Various factors affect decentralization of authority. These factors are discussed below:
- The size of the organization: It is observed that the speed and adequacy of decision making, flexibility and efficiency are enhanced through decentralized operations in the case of very large, multi-product diverse and complex organization. Thus, larger the size of an organization, larger will be the decentralization of authority. Smaller the size of an organization, smaller will be the decentralization of authority.
- Organization history: Degree of decentralization depends on how the organization has been built-up over time. If the organization is established or grown up by a large number of people or reputed person then the rights and powers are to be decentralized. If the organization is established by the small group of people then the rights and power are to be centralized.
- The cost of decentralization: If the cost of decentralization is high, then the manager or superior centralize the rights and power. If the cost of decentralization is minimum or low then the right and power are to be decentralized.
- Philosophy of management: Decentralization of authority depends on the perception and philosophy of top management. Some managers have low self-confidence, conservative attitude and traditional faith. Such types of managers centralized the rights and power but some managers have the modern concept and consider the democratic system. Such types of manager decentralize the rights and power.
- Control technique: In the case of the effective control system, the manager or superior decentralize the rights and power because subordinately is self-controlled. In the absence of effective control system, the manager or superior centralize the rights and power.
- Nature of decision: Organizational decisions are broadly classified into two types i.e. repetitive and non-repetitive. If the decisions are repetitive in nature, then the rights and power are to be centralized. If the decisions are not- repetitive or unique nature then the rights and power are to be decentralized.
- Competencies of a subordinate: If more competent and experienced personnel are available at a lower level, then the power and authority are decentralized. Without having the personnel competent, without facilitating efficient training and management development program to the staff members, decentralization process cannot be followed.