Which of the following is not an importance of Decentralisation?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Helps in decision making at the top management level which reduces the speed of decision making

Option (1) Helps to identify those executives who have the necessary potential to become dynamic leaders — An importance of decentralisation (Incorrect). Lower-level managers get real decisions to take, so the able ones show themselves. This develops managerial talent.
Option (2) Helps to identify those who may not be successful in assuming greater responsibility — An importance of decentralisation (Incorrect). The same test also shows who is not ready for a bigger role.
Option (3) Helps in decision making at the top management level which reduces the speed of decision making — Not an importance of decentralisation (Correct). It says the reverse of the real point. Decentralisation lets decisions be taken at the lower levels, close to the action, so decisions become quicker.
Option (4) Helps the top management to devote more time to important policy decisions rather than occupying their time with both policy as well as operational decisions — An importance of decentralisation (Incorrect). With daily decisions taken lower down, the burden on top management is reduced.

NCERT (2026-27 Edition): “(i) Develops initiative among subordinates: Decentralisation helps to promote self-reliance and confidence amongst the subordinates. This is because when lower managerial levels are given freedom to take their own decisions they learn to depend on their own judgment. It also keeps them in a state wherein they are constantly challenged and have to develop solutions for the various problems they encounter. A decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.”

“(ii) Develops managerial talent for the future: Formal training plays 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 be successful in assuming greater responsibility. …”

“(iii) 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 dynamic operating conditions. …”

“(iv) 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 generally replaced by other forms of control such as return on investment etc. Decentralisation also leaves the top management with more time which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions. …”