What Is Decentralization Ratio?
Decentralization ratio is a measure of the degree to which decision-making authority has been delegated from higher levels in an organization to lower ones. It is calculated by dividing the number of decisions made at lower organizational levels by the total number of decisions made throughout the entire organization. The decentralization ratio can be used as a tool for assessing how much autonomy and responsibility have been given to different parts of an organization, and whether or not it is appropriate for its size and complexity.
The decentralization ratio helps organizations determine if they are making effective use of their resources, since more decentralized structures tend to be more efficient than centralized ones due to increased flexibility and responsiveness. Additionally, it allows managers to identify areas where further delegation may be beneficial in order to improve efficiency or reduce costs. Decentralized organizations also tend to foster innovation through greater employee engagement and ownership over projects, leading ultimately towards better performance outcomes overall.