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.

Advantages of Decentralization

Advantages of Decentralization

Advantages of Decentralization are timely decision making, informed decision making, ownership of decisions, and culture of responsibility, positive impact on performance and exposure to the operational management.

1.    Timely Decision

In decentralization approach different operational decisions are made in time. Timely decision making saves many direct & indirect costs for the organization.

2.    Informed Decision Making

Decentralization improves informed decision making, because operational decision are made by operational manager, who have more relevant and detailed knowledge of operations.

3.    Ownership of Decisions

Decentralization improves the sense of ownership within organizations .They takes the responsibility for their decision making.

4.    Responsibly & performance

Decentralization brings the responsibility in the operational management and thus performance at operational level improves.

5.    Exposure to Operational Management

Decentralization improves the confidence of the local management. It also give exposure to the local management. This exposure can be helpful for their career development.