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. While pioneers of scientific management tried to determinethe best way to perform a job, those in the administrative management explored the possibilities of an ideal way (rule of thumb) to put all jobs together and operate an organization. Thus the main focus of administrative school or general management theory is on finding "the best way " to run organizations. Admnistrative management school is also called "traditional principles of management. Henry Fayol, a French industrialist, is the chief architect and the father of the administrative management theory. Other prominent exponenets nclude Chester I. Barnard, amid Colnel Lyndal Urwick. Some people think Max Weber had influenced this school as well. According to them the two major contributors to administrative management school of thought were Henri Fayol (1930) and Max Weber (1922). Henri Fayol's 14 principles of management are still relevant, while Max Weber's bureaucracy model still has some relevance in medium and large organizations. Weber's bureaucratic management theory is often presented alongside the work of administrative management researchers such as Henry Fayol, Luther Gulick and Lyndall Urwick. The administrative theory "emphasized management functions and attempted to generate broad administrative principles that would serve as guidelines for the rationalization of organizational activities" (Scott p. 36). Henry Fayol played a main role in the turn-of-the-century Classical School of management theory. Fayol believed that techniques of effective management could be defined and taught and that managerial organization hold as much importance as management as workers organization. He was the first to identify functions of management. According to Fayol the five functions of managers were: • • • • • Plan Organize Command Coordinate Control.
Functions of Managers (According to Henry Fayol) Planning is the act of anticipating the future and acting on it. "Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change and develop appropriate responses." (Robbins, 2000, p.247) Organization is the development of the institution's resources, including material and human. Commanding is keeping the institution's actions and processes running. Coordination is the alignment and harmonization of the groups' efforts. Finally, control means that the above activities are performed according to the appropriate rules and procedures. Fayol's work included a definition of a body of principles, which enabled a manager to construct a formal structure of the organization and to supervise it in a rational way. He focused his research and work on a more managerial level. Fayol developed fourteen principles of management. Fayol emphasized the role of administrative management and concluded that all activities that occur in business organizations could be divided into six main groups.
1. 2. 3. 4. 5.
Technical (production, manufacturing); Commercial (buying, selling, exchange); Financial (obtaining and using capital); Security (protection of property and persons); Accounting (balance sheet, stocktaking, statistics, costing); 6. Managerial (planning, organizing, commanding, coordinating, controlling). Fayol concluded that the six groups of activities are interdependent and that it is the role of management to ensure all six activities work smoothly to achieve the goals of an enterprise. Main contributors of Administrative Management School • • • • • Henry Fayol Chester I. Barnard Colnel Lyndal Urwick Luther Gulick Max Weber (According to some researcher...)
14 Principles of Management
According to Henry Fayol management has 14 principles. Henry Fayol listed the 14 principles of management as follows:
1. Specialization of labor. Specializing encourages continuous improvement in 2. 3. 4. 5. 6. 7. 8. 9.
skills and the development of improvements in methods. Authority. The right to give orders and the power to exact obedience. Discipline. No slacking, bending of rules. Unity of command. Each employee has one and only on e boss. Unity of direction. A single mind generates a single plan and all play their part in that plan. Subordination of Individual Interests. When at work, only work things should be pursued or thought about. Remuneration. Employees receive fair payment for services, not what the company can get away with. Centralization. Consolidation of management functions. Decisions are made from the top. Scalar Chain (line of authority). Formal chain of command running from top to bottom of the organization, like military
10. Order. All materials and personnel have a prescribed place, and they must
11. Equity. Equality of treatment (but not necessarily identical treatment) 12. Personnel Tenure. Limited turnover of personnel. Lifetime employment for
13. Initiative. Thinking out a plan and do what it takes to make it happen. 14. Esprit de corps. Harmony, cohesion among personnel.
Out of the 14, the most important elements are specialization, unity of command, scalar chain, and, coordination by managers (an amalgam of authority and unity of direction). Henry Fayol synthesised 14 principles for organisational design and effective administration. It is worthwhile reflecting on these are comparing the conclusions to contemporary utterances by Peters, Kanter and Handy to name but three management gurus. Fayol's 14 principles are: 1. Specialization/division of labour A principle of work allocation and specialization in order to concentrate activities to enable specialization of skills and understandings, more work focus and efficiency. 2. Authority with corresponding responsibility If responsibilities are allocated then the post holder needs the requisite authority to carry these out including the right to require others in the area of responsibility to undertake duties. Authority stems from:
• • •
that ascribed from the delegation process (the job holder is assigned to act as the agent of the high authority to whom they report - hierarchy) Allocation and permission to use the necessary resources needed (budgets, assets, staff) to carry out the responsibilities. Selection - the person has the expertise to carry out the responsibilities and the personal qualities to win the support and confidence of others.
The R = A correspondence is important to understand. R = A enables accountability in the delegation process. Who do we cope with situations where R > A? Are there work situations where our R< A? "judgement demands high moral character, therefore, a good leader should possess and infuse into those around him courage to accept responsibility. The best safeguard against abuse of authority and weakness on the part of a higher manager is personal integrity and particularly high moral character of such a manager ..... this integrity, is conferred neither by election nor ownership. " 1916 A manager should never be given authority without responsibility--and also should never be given responsibility without the associated authority to get the work done.
3. Discipline The generalization about discipline is that discipline is essential for the smooth running of a business and without it - standards, consistency of action, adherence to rules and values - no enterprise could prosper. "in an essence - obedience, application, energy, behavior and outward marks of respect observed in accordance with standing agreements between firms and its employees " 1916 4. Unity of Command The idea is that an employee should receive instructions from one superior only. This generalization still holds - even where we are involved with team and matrix structures which involve reporting to more than one boss - or being accountable to several clients. The basic concern is that tensions and dilemmas arise where we report to two or more bosses. One boss may want X, the other Y and the subordinate is caught between the devil and the deep blue sea. 5. Unity of Direction The unity of command idea of having one head (chief executive, cabinet consensus) with agree purposes and objectives and one plan for a group of activities) is clear. 6. Subordination of individual interest to the general interest Fayol's line was that one employee's interests or those of one group should not prevail over the organisation as a whole. This would spark a lively debate about who decides that the interests of the organisation as a whole are. Ethical dilemmas and matters of corporate risk and the behaviour of individual "chancers" are involved here. Fayol's work - assumes a shared set of values by people in the organisation - a unitarism where the reasons for organisational activities and decisions are in some way neutral and reasonable. 7. Remuneration of staff The general principle is that levels of compensation should be "fair" and as far as possible afford satisfaction both to the staff and the firm (in terms of its cost structures and desire for profitability/surplus). 8. Centralisation Centralisation for HF is essential to the organisation and a natural consequence of organising. This issue does not go away even where flatter, devolved organisations occur. Decentralisation - is frequently centralisaed-decentralisation !!! The modes of control over the actions and results of devolved organisations are still matters requiring considerable attention. 9. Scalar chain/line of authority The scalar chain of command of reporting relationships from top executive to the ordinary shop operative or driver needs to be sensible, clear and understood.
10. Order The level of generalisation becomes difficult with this principle. Basically an organisation "should" provide an orderly place for each individual member - who needs to see how their role fits into the organisation and be confident, able to predict the organisations behaviour towards them. Thus policies, rules, instructions and actions should be understandable and understood. Orderliness implies steady evolutionary movement rather than wild, anxiety provoking, unpredictable movement. 11. Equity Equity, fairness and a sense of justice "should"pervade the organisation - in principle and practice. 12. Stability of tenure Time is needed for the employee to adapt to his/her work and perform it effectively. Stability of tenure promotes loyalty to the organisation, its purposes and values. 13. Initiative At all levels of the organisational structure, zeal, enthusiasm and energy are enabled by people having the scope for personal initiative. (Note: Tom Peters recommendations in respect of employee empowerment) 14. Esprit de Corps Here, Fayol emphasises the need for building and maintaining of harmony among the work force , team work and sound interpersonal relationships. In the same way that Alfred P Sloan, the executive head of General Motors reorganised the company into semi-autonomous divisions in the 1920s, corporations undergoing reorganisation still apply "classical organisation" principles - very much in line with Fayol's recommendations.
Decentralization or Decentralisation (see spelling differences) is the process of dispersing decision-making governance closer to the people or citizen. 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. A central theme in decentralization is the difference between a hierarchy, based on: • • authority: two players in an unequal-power relationship; and an interface: a lateral relationship between two players of roughly equal power.
The more decentralized a system is, the more it relies on lateral relationships, and the less it can rely on command or force. In most branches of engineering and economics, decentralization is narrowly defined as the study of markets and interfaces between parts of a system. This is most highly developed as general systems theory and neoclassical political economy. Centralization vs. Decentralization The emergence of the debate over decentralization vs. centralization as a contemporary facilities management issue comes to us in a era where an organizations efficiency, speed, and usage of time have never been more critical. The demands on an organizations ability to rapidly respond to change while maintaining a sense of stability rests heavily on the combined application of the these strategies. The debate is not concerned with which strategy is better however - rather it is concerned with the extent to which the strategies should compliment one another. Decisions to decentralize or centralize a company's operations, facilities, or management policies must be derived from a careful analysis of the company's existing state, immediate needs, and future goals. This web site seeks to clarify the distinction between these seemingly opposing strategies and stress the importance of their coexistence within organizations. Definitions of Centralization and Decentralization Centralization refers to the union and consolidation of departments into one center. Within the center, standardization may occur on operations ranging from computer systems to networked resources, from employee policy and conduct to furniture layout and space allocation. Obvious advantages are increased organization, cost reduction due to bulk purchases, and increased efficiency. Disadvantages are that organizational flexibility is often compromised and necessary changes in structure become difficult and slow to implement. Decentralization refers to a shift in organizational structure that distributes more administrative control to local centers or groups. Main advantages of decentralization are increased communication among local sectors of the organization and less of a reliance on formal communication. Disadvantages are many and make this strategy slightly more risky than the former. They include possibilities of neglect, mismanagement, and the loss of objectivity.
Below are diagrams illustrating each strategy. Notice the decentralized diagram features communication hubs for each branch where the centralized diagram has a single communication center. Decentralization Centralization
Organizational Theory Decentralization also called departmentalization is the policy of delegating decisionmaking authority down to the lower levels in an organization, relatively away from and lower in a central authority. A decentralized organization shows fewer tiers in the organizational structure, wider span of control, and a bottom-to-top flow of decision-making and flow of ideas. In a centralized organization, the decisions are made by top executives or on the basis of pre-set policies. These decisions or policies are then enforced through several tiers of the organization after gradually broadening the span of control until it reaches the bottom tier. In a more decentralized organization, the top executives delegate much of their decision-making authority to lower tiers of the organizational structure. As a correlation, the organization is likely to run on less rigid policies and wider spans of control among each officer of the organization. The wider spans of control also reduces the number of tiers within the organization, giving its structure a flat appearance. One advantage of this structure, if the correct controls are in place, will be the bottom-to-top flow of information, allowing all decisions among any official of the organization to be well informed about lower tier operations. For example, an experienced technician at the lowest tier of an organization might know how to increase the efficiency of the production, the bottom-to-top flow of information can allow for this knowledge to pass up to the executive officers. Political theory Some political theorists believe that there are limits to decentralization as a strategy. They assert that any relaxation of direct control or authority introduces the possibility of dissent or division at critical moments, especially if what is being decentralized is decision-making among human beings. Friedrich Engels famously responded to Bakunin, refuting the argument of total decentralization, or anarchism, by scoffing "how these people propose to run a factory, operate a railway or steer a ship without having in the last resort one deciding will, without single management, they of course do not tell us".
However, some anarchists have, in turn, responded to his argument, by explaining that they do support a (very limited) amount of centralization, in the form of freely elected and recallable delegates. More to the point from the majority of anarchist perspectives are the real-world successes of anarchist communities, which for the majority only ended when they were defeated by the overwhelming military might of the State or neighboring States. All in all, we do not know what a truly decentralized society would look like over a long period of time since it has never been permitted to exist, however the Zapatistas of Mexico are proving to be quite resilient. In "On Authority", Engels also wrote of democratic workplaces that "particular questions arise in each room and at every moment concerning the mode of production, distribution of material, etc., which must be settled by decision of a delegate placed at the head of each branch of labour or, if possible, by a majority vote." Modern trade unions and management scientists tend to side strongly with Engels in this debate, and generally agree that decentralization is very closely related to standardisation and subordination, e.g. the standard commodity contracts traded on the commodity markets, in which disputes are resolved all according to a jurisdiction and common regulatory system, within the frame of a larger democratic electoral system which can restore any imbalances of power, and which generally retains the support of the population for its authority. Notable exceptions among trade unions are the Wobblies, and the strong anarchosyndicalist movement of Spain. However, a strategy of decentralization is not always so obviously political, even if it relies implicitly on authority delegated via a political system. For example, engineering standards are a means by which decentralization of supply inspection and testing can be achieved—a manufacturer adhering to the standard can participate in decentralised systems of bidding, e.g. in a parts market. A building standard, for instance, permits the building trades to train labour and building supply corporations to provide parts, which enables rapid construction of buildings at remote sites. Decentralization of training and inspection, through the standards themselves, and related schedules of standardized testing and random spot inspection, achieves a very high statistical reliability of service, i.e. automobiles which rarely stall, cars which rarely leak, and the like. In most cases, an effective decentralization strategy and correspondingly robust systems of professional education, vocational education, and trade certification are critical to creating a modern industrial base. Such robust systems, and commodity markets to accompany them, are a necessary but not sufficient feature of any developed nation. A major goal of the industrial strategy of any developing nation is to safely decentralise decision-making so that central controls are unnecessary to achieving standards and safety. It seems that a very high degree of social capital is required to achieve trust in such standards and systems, and that ethical codes play some significant roles in building up trust in the professions and in the trades. The consumer product markets, industrial product markets, and service markets that emerge in a mature industrial economy, however, still ultimately rely, like the simpler commodity markets, on complex systems of standardization, regulation, jurisdiction, transport, materials and energy supply. The specification and comparison of these is a major focus of the study of political economy. Political or other decision-making units typically must be large and leveraged enough for economy of scale, but also small enough that centralised authority does not become unaccountable to those performing trades or transactions at its perimeter. Large states, as Benjamin Franklin observed, were prone to becoming tyrannies, while small states, correspondingly, tended to become corrupt.
Finding the appropriate size of political states or other decision-making units, determining their optimal relationship to social capital and to infrastructural capital, is a major focus of political science. In management science there are studies of the ideal size of corporations, and some in anthropology and sociology study the ideal size of villages. Dennis Fox, a retired professor of legal studies and psychology, proposed an ideal village size of approximately 150 people in his 1985 paper about the relationship of anarchism to the tragedy of the commons. All these fields recognize some factors that encourage centralised authority and other factors that encourage decentralised "democracy"—balances between which are the major focus of group dynamics. However, decentralization is not only a feature of human society. It is also a feature of ecology. Another objection or limit to political decentralization, similar in structure to that of Engels, is that terrestrial ecoregions impose a certain fiat by their natural watercirculation, soil, and plant and animal biodiversity which constitutes a form of (what the United Nations calls) "natural capital". Since these natural living systems can be neither changed nor replaced by man, some argue that an ecoregional democracy which follows their borders strictly is the only form of decentralization of larger political units that will not lead to endless conflict, e.g. gerrymandering, in struggle between social groups. Decentralization in History Decentralization and centralization are themes that have played major roles in the history of many societies. An excellent example is the gradual political and organizational changes that have occurred in European history. During the rise and fall of the Roman Empire, Europe went through major centralization and decentralization. Although the leaders of the Roman Empire created a European infrastructure, the fall of the Empire left Europe without a strong political system or military protection. Viking and other barbarian attacks further led rich Romans to build up their latifundia, or large estates, in a way that would protect their families and create a self-sufficient living place. This development led to the growth of the manorial system in Europe. This system was greatly decentralized, as the lords of the manor had power to defend and control the small agricultural environment that was their manor. The manors of the early Middle Ages slowly came together as lords took oaths of fealty to other lords in order to have even stronger defense against other manors and barbarian groups. This feudal system was also greatly decentralized, and the kings of weak "countries" did not hold much significant power over the nobility. Although some view the Roman Catholic Church of the Middle Ages as a centralizing factor, it played a strong role in weakening the power of the secular kings, which gave the nobility more power. As the Middle Ages wore on, corruption in the church and new political ideas began to slowly strengthen the secular powers and bring together the extremely decentralized society. This centralization continued through the Renaissance and has been changed and reformed until the present centralized system which is thought to have a balance between central government and decentralized balance of power. Decentralised Governance Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi-independent government organizations and/or the private sector—is a complex and multifaceted concept. It embraces a variety of concepts. Different types of decentralization shows different characteristics, policy implications, and conditions for success.
Political, administrative, fiscal, and market decentralization are the types of decentralization. Drawing distinctions between these various concepts is useful for highlighting the many dimensions of successful decentralization and the need for coordination among them. Nevertheless, there is clearly overlap in defining these terms and the precise definitions are not as important as the need for a comprehensive approach (see Sharma, 2006). Political, administrative, fiscal and market decentralization can also appear in different forms and combinations across countries, within countries and even within sectors. Political Decentralization Political decentralization aims to give citizens or their elected representatives more power in public decision-making. It is often associated with pluralistic politics and representative government, but it can also support democratization by giving citizens, or their representatives, more influence in the formulation and implementation of policies. Advocates of political decentralization assume that decisions made with greater participation will be better informed and more relevant to diverse interests in society than those made only by national political authorities. The concept implies that the selection of representatives from local electoral constituency allows citizens to know better their political representatives and allows elected officials to know better the needs and desires of their constituents. Political decentralization often requires constitutional or statutory reforms, creation of local political units, and the encouragement of effective public interest groups. Administrative Decentralization Administrative decentralization seeks to redistribute authority, responsibility and financial resources for providing public services among different levels of governance. It is the transfer of responsibility for the planning, financing and management of public functions from the central government or regional governments and its agencies to local governments, semi-autonomous public authorities or corporations, or area-wide, regional or functional authorities. The three major forms of administrative decentralization -- deconcentration, delegation, and devolution -- each have different characteristics. Deconcentration Deconcentration is the weakest form of decentralization and is used most frequently in unitary states-- redistributes decision making authority and financial and management responsibilities among different levels of the national government. It can merely shift responsibilities from central government officials in the capital city to those working in regions, provinces or districts, or it can create strong field administration or local administrative capacity under the supervision of central government ministries. Delegation Delegation is a more extensive form of decentralization. Through delegation central governments transfer responsibility for decision-making and administration of public functions to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it. Governments delegate responsibilities when they create public enterprises or corporations, housing authorities, transportation authorities, special service districts, semi-autonomous school districts, regional development corporations, or special project implementation units. Usually these organizations have a great deal of discretion in decision-making. They may be
exempted from constraints on regular civil service personnel and may be able to charge users directly for services.
Devolution Devolution is an administrative type of decentralisation. When governments devolve functions, they transfer authority for decision-making, finance, and management to quasi-autonomous units of local government with corporate status. Devolution usually transfers responsibilities for services to local governments that elect their own elected functionaries and councils, raise their own revenues, and have independent authority to make investment decisions. In a devolved system, local governments have clear and legally recognized geographical boundaries over which they exercise authority and within which they perform public functions. Administrative decentralization always underlies most cases of political decentralization. Fiscal Decentralization Dispersal of financial responsibility is a core component of decentralisation. If local governments and private organizations are to carry out decentralized functions effectively, they must have an adequate level of revenues – either raised locally or transferred from the central government– as well as the authority to make decisions about expenditures. Fiscal decentralization can take many forms, including • • • • • self-financing or cost recovery through user charges, co-financing or co-production arrangements through which the users participate in providing services and infrastructure through monetary or labor contributions; expansion of local revenues through property or sales taxes, or indirect charges; intergovernmental transfers that shift general revenues from taxes collected by the central government to local governments for general or specific uses; and authorization of municipal borrowing and the mobilization of either national or local government resources through loan guarantees.
In many developing countries local governments or administrative units possess the legal authority to impose taxes, but the tax base is so weak and the dependence on central government subsidies so ingrained that no attempt is made to exercise that authority. Fiscal Decentralization and Fiscal Federalism The concept of fiscal federalism is not to be associated with fiscal decentralization in officially declared federations only; it is applicable even to non-federal states ( having no formal federal constitutional arrangement) in the sense that they encompass different levels of government which have defacto decision making authority ( Sharma, 2005a: 44). This however does not mean that all forms of governments are 'fiscally' federal; it only means that 'fiscal federalism' is a set of principles, that can be applied to all countries attempting 'fiscal decentralization'. In fact, fiscal federalism is a general normative framework for assignment of functions to the different levels of government and appropriate fiscal instruments for carrying out these functions (Oates, 1999: 1120-1). The questions arise: (a) How federal and
non-federal countries are different with respect to 'fiscal federalism' or 'fiscal decentralization' and (b): How fiscal federalism and fiscal decentralization are related ( similar or different)? Chanchal Kumar Sharma (2005a, 2005b) clarifies: While fiscal federalism constitutes a set of guiding principles, a guiding concept, that helps in designing financial relations between the national and subnational levels of the government, fiscal decentralization on the other hand is a process of applying such principles ( Sharma,2005b: 178). Federal and non-federal countries differ in the manner in which such principles are applied. Application differs because unitary and federal governments differ in their political & legislative context and thus provide different opportunities for fiscal decentralization (Sharma, 2005a:44). Fiscal Federalism: The Federal Approach to Governance In common parlance political and constitutional aspects (eg giving citizens or their elected representatives more power in political decision-making, establishment of subnational political entities for decision making and making them politically accountable to local electorate which often entails constitutional or statutory reforms like providing for representation of the member states, the strengthening of legislatures, creation of local political units along with the encouragement of effective public interest groups and pluralistic political parties) are considered crucial for federalism. Chanchal Kumar Sharma (2005b) however argues that it is the fiscal side of the federalism (fiscal federalism) that is crucial for federal dynamism. This is because Federalism is not a fixed allocation of spheres of central and provincial autonomy (as assumed in federal finance models) or a particular set of distribution of authority between governments, it is a process, structured by a set of institutions, through which authority is distributed and redistributed. A Federalised System is a “balanced approach between the contrasting forces of centralisation and decentralisation for combining the political and economic advantages of unity while preserving the valued identity of the sub national units" ( Sharma, 2005). Fiscal federal principles guide how boundaries, assignments, the level and nature of transfers should be revised from time to time to ensure efficiency and perhaps equity. Thus fiscal federalism provides the tools for "application of the federal approach to governance which lies in its ability to balance the contrasting forces of centralization and decentralization" (Sharma, 2005b: 177). In the age of Globalization, when fiscal decentralization is in vogue, all countries (federal or not) are applying what may be called, in Sharma's (2005b) words "the federal approach to governance”. The only difference is that in federal countries the subnational governments may be involved in decision making process through some appropriate political or constitutional forum while Central government may dominate quite heavily in a unitary country. Its no surprise then argues Sharma (2005b:177; 2008) that fiscal federalism literature is far away from Centralization Vs Decentralization focus. Final aim is not to decentralize just for sake of it but to ensure good governance. Thus, in fiscal federalism -states Sharma (2008)"decentralization is not seen as an alternative to centralization. Both are needed. The complementary roles of national and subnational actors are determined by analyzing the most effective ways and means of achieving a desired objective" Economic and Market Decentralization The privatization and deregulation shift responsibility for functions from the public to the private sector and is another type of decentralization. Privatization and deregulation are usually, but not always, accompanied by economic liberalization and market development policies. They allow functions that had been primarily or exclusively the responsibility of government to be carried out by businesses,
community groups, cooperatives, private voluntary associations, and other nongovernment organizations. Privatization. Privatization can range in scope from leaving the provision of goods and services entirely to the free operation of the market to "public-private partnerships" in which government and the private sector cooperate to provide services or infrastructure. Privatization can include: # allowing private enterprises to perform functions that had previously been monopolized by government; # contracting out the provision or management of public services or facilities to commercial enterprises indeed, there is a wide range of possible ways in which function can be organized and many examples of within public sector and public-private institutional forms, particularly in infrastructure; # financing public sector programs through the capital market (with adequate regulation or measures to prevent situations where the central government bears the risk for this borrowing) and allowing private organizations to participate; and # transferring responsibility for providing services from the public to the private sector through the divestiture of state-owned enterprises. Deregulation. Deregulation reduces the legal constraints on private participation in service provision or allows competition among private suppliers for services that in the past had been provided by the government or by regulated monopolies. In recent years privatization and deregulation have become more attractive alternatives to governments in developing countries. Local governments are also privatizing by contracting out service provision or administration. Measuring Decentralization While diversity in degree of decentralization across the world is a fact yet there is no consensus in the empirical literature over the questions like ‘which country is more decentralized?’ This is because decentralization is defined and measured differently in different studies (Sharma, 2006). Chanchal Kumar Sharma (2006: 54) finds in his literature survey: "On the basis of ‘decentralization instrument’ there are two strands in the literature that argue for two different approaches to measure fiscal autonomy. One gives more weightage to devolution of tax authority as an instrument of decentralization and hold it crucial for subnational autonomy, the other gives more weight to the nature of intergovernmental transfers (discretionary or not) as an instrument impacting upon the subnational behaviour and effecting their autonomy and accountability. Thus former choose to focus on fiscal policy i.e., the relationship between expenditures and allocated revenues (vertical imbalance) while latter pay attention to regulatory or financial mechanisms i.e. the nature of intergovernmental transfers". Out of these two approaches, observes Sharma (2006), "when it comes to the measurement of fiscal decentralization ‘the share of subnational expenditures and revenues’ is considered the best indicator. This is because fiscal instruments are easier to measure while regulatory and financial instruments are extremely complex and difficult to measure statistically because nowhere transfers remain strictly confined to the technical objectives. Transfers pursue a mix of objectives and politically motivated transfers remain key part of the intergovernmental relations across the globe" (Sharma, 2006: 54).
Arjan H. Schakel (2008) notes that various experts such as Akai and Sakata 2002; Breuss and Eller 2004; Ebel and Yilmaz 2002; Fisman and Gatti 2002; Panizza 1999; Sharma 2006, have found the fiscal indicators on the expenditure side to be quite problematic for capturing decision-making decentralization. This is because argues Schakel (2008) "it is difficult to tell whether the expenditure is coming from conditional or unconditional grants, whether the central government is determining how the money should be spent, whether it is setting the framework legislation within which subnational governments implement, or whether −indeed− subnational governments are spending the money autonomously". Chanchal Kumar Sharma (2006:49) states, "...a true assessment of the degree of decentralization in a country can be made only if a comprehensive approach is adopted and rather than trying to simplify the syndrome of characteristics into the single dimension of autonomy, interrelationships of various dimensions of decentralization are taken into account." References http://en.wikipedia.org/wiki/Decentralization http://instruct1.cit.cornell.edu/courses/dea453_653/01students/asheley_jonathan/O verview.html
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