Final answer:
Decentralization is the delegation of decision-making authority throughout an organization, allowing managers at various levels to make key decisions relating to their area of responsibility. This promotes faster decision-making, empowers managers, and provides flexibility, but can also lead to coordination challenges.
Step-by-step explanation:
The delegation of decision-making authority throughout an organization by allowing managers at various operating levels to make key decisions relating to their area of responsibility is called Decentralization. In a decentralized organization, decision-making power is distributed among managers, allowing them to address issues specific to their departments or areas of expertise.
For example, in a retail company, the regional manager may have the authority to make decisions regarding store operations, while the store manager has decision-making authority over the employees and daily operations of the store. This delegation of authority enables faster decision-making, empowers lower-level managers, and promotes organizational flexibility.
Decentralization can have advantages, such as empowering employees and allowing for quicker responses to local issues. However, it can also have disadvantages, including potential coordination challenges and a lack of uniformity in decision-making across the organization.