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CMA Foundation · Fundamentals of Business Economics and Management · Organisation Structure, Responsibility, Accountability and Delegation of Authority

Sharma Textiles, a Ludhiana firm, lets each regional branch manager fix local prices and hire staff, while the head office controls only the overall budget and policy. The relationship between delegation and decentralisation here is best described as:

Decentralisation is a systematic extension of delegation to all levels. Delegation is passing authority to a subordinate in a particular case, whereas decentralisation is a deliberate policy spreading decision power throughout the organisation, as in the branch managers fixing prices and hiring staff.

  1. ADecentralisation is a systematic extension of delegation to all levelsCorrect
  2. BDelegation and decentralisation are identical in every respect
  3. CDelegation is possible only in a centralised firm
  4. DDecentralisation means authority is retained wholly by the head office

Explanation

Delegation is passing authority to a subordinate, often individually and with the superior retaining control. Decentralisation is the systematic, organisation-wide pushing of decision power downwards, so it extends delegation across levels. The two are not identical, and retaining all authority is centralisation.

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