Disadvantages of Decentralization

Disadvantages of Decentralization

1.    Overall Direction is Ignored

In decentralization decision making, the overall direction of organization is lost. Local managers take into account only limited scenario. They see only operational advantage in decision making, which may be disadvantageous to overall direction.

2.    Control is Lost

In decentralization decision making, control of top management is lost. It is difficult to control the decision of of Local/Operational managers. This loss of control will increase the cost for the organization and some unwanted and costly decisions are made by the Local Management.

3.    Performance measurement

In decentralization system it is difficult to measure the performance, because there is not standard operating procedures in decentralization environment. Performance can only be measured against standard Procedures.

4.    No Economies of Scale

In decentralization system economies of scale is lost. Many purchases are made on local level and therefore organization cannot benefit from the economies of scale.