1. Reduces burden of top executives:
Decentralization of authority relieves top executives from operating details or routine work so that they can concentrate on more important functions of policy-making, coordination and control. As a company grows beyond the reach of the chief executive, decentralisation becomes necessary. By delegating authority for operating decisions, top management can extend its leadership over a giant enterprise.
2. Quick and better decisions:
Decentralization permits prompt and more accurate decisions because decisions are made by those who are fully aware of the realities of the situation. Decisions can be made near the point of action without consulting higher levels and without waiting for approval of top executives.
3. Growth and diversification:
Decentralisation facilitates growth and diversification of products and markets. Under decentralisation, each product line is treated as a separate division so that it can respond quickly to the changing demands of its special market. The self-contained product divisions enjoy considerable independence and proper emphasis can be put on each product line under the overall coordination and control of top management.
4. Better communication:
Decentralisation improves organizational communication and efficiency because there are fewer levels of authority. The problems of red-tape and bureaucratic delays are reduced.
5. Development of executives:
Decentralisation provides an opportunity to subordinate managers to take initiative and acquire leadership qualities. Lower level executives learn to manage by exercising delegated authority. A reservoir of promotable managers becomes available which simplifies management successions and helps to ensure continuity of management. Decentralisation promotes autonomy, initiative and creativity on the part of subordinates. As the success and survival of the organisation does not depend upon a few individuals at the top, decentralisation makes for stability and continuity of the enterprise.
5. Improvement in motivation and morale:
Decentralisation improves the job satisfaction, motivation and morale of subordinates. Opportunity to make decisions provides sense of belonging and satisfies the needs for power, prestige, status and independence. A climate of competition is generated. High motivation and morale help in improving productivity and working relationships. Better utilization of talents at lower levels can be made.
7. Effective supervision and control:
Decentralisation results in effective supervision because managers at the lower levels have complete authority to make changes in work assignment, to take disciplinary action, to recommend promotions and to change production schedule. Decentralisation also promotes effective control through comparative evaluation of performance and clear-cut accountability for results.
8. Democratic management:
Decentralisation makes for democratic management and flexibility of operations. People at lower levels do not feel alienated from the top and there is little danger of administration becoming top heavy or monolithic. Necessary changes can be made without dislocating the entire structure.
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