given to man ager s. In the abse nce of thes e,
properly.
lizat ion but eme rge beca use it ts not
Thes e prob lems , however, are not inhe rent to dece ntra
on for man agin g large and dtversifit'~
followed properly. Looking into the role of dece ntral izati
ent envi ronm ent som e efforts shoul
orga niza tions whose num ber is incre asin g fast in the pres ·
b e mad e for mak ing dece ntral izati on effective.

Making Decentralization Effe ctive

rs desc ribe d earlier. However. wheJl ~
Whether to decentralize or not depe nds on vario us facto
adva ntag es it has to unde rtake soJtlg
orga niza tion choo ses for dece ntral izati on to take its
e tmp ort~ nt mea sure s for rnakifl
mea sure s to mak e dece ntra lizat ion effec tive. Som
d ecentralization more effective are as follows:
ro,ocr and Authority
251
1. Centralized Top Policy and Control. The c .
decentralized structure has been generatedoncept of centrahzed top policy and control in
th
Motors of USA during the tenure of Alfred~~~ of e management practices of General
contradictory to decentralization , it is not so an. ~hough this concept appears to be
centralization of policy formulation d · Centralized top policy and control refers to
.... ~~~ ti
an control relevant for the en tir e orga..lllL,a
top. This ensures integration of vari on at the
Now this concept is followed b ous parts of e th organization into a unitary whole.
' y most of the organizat· h. h h
decentralization . This system how h . ions w ic ave opted for
· . ever, s ould be limited to certain basic and important
activities affecting the functionmg of entire organiz r l'k f"
distribution, etc. a ion 1 e mancing pattern, dividend
2. Appreciation of Concept of Decentralizatio n• Am a_,or
,i
problem m • d ecentralization and
.
its working is that managers do not really understand and i t th hil
decentralization and, therefore they are not ready to appti~ec ~te e p o_sophy of
hil h ' · prac se 1 as organizational
P osop Y· Oecentralization is based on the premise that considerable autonomy will be
gtven to various units within the framework of the orgamz·ation. However, problems come
while determining the framework. Top-level managers may see it as providing adequate
control on various units so that they dance to their tune while unit managers may feel that
they are free to do whatever they like. Such a feeling may create confusion and tension
between corporate-level managers and unit managers. In order to overcome this problem,
proper organizational climate should be developed in which decentralization is taken in
right perspective.
3. Development of Managers. The success of decentralization depends on the quality of
managers who hold various positions. It can be said that better quality managers are
always needed whatever structure is adopted. However, in case of decentralization, need
for quality managers is more to use authority properly which is delegated to them. Such
managers can be developed internally through relevant techniques of training and
development.
4. Competition among Units. Since various units of a decentralized organization work
independently, there should be proper competition among these units. Since, in many
cases, what one department produces is used by another department irrespective of cost
or quality, inefficiency of one department may be passed to another department. This
problem may be overcome by introducing the element of competition in which the
contribution of each department is to be measured in terms of market price or quality.
This will create consciousness among unit and department managers. Similarly, where
various units produce goods which are not used internally, competition may be generated
in terms of overall contributions of the units to the organization and suitable incentive
package may be adopted to reward highly efficient units.

Empowerm ent
Empowerment has become quite popular in different social areas like woman empowerment.
empowerment ofless privileged class, etc. In management. the basic theme of empowerment has
emerged from the proponents of total quality management which has gained acceptance thro~out
the world. Presently, progressive organizations are looking beyond delegation of authonty and
decentralization; they are putting focus on empowerment which is defined as follows:
Empowerment is a management practice of sharing power, information, and rewards
With employees and making them competent so that they can take initiative to make
decisions to solve problems and improve their work performance.
252 Principles and Practice of Manage~
",ent
There are five elements of empowerment:
1. Helping employees achieve job mastery - giving training, coaching, and guided experience
that are required for initial success.
2. Allowing more control - giving employees discretion over job performance and making
them accountable for the performance outcomes.
3. Providing successful role models - allowing them to observe peers who are performing
successfully on the Job.
4. Using social reinforcement and persuasion-giving praise , encouragement, and verbal
feedback to raise confidence.
5. Giving emotional support- reduction of stress and anxiety through better role prescription,
task assistance , and personal care. 5

Benefits of Empowerment
Empowerment is being practised throughout worl,d as a me~s fo~ mo~va~g e~ployees in the
present era. Alvin Tofller has called this era as power shift era which rmplies a deep level
transformation in the nature of power. 6 If applied properly, empowerment leads to the followmg
benefits:
1. Overcoming Sense of Powerlessness. Most of the organizations have a number of
employees who believe that they are dependent on others and their own efforts have little
impact on the performance. Sense of this powerlessness creates frustration in employees
and they start developing a feeling that they cannot perform successfully or make meaningful
contributions. Proper adoption of empowerment helps employees to overcome this feeling.
As a result, work for them becomes meaningful and they experience higher level of
satisfaction at the workplace.
2. Better Performance. Empowerment affects employees positively in the form of developing
self-confidence, attaching high value to job, and increased use of their talent. All these
result in better performance in terms of faster responses, loyal customers, better quality,
lower costs, and greater productivity. 7
3. Sense of Achievement. Empowerment leads to development of sense of achievement in
employees. Sense of achievement emerges when one performs excellently. Empowerment
helps employees to perform excellently.
Thus, empowerment benefits both employees and organization.
Barriers to Empowerment

Empowerment essentially involves change in management practices which should be employee

oriented. However, there may be many factors in an organization which work against proper
empowerment. Such factors are as follows:
1. Incongruent Orgaotz,itional Culture. Organizational culture affects different processes
and systems which include empowerment too . If the organizational culture has been
developed on authoritarian concept, it works as impediment for effective empowerment
because very little importance is given to employees. Personal whims of higher-ups take
precedent over everything. Unless this type of organizational culture is not changed,
empowerment cannot be effective.
2. Tight Control Systems. In many organizations, control systems are designed on the
premise that "people cannot be relied upon even in tiny matters." Such control systerns
Power and Authority 253

work against the creativity of organizational personnel as well as empowerment. For

effective empowerment, it is necessary that people are given freedom to work within the
overall framework provided by an organization while tight control systems work against
this freedom.
3. Inadequate Delegation of Authority. Adequate delegation of authority is a prerequisite
for proper empowerment. However, in many cases, superior managers do not delegate
adequate authority to their subordinates as discussed earlier in the Chapter. In the
absence of adequate delegation of authority, empowerment does not work effectively.
 f.ij° Mun<
P r inc iples and Practtce ,~,,
"-f/,:,,
286
tantly and timely.
6. Communicate openly, cons ' nts will typically affect client's 11'
ti uch engageme T
From the strategic perspec ve, s th t exist between the I groups and their
organization and the tnterrelationshipls :aptatton will be a key hurdle and Will be
~ b th parties ro et ad personnel wi11 .:iace. These p ersons Will
ili
business partners. ror o
one of the greatest challenges that ec e ent to an unstable transition environment
th ir stable local envrronrn
need to move from e bal steady-state environment.
and then eventually to glo
uman life. One of the few things of real pennane
th ecessary aspect ofh h nee
Change in some way is en all t of changes - change in seasons, c ange in person
e We see sor s h . i ~ s,
in this world is ch ang . d o on Whole society is c ang1ng n some iorrn or th
change in man-made organizattonths, anghs b••e~tive of change is for better. Therefore, in dyn::i,. }
or for worse, ou o :.i ...... 111c
other, either for better . tions the question before the managers is not Whethe
d ing today's organiza ' h t r
society surroun the or anization or not. The relevant question is: ow o cope up With
change will take place in thg t front the organization; how to incorporate changes in the
. ·t ble barrage of changes a con t fi th
mevi a h. ·ts obiectives? Therefore, it is relevan or e managers to find
organization in order to ac ieve i J • • t·
the answer of this question and incorporate it in their organiza 10n.

Nature of Organizational Change

'change' refers to an alteration in a system whether physical, biological, or social.
Th e term · ti O g · ti al h
Thus, organizational change involves making alteration in the orgamza on. r amza on c ange
has the following features:
1. When change occurs in any part of the organization, it disturbs the. ~ld. equilibrium
necessitating the development of a new equilibrium. The type of new equilibnum depends
on the degree of change and its impact on the organization. Equilibrium is the balance
among different forces operating in a situation at a given point of time.
2. Any change may affect the whole organization; some parts of the organization may be
affected more, others less; some parts are affected directly, others indirectly.
3. Organizational change is a continuous process. However, some changes, which are of
minor type, may be absorbed by the existing equilibrium; others, which are major ones,
may require special change efforts.
Newstrom has explained the impact of a change in any part of the organization on the total
organization. He has illustrated it by comparing an organization to an air-ftlled balloon. When a
finger (which represents external force) is forced against a point on the balloon (which represents
the organization), the contour of the balloon visibly changes; it becomes indented at the point of
~ontact. However,_ ifwe look minutely, we find that the shape of the entire balloon has changed:
~ru;
it sn:etch~d slightly. Thus, the whole organization tends to be affected by change in any part
0 ~ it. It rmphes that a change in any part of the organization requires changes in other part~.

either at the same time or later. However, making all the required changes simultaneously is
more effective. Because of this phenomenon of organizational change, it is undertaken ill a
comprehensive way.
In the context of organizational change, two interrelated practices have become quite popula!
in forward-looking organization: organizational entrepreneuring and organizational reengtneerwg·
Organizational Entrepreneurlng

~:::::::::i:~ :::.re~~uring re~r~ to the_ ~eve!opment and application of new ideas

ce i s compe tive position m the marketplace by taking bigger risks.
wi~;
 .ntct and Coordination
COT!,• 287
period of ttme, organizations develop tend enc tO
~.: H~g business models, systems and procye avoid risks because of their well-established
c:;,vsi.u• · sses which · ht h
OIIlent is dynamic, a time comes when the d mig ave worked well. Since
envtro se mo els syste d
ffecttve and organizations lose their competitive O ' ms, an processes ~ecome less
~e organiZations may think of doing business in~ siti~n. In order to overcome this problem,
e old ways. This is done through inn ti ova ve ways which might be quite different
frorn th ova ons which inv 1 i k th •
rofit potential. Innovations involve doing the eXistin b i o ve r s s, ough with better
U:
~ritical success factors which competitors cannot ma~ch nd/essetsakin new ways b~ creating n_ew
n or ing those busmesses which
ave not been tri e d earli er and h ave remained uncontested s h t .
h . • uc s eps may be nsky but offer
better scope of profl tab i1ity. Blue ocean stratem, t:::,J•
proposed by Ki man d M ou b orgne, . based on
is
this theme. 2
Organtzational en~ep~eneuring requires radical changes in the organizations which may be
brought through orgaruzational reengineering.

0rgantzational Reengineering
In general, reengtneering involves making radical changes in a system which may include use of
new technology. An organization is a system. Thus, organizational reengineertng involves making
radical changes in an organization, including its long-term objectives and strategies to improve
its performance substantially. Organizational reengineering differs from business process
reengmeering (discussed in Chapter 3) in terms of scope of change. While business process
reengineering focuses on radical changes in business processes, organizational reengineering
involves changes in all aspects of the organization, including business processes. The concept of
'reengineering the corporation' has been given by Hammer and Champy which involves radical
change of an organization. 3 At present, scope of .organizational reengineering has become quite
broad and includes transformation, integration, and rationalization. Transformation involves
cardinal rethinking of an organization's mission, objectives, and strategies and making required
changes in these. These are connected with external conditions and concern the whole organization.
Integration involves reviewing and redesigning technology, structure, processes, and working
methods of the organization and integrating these with organization's mission, objectives, and
strategies. Rationalization involves simplification of matters of routine type like quality
improvement, maintenance of assets, workforce rationalization, etc. It may not involve radical
change.
FACTORS NECESSITATING ORGANIZATIONAL CHANGE
Organizational change is required to maintain equilibrium between various external and inte~al
forces to achieve organizational objectives. Therefore, there are various factors because ~f~hich
organizational change becomes necessary. These factors may be grouped into two categones -
external and internal.
Externai Factors
Every . . t xt known as envtronment. An organization interacts
organization exists in some con e • h Th g · ti ·
continuously with its environment which is dynamic and keeps on c anging. e or aruza : is
required with its environment. Any change in the environment m es
the to maintain equilibritJ.IIl It the organization is required to create a new
e eXistlng equilibrium irrelevant. As a resud b
th vir nment. Thus, the following types of
qUilibrium by making changes in it as require Y e en °
enVironmentaI changes necessitate organizational change: . , .
1 h int hnology in the organtzation s busmess
· Technological Changes. When there ts a c anget
sector and other organizations adopt the new ec O1O •
i:
gy, the organization becomes less
 Principles and Practice of Man
agern
288 <'! flt
. d it competitive position weakens. Therefore, it has to adopt .
cost effectivWhean th s ganization adopts a new technology, its work structure is art new
technology en e or h gy h • t ectec1
and a new .equilibrium has to be established as tee no1o a~ impac on organizatto
For example , computers and automation have made sign.tricantn
structure an d processes.
impact on organizational functioning.
2 Changes in Marketing Conditions. Since every organization gives its outputs to the
.
· environmen . There may be .....
t , an organization has to face competition in the market. lWO

types of forces which may affect the competitive position of an organization - competitors
and buyers. Any change in these forces may require suitable changes in the organization.
For example, when Indian economy was liberalized, many for~ign organt~ations entered
the Indian market. This phenomenon forced Indian organizations to realign themselves
with the new situation by divesting their non-core businesses and c~ncentrating on the
core businesses, acquiring core businesses, and developing competitive competence to
face competitive threats. Similarly, there may be changes in buyers in terms of their
needs, liking/disliking , and income disposal for a product. These changes force the
organizations to bring those products which meet buyers' requirements .
3. Social Changes. Social changes reflect in terms of people's aspirations, their needs, and
their way of working. Social changes take place because of the several forces like level of
education, urbanization, feeling of autonomy, and international impact due to new
information sources. These social changes affect the behaviour of people in the organization.
Therefore, there is need for making adjustment in organizational working so that it matches
with people.
4. Political and Legal Changes. Political and legal factors broadly define the activities which
an organization can undertake and the methods which will be followed by it in
accomplishing those activities. Any change in the political and legal factors may affect the
organizational operation.

Intemal Factors

Besides change in external factors which may necessitate organizationa l change, any change in
organization's internal factors may also necessitate change. Such a change is required because of
two reasons - change in managerial personnel and deficiency in existing organizational practices.
1. Change in Managerial Personnel. Change in managerial personnel takes place very often.
Old managers are replaced by new managers because of retirement, promotion, transfer.
or any other reason. Each new manager brings his own ideas and way of working in the
organization. The relationships, more particularly informal ones change because of change
in managerial personnel. Moreover, attitudes of the existing p'ersonnel change over th e
period of time. The result is that the organization has to change accordingly.
2. Deficiency in Existing Organizationa l Practices. Sometimes, changes are necess~Y
because of deficiency in the present organizational practices. These deficiencies rnaY be~
the form of lack of uniformity in policy decisions, undesirable span of management, iargs
number of managerial levels, lack of coordination between various departments, obstacle
in communicatio n, multiplicity of committees, lack of cooperation between line and staff,
and soon.