ACCA Applied Knowledge · Business and Technology · The formal and informal business organisation
Which of the following is a disadvantage most commonly associated with decentralisation?
A key disadvantage of decentralisation is the risk of inconsistent decisions and loss of overall control by senior management, as local managers may pursue goals that conflict with corporate objectives. Slow decisions, demotivation and senior manager overload are problems usually linked to centralisation.
- ASlower decisions because every issue must be referred upwards
- BReduced motivation among local managers
- CRisk of inconsistent decisions and loss of overall control by senior managementCorrect
- DSenior managers becoming overloaded with routine operational detail
Explanation
When authority is delegated, local managers may take decisions that differ between units or conflict with overall corporate goals, weakening central control. The other three options are typical drawbacks of centralisation: slow decisions, demotivated local managers and overloaded senior managers.
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