Organisations and management accounting
Organisations and management accounting

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Organisations and management accounting

5.1 Advantages of decentralisation

Coates et al. (1996, pp. 115–6) identify the advantages of decentralisation as follows:

  • Specialisation. Managers can develop more detailed and specialised knowledge by concentrating on a limited aspect of the organisation’s operations. This should result in better quality decisions.
  • Timeliness. Quicker decisions are possible if it is not necessary to pass decisions up through the hierarchical chain of command. In addition, senior managers’ time is then available for more important decisions affecting the future of the whole organisation.
  • Motivation. Having authority to make decisions usually results in greater motivation and commitment and hence improved performance.
  • Human resource development. Less experienced managers can ‘learn their trade’ without their mistakes jeopardising the entire organisation. The impact of mistakes/misjudgements is likely to be confined to a limited aspect of the organisation’s operations.
  • Organisational segment performance comparison. By dividing the organisation into separate segments, it is possible to evaluate which aspects of operations are performing well and which are not – something not usually possible when the inputs/outputs are at a more aggregate level.
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