8 Factors to Determine the Degree of Effective ... Decentralisation of Authority - Factors Affecting the Degree of Decentralization: Nature of Growth of Organization, Extent of Diversification and a Few Others. In this type of organisation structure, the duty of daily operations and minor decision-making capabilities are . The community-driven development (CDD) and decentralization nexus can empower communities to exert influence over local governance and services. Answer. The larger the size of a concern, a decentralization . Centralisation and Decentralisation - VEDANTU Under decentralization, power and control are systematically delegated to lower levels in the organization. The Real Advantages and Disadvantages of Decentralization. PDF Hr Centralization Vs. Decentralization 4. It determines whether the operations of the organization are concentrated at the one place or in a region or dispersed . But in case, subordinates do not have enough authority, then the manager is frequently consulted for the clarifications, and as a result superior spends a lot of time in this. . PDF The Effect of Local Governance on Firm Productivity and ... Centralization and decentralization exist as two diverse systems of the exercise of power. Nature of Growth of Organization: Uniformity of Policy, 3. The degree of decentralisation in an enterprise is determined by a number of factors. This table presents the result of the effect of decentralization on firm innovation. Must a business choose one or the other? Which of the following determines the degree of decentralization a firm might use? When a firm increases its degree of decentralization it may: a. incur an increase in influence costs. In such a model, the mode of communication mostly adopted is the vertical or top-down mechanism. Decentralization is usually desirable when the following conditions are met: The organization is very large, like ExxonMobil, Ford, or General Electric. This is the case in many undeveloped countries like Nigeria. A firm's vertical differentiation determines where in its hierarchy decision-making power is concentrated. The following factors affect the decision of decentralization of the organization: Management's Philosophy: In the organizations where the top management wants its employees to take some of the decisions, a decentralized system is formed.. In an organization, centralized way of making a decision entails less autonomy to everyone except the central leadership. Answer: (c)Span of management. A system is "an assemblage or combination of things or parts forming a complex or unitary whole".3 Thus, to describe a Key challenges to effective TPGRM in . 2. Centralization and decentralization are the categories by which the pattern of authority relationships became clear. To the extent that authority is not delegated, it is centralized. A. profitability: B. asset utilization: C. liquidity: D. none of the above. Varying degrees of decentralisation 08 3. With increasing globalization and the advent of technical innovations, organizations are changing the way they are structured at both the enterprise and functional level in order to adapt to new business realities. As the size of the organisation increases. Centralization and-decentralization 1. determine the nature of divisionalisation, D. The degree to which lower management is empowered to make decisions. The size of the organization may refer to the number of branches the organisation has or even the number of its employees. Moreover, centralization only requires few highly competent individuals, unlike decentralization that would attract incompetent people. Concentration of power: Centralization, within an organization refers to the . Size and Complexity of the . b. realize larger benefits from specialized task assignment. The firm's financial requirements are directly related to its investment needs, that is, the firm should formulate its dividend policy on the basis of its future investment needs. Read more about Decentralisation at Vedantu.com. TRUE. Compare the arguments for decentralization and centralization. DECENTRALIZATION 3 Decentralization in Business Management When trying to explain what decentralization looks like in management there are many layers to examine first. Which of the following determines the degree of decentralization a firm might use? 8-1. c. also change its corporate culture. Rate of change in the organization. Factors Determining Span of Management. Q1. Availability of competent managers. true. The firm is in a dynamic environment where quick, local decisions must be made, as in many high-tech industries. Question: When a firm increases its degree of decentralization it may: a. incur an increase in influence . The terms centralization and decentralization refer to the political and administrative structure of a country. The firm is in a dynamic environment where quick, local decisions must be made, as in many high-tech industries. 1,000/- and B is allowed to do the similar type of work worth Rs. Decentralization of performance The nature of operations (like the economics of division of labor, the opportunities for using machines and the nature of the work to be performed)also determine the extent of decentralization. Of course decentralization also has important challenges, which also need to be mentioned. authority such as a company that requires employees to undergo a variety of health tests each year as decided by the firm. The Philosophy of the Management, 7. There are typical triggers that bring up the question of whether to centralize or decentralize a certain function. History and age- the size of organization, the degree of decentralization depends upon history and ages of organization.If it is organized by an individual then in such kind of organization, there will be centralization of authority. Administrative decentralization can be easily carried out politically, but giving autonomous functioning is not allowed. They are: The size of the organisation determines the extent of decentralisation. Organizational culture- this influences the control techniques identical to a particular firm. Centralization and decentralization are two extremes. On the other hand, Decentralization refers to the dissemination of powers by the top management to the middle or low-level management. Any of these cannot be exclusively adopted by any organization. the workplace will force businesses into a new era of decentralisation. Click to see full answer. 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. Top management outlook. Nature of functions of the organization. The mode of . 279. MCQ Questions for Class 12 Business Studies with Answers were prepared based on the latest exam pattern. The degree to which an organization allows lower level managers to make decisions determines the degree of decentralization. 11) If Burger King were to buy out Mom and Pop's Burgers, Burger King would be growing by vertical integration. Dispersal of operations. TRUE or FALSE. 8 Factors to Determine the Degree of Effective Decentralization. A. . . Decentralisation can be defined as the organisational structure, where the top management of a firm entrusts the middle and lower-level management with the responsibility to take the decision. The following are illustrative examples. The level of management in the organizational structure is determined by. Definition: Centralization and decentralization are two types of systems based on which the decision-making takes place within a business or an organization. A subsidiary is a company that has a degree of independence from . Restructuring a given function must be done in the context of overarching business strategy, and with sensitivity to many moving parts. Centralization entails the systematic reservation of authority based at a central point. There is no denying the fact that larger the firm, the more the decisions to be made inviting number of departments and levels, the harder it is to coordinate them. 1. Thus, higher the degree of decentralization, the wider is the span of management. However, if the mindset of the administration is such that they solely prefer to make all the business-related decisions, they won't go for . The main difference between Centralization and Decentralization is that centralization in an organization involves planning and decision-making power is given completely in the hands of senior management. The degree to which an organization allows lower level managers to make decisions determines the degree of decentralization. Businesses that operate in markets where they are subject to compulsory standards or regulations, such as financial services or military supplies, need centralized control and tightly applied policies and procedures. Business leaders dating back at least to Alfred Sloan, who laid out GM's influential philosophy of decentralization in a series of memos during the 1920s, have recognized that badly judged centralization can stifle initiative, constrain the ability to tailor products and services locally, and burden business divisions with high costs and poor . Decentralization on the other hand, means delegation of business decisions by the owners to their subordinates, and then the others further down in the management hierarchy. Contents Centralization Prerequisites of decentralization Types of decentralization Factors determining the extent of centralization Advantages of centralization and decentralization Distinction between delegation and decentralization Decentralization and performance evaluation Marketing decision to decentralize Case . 2.1 Decentralization of business regulatory functions The main hypothesis of this paper is that local governance quality determines how national business regulations are interpreted and enforced, which will affect aggregate productivity through both individual firms productivity as well as the efficiency of resource allocation across firms. What […] system's "centralization" or "decentralization" is, in this paper, a matter of degree. Availability of competent personnel. The advantages decentralization over centralization In decentralized organization the burden of Chief Executive is reduced, who has the entire burden of decision making in centralized organization. Some of those factors are explained in detail below. It implies that all power and authority is concentrated at the highest level. This can take the form of transferring powers to lower levels of an organization, which is called deconcentration or administrative decentralization. Although there are multiple factors that can influence the decision of decentralization, here is a common list of major factors: Importance of the decision-making process. Decentralization is usually desirable when the following conditions are met: The organization is very large, like ExxonMobil, Ford, or General Electric. Determine the Degree of Structural Centralization Storyboard. MCQ on Organising Class 12 Business Studies - Topic 2 - Organizational Structure. Learn Decentralisation topic at Vedantu. strategic business units (SBUs) within multibusiness organizations is examined. Effect of decentralization on firm innovation. Factors Determining the Degree of Decentralization. Planning pattern. Decentralization may lead to more creative, innovative and responsive programs by allowing local "experimentation." It can also increase political stability and national unity by allowing citizens to better control public programs at the local level. Learn vocabulary, terms, and more with flashcards, games, and other study tools. There are important costs associated with decentralization. The chain of command used to follow the flow of authority from top of the hierarchy to the lowest levels. . So the degree of decentralisation is to be decided by the authority given. In contrast, decentralization involves delegation of responsibility and the associated decision-making powers across various levels in the organization. Decentralized IT structures provide several benefits, including: 1. d. all the above. However, how does the organization decide upon the degree of decentralization? The degree of centralization and de-centralization can be affected by many factors like nature of operation, volume of profits, number of departments, size of a concern, etc. Definition of Decentralisation. Factors to determine the degree of effective decentralisation are : 1. See Appendix A for the definitions of all the variables. Centralization and Decentralization 2. ; The three steps involved in delegation are: Responsibility, Authority and Accountability. Answer: The degree of specialization within an organization is determined by the organization's structure. Determine the Degree of Structural Centralization Identify the locus of decision making in your organizational structure. Meaning of Decentralisation 2. It is the delegation of authority, at all the levels of management. The degree to which an organization allows lower level managers to make decisions determines the degree of decentralization. Managers are willing to share power with their subordinates. But decentralization is not a panacea, and it does have potential disadvantages . Managers are willing to share power with their subordinates. 5,000/- naturally there is less degree of decentralisation in the case of A as compared to B. . Decentralization transfers authority and responsibility of major government functions from central to sub-national governments — including local governments, civil society, and the private sector. Degree of Decentralization indicates the extent to which an organization wants to decentralize depends upon the degree of decentralization. Answer: Some important factors determining decentralization are: The size and complexity of the organization. B. 9) Corporate strategies determine what business a company is in or wants to be in, and what it wants to do with those businesses. It allows each business unit to maintain a separate server and choose hardware and applications based on individual needs. A larger firm needs more decisions. a) Authority. In order to work together efficiently, the group must find the best way to organize the . Decentralization is usually desirable when the following conditions are met: The organization is very large, like ExxonMobil, Ford, or General Electric. Answer» d. none of the above. 10) Diversification is an example of a corporate retrenchment strategy. An organization is a group of people who together work to achieve a common goal. Answer: True LG: 2/LL: 1 Page: 245. When an organization grows, it becomes complex and becomes a challenge for top executives. Keywords: Fiscal federalism - Partial and full scal decentralization - Soft and hard budget constraints - State capacity. It is more costly. The outlook of the top management. We will work from the top of a business structure and make our way down to the microscopic base of decentralization, a management style that is proven to be one of the best business implementations an organization can choose. 1. There is no denying the fact that larger the firm, the more the decisions to be made inviting number of departments and levels, the harder it is to coordinate them. History of the Enterprise, 6. Coordinating all of them and consulting several specialists and executives can take a lot of time, delaying the decision. e. none of the above. Planning and control procedures. Degree 5. Decisions can be costly to the concerned organization, especially in terms of money, goodwill of the company, and employee . Start studying Business ch 8. Which factors affecting degree of centralization and decentralization? As you read through the examples put forward In any organization there is a lesser or greater degree of decentralization. Introduction. We have provided Organising Class 12 Business Studies MCQs Questions with Answers to help students understand the concept very well. Strategy and the organizational Environment: A strategic plan will influences the types of markets, technological environment, and competition with which the organization must contend.These factors will, in turn influence the degree of decentralization that the firm appropriate. The superscripts ***, **, and * indicate two-tailed statistical significance at the 1%, 5%, and 10% levels, respectively. A Business Encyclopedia. Also, a large-sized company has numerous departments and levels. Similarly, what are the various factors influencing the centralization and decentralization? For example, if A is empowered to buy certain types of materials worth up to Rs. TRUE or FALSE. Conversely, in a decentralized state, power and responsibilities are dispersed and distributed across regions and areas. But in case of business activities when there is merging being done there is decentralization of authority. Business and Industry . Importance 6. The degree to which an organization allows lower level managers to make decisions determines the degree of decentralization. Decentralized IT structure . The size of the organization is an important factor which determines the degree of decentralization. In this article, we will look at the 9 factors that determine the degree of decentralization. The firm is in a dynamic environment where quick, local decisions must be made, as in many high-tech industries. A firm's culture defines the formal structure and work relations. The amount of control the president has over the company is directly related to the degree of centralization or decentralization. Over 63% of business leaders predict a shift towards a more decentralised business model with . History of the organization. Control. The degree of decentralization in an organization is determined by a combination of the following factors: Factor # 1. Size of the enterprise: Another pertinent factor determining the degree of decentralization largely is the size of the organization. Availability of Managers, 5. Check the below NCERT MCQ Questions for Class 12 Business Studies Chapter 5 Organising with Answers Pdf free download. But, con-trary to the common wisdom, we nd that full decentralization is the preferred regime when regional administrative capacity is low. So, the extent or degree of decentralisation varies from concern to concern. If the firm has abundant investment opportunities, it should prefer less dividend payments, because the firm can invest the funds. Is it true that the degree to which an organization allows lower level managers to make decisions determines the degree of decentralization? b) Responsibility. To determine whether an organization is centralized or decentralized greatly depends on the location of decision-making authority and the degree of decision-making power at lower levels. The size. If it has developed a set of departments first and other departments or divisions are established later, authority tends to be centralized. History of the Enterprise: The way in which the business has been built is another factor which determines the degree of decentralization. Determine what makes sense to employees." Each state has different drivers that contribute to how human resources/ civil service functions, for example, the political environment, presence of unions, budget cuts, and so on. Centralization vs Decentralization. In WHO's case the most obvious one is the necessity to maintain the 6 regional organizations, as well as the many country offices, in addition to headquarters. Control. The amount of control the president has over the company is directly related to the degree of centralization or decentralization. Centralization is the degree to which decision making authority is concentrated at higher levels in an organization. Decision making and control of an entity arise from the top management. Decentralization is the tendency to disperse decision-making authority throughout all levels of management by extensive delegation. Decentralization is the allocation of authority to multiple locations, organizations, teams and individuals. Three strategic continua are considered-Gupta and Govindarajan's (1984) build-harvest, Porter's (1980) differentiation-low cost, and Miles and Snow's (1978) prospector-defender; in each case it is proposed that the degree of decentralization of decision-making Process 4. The degree of decentralization is a characteristic of a system. Realize the benefits of a "best fit" structure by finding the balance between flexibility and control. Meaning of Decentralisation: Decentralisation is passing of authority to make decisions to the lowest possible level in the organisational hierarchy. Impact of decentralisation on TPGRM 10 4. The _____ ratios help determines the degree of financial risk and earnings volatility present in afirm. Economic Size, 4. . This research will help you: Difference between centralization and decentralization The main points of difference between centralization and decentralization are given below: 1. TRUE. The importance of a proper understanding of corporate liquidity management practices is underscored by the fact many CFOs report that liquidity management decisions are among the most important decisions they make (Graham and Harvey, 2001) and by the fact corporate cash reserves now make up more than 20% of the total assets of typical U.S. publicly traded firms. The question of decentralization vs. centralization in building organizations is a classic question in organizational design. Answer: True LG: 1/LL: 1 Page: 240. The top management of a firm influences it's degree of centralization by working to keep ultimate authority of decision making at the upper levels of the firm. Managers are willing to share power with their subordinates. Organizational Structure. decentralization dominates; otherwise full decentralization may dominate. The degree to which an organization allows lower level managers to make decisions determines the degree of decentralization. Degree of diversification. A mixed model of both centralization and decentralization is likely the answer. Decentralization is defined as the transfer of decision-making authority closer to the consumer or beneficiary. Decentralization is pursued. Decentralisation is delegation of authority to the maximum possible extent. Businesses that operate in markets where they are subject to compulsory standards or regulations, such as financial services or military supplies, need centralized control and tightly applied policies and procedures. In this section we discuss some of the major factors that determine the behaviour of the organizations, in particular the power relationships between different groups within and around organizations, that may influence the outcome of attempts at decentralization. Decentralisation is not an absolute term. The degree to which lower level management is empowered to make decisions. Decentralization is a practical approach when different departments in a company have different IT needs and strategies. Decentralization, in simple words, is the diffusion of authority throughout the organization. it becomes necessary to decentralise and divide the organisation . In a centralized state, the power and the authority are concentrated in the hands of the central government, which takes decisions and performs most functions. The first and one of the major factors is the size of the organization. d) All of these. Communication system. Control techniques. Allen defines decentralization as systematic effort to depute the lowest levels all authority except that which can only be exercised at central points. The driving force behind the change in business organizations is the change in consumer expectations. Size of the enterprise: Another pertinent factor determining the degree of decentralization largely is the size of the organization. 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