Effective decentralisation requires fulfillment of the following conditions :
- Appropriate centralisation– Decentralisation can be effective when there is a centralised authority for overall planning and control. The central authority ensures close coordination between various operating units. Without such a cementing force, the decentralised organisation may fall apart into pieces.
- Development of managers– Effective decentralisation requires a large number of highly competent managers who are capable of working independently. In order to develop such executives, top management must delegate authority and allow the subordinates to learn through experience in making decisions.
- Open communication– A sound communication system should be established to ensure continuous interaction between superiors and subordinates. Necessary feedback on operating results should be made available to superiors. Open communication system will enable managers to provide advice and guidance to subordinates.
- Coordination– Decentralisation tends to create rivarly and cooperating divisions. Departmental managers compete for scarce resources. Effective coordination is essential to prevent such disintegrating tendencies. Interdepartmental coordination helps to prevent the danger of fragmentation. Committees, liaison officers and other mechanisms of coordination may be used to ensure coordination.
- Adequate controls– Effective decentralisation needs an appropriate control system that will distribute the resources, lay down standards ol performance and exercise control to ensure that the various operating units are working in the desired direction.