Define decentralization and decentralized decision-making. Discuss the costs and

Question

Define decentralization and decentralized decision-making. Discuss the costs and benefits associated with decentralized decision-making and common forms of decentralization. Define balanced scorecard. Evaluate the usefulness of the balanced scorecard approach to decision making. Search sources to integrate outside perspectives. Formulate arguments for or against the use of performance measurements and/or the balanced scorecard approach implicating their influence on decision-making and the effectiveness of the organization.

Explanation / Answer

Decentralization or decentralisation (see spelling differences) is the process of dispersing decision-making governance closer to the people and/or citizens. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy, sociology, and economics. Decentralization is also possible in the dispersal of population and employment. Law, science and technological advancements lead to highly decentralized human endeavours.

Decentralization is defined and interpreted in several ways. Sometimes it is considered a
term, sometimes a concept, a process, a theory, a methodology, or a policy, even a trend
(Katalin Tausz). One of the most common definitions is that it is a process through which
authority and responsibility for public functions is transferred from the central
government to local governments, civil societies and other non-government
organizations. It is a spectrum rather than a single state, ranging from deconcentration,
delegation to devolution, and delocalization. But, decentralization should not be seen in
over-simplistic manner, as a movement of power from the central to the local
government. It is rather a process of redefinition of structures, governance procedures and
practices to be closer to the citizenry.

Decentralization is a generic term which covers a number of models such as the
following: deconcentration which refers to the process of administrative decentralization
whereby the central government designs a structure that enables its field agents and
offices to work in close proximity to the local people; delegation which is the transfer of
responsibilities from central government to semi-autonomous bodies that are directly
accountable to the central government; devolution which is the process of transferring
decision-making and implementation powers, functions, responsibilities and resources to
legally constituted, and popularly elected local governments; delocalization which is the
spatial distribution of central government socio-economic development facilities and
activities such as schools, hospitals, etc. in peripheral regions3.
Today, throughout the world there is a broad-based movement towards greater
decentralization. Decentralization and local governance are recognized as basic
components of democratic governance as providing the enabling environment in which
decision-making and service delivery can be brought closer to local people.

The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

The balanced scorecard is a management framework which, since its inception by Kaplan and Norton in
the early 1990s, has been adopted, modified and applied by hundreds of organisations worldwide. If understood thoroughly and implemented appropriately, its potential contribution to organisational success – however measured – is fundamental. The scorecard translates vision and strategy into four notional quadrants. In the original offering from Kaplan and Norton, these quadrants reflected the following perspectives and implications of the strategy:
Financial;
Customer;
Internal business processes; and
Organisational learning and growth.

The key to the popularity of the scorecard may lie in its flexibility and adaptability.Whether for commercial
organisations, governed by profits, public sector operations governed by service delivery, or not-for-profit
organisations driven by commitment to a particular cause, a scorecard that improves performance (either through performance measurement, or via strategy refinement), can be developed. When first developed, the scorecard was positioned as a holistic performance-measurement framework, which could provide management with useful information relating to financial performance, internal processes, customer perceptions and internal learning and growth.

The underlying premise of the strategic
scorecard is straightforward: that all
the actions determined by
management decisions and
implemented to promote strategy
realisation, have an impact. To
successfully contribute to achievement
of an organisation’s mission, the
scorecard must effectively interpret
strategy into operational terms.
Strategy is thus ‘operationalised’
through the assumed relationships
between actions and their impacts. By
measuring these impacts (via the
scorecard’s identified key performance
indicators), management information –
which informs decision-making – is
created.

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