Good Looks Ltd are the manufacturers of cosmetics. The company enjoyed a pre-eminent position in the business and has grown in size. Till recently the company had been doing good business, but after the entry of competitors the market share of “Good Looks Ltd” has declined. One of the reasons for this was that all decisions were taken by the higher management. This has resulted in the concentration of all decision making process at the apex of the management hierarchy. Worried about the decline in the market share and profit, the company appointed “Structures Consultants India Ltd” as a consultant to suggest improvements in the organisation’s decision making process. The consultant suggested that the decision making responsibilities may be divided among hierarchical levels. They said that if decision making authority will be shared with the lowest levels and is consequently placed near the point of action, it will help in quick decision making and this will help the company in adapting itself to the dynamic operating conditions. They stated that the philosophy of dispersal of authority propagates the belief that people are competent, capable and resourceful and can assume the responsibility of effective implementation of their decisions.
(a) Identify and give the meaning of the concept based on which “Structures Consultants India Ltd” gave their recommendation to “Good Looks Ltd”
(b) Explain any four points of importance of the concept identified in (a) above
Answers
Answer:
a) Decentralization
b) 1) Develops initiative among subordinates :Decentralization helps to promote self-reliance and confidence amongst the subordinates. This is because when loer managerial levels are given freedom to take their own decision they learn to depend on their own judgement. It also keeps them in a state wherein they are constantly challenged and have to develop solutions for the various problems they encounter. A decentralization policy helps to identify those executives who have the necessary potential to become dynamic leaders.
2) Develops managerial talent for the future: Formal trainingplays an important part in equipping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently. Decentralisation gives them a chance to prove their abilities and creates a reservoir of qualified manpower who can be considered to fill up more challenging positions through promotions. It also helps to identify those who may not besuccessful in assuming greater responsibility. Thus, it is a means of management education as well as an opportunity for trained manpower to use its talent in real life situations.
3)Quick decision making: The management hierarchy can be looked upon as a chain of communication. In centralised organisation because every decision is taken by the top management the flow of Information is slow as It has to traverse many levels. Response also takes time. This reduces the speed of decision making and makes it difficult for an enterprise to adapt to dynamle operating conditions. In a decentralised organisation. however since decisions are taken at levels which are nearest to the points of action and there is no requirement for approval from many levels, the process is much faster. There are also less chances of information getting distorted because it doesn't have to go through long channels.
4) Relief to top management: Decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide albeit within the limits set by the superior. Also, personal supervision is generallyreplaced by other forms of conts such as return on invest etc. Decentralisation also lea the top management with time which they can dive important policy decisions rat than occupying their time w both policy as well as operation decisions. In fact decentralisation is greatest when checking required on decisions taken by lower level of management is least